Eskom and Transnet woes threaten mining jobs

It’s been a terrible week for mining, with 11 workers killed in a mine shaft accident at Impala’s Rustenburg operations, while several mining companies announced plans to cull jobs amid a commodities downturn and deteriorating efficiency at South African ports.

The situation has become so dire that the ANC has asked Anglo American to hold off on planned job cuts in South Africa until after the 2024 elections.

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The deteriorating state of SA’s ports is just the latest in a series of mishaps at state-owned companies that have left many firms contemplating their future operations in SA.

Volkswagen SA has refuted recent rumours that it is planning to leave SA due to the deteriorating business environment, but firms across the country dependent on reliable energy and speedy access to ports are having these fateful discussions in private.

The question is: can government repair Eskom and Transnet sufficiently to avoid a tsunami of job cuts as we head into 2024?

The prospects are not good. The backlogs are too deep, and band-aid repairs to infrastructure can only take us so far.

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What’s happening in the mining industry may be an omen of what’s to come.

Particular pressures on mining

Miners have had to contend with more than just erratic electricity supply and choked-up ports – their costs have risen above inflation rates while commodity prices have fallen.

They are accustomed to this kind of existential threat and the restructuring that comes with it. That will likely lead to more mechanised mining and permanent job losses.

Wesizwe Platinum this week announced that some 571 staff out of a total of 761 at its Bakubung mine in the North West could be retrenched following three labour stoppages, the last one unprotected, that had hurt the company’s mine development progress.

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The adverse effects of the strikes were compounded by the downturn in the mining industry, the company said in a Sens statement.

Also this week, ArcelorMittal said it is contemplating winding down its long steel products business, which will impact its operations in Newcastle and Vereeniging.

This could imperil 3 500 employees and contractors as the company commences the obligatory Section 189 consultations in terms of the Labour Relations Act, which is a prelude to retrenchments.

A week ago, the National Union of Mineworkers (NUM) issued a statement following its National Executive Committee, saying it is “shattered and disappointed” by the high levels of possible job losses, particularly in mining.

“To this date, close to 10 000 jobs stand to be lost between now and January 2024,” it says, adding that workers who are about to lose their jobs have nothing to celebrate this festive season, and the recent slight drop in unemployment is likely to reverse.

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“The NUM is very disappointed with Transnet’s inability to smoothly transport minerals to the country’s terminal ports. Mining companies are sitting with stockpiles of minerals that need to be transported to terminals in Richard’s Bay.”

The trade union plans a march on 9 December to President Cyril Ramaphosa’s office and the Department of Public Enterprises to protest job losses due to Transnet’s decay.

ArcelorMittal

ArcelorMittal said a slowing domestic economy had reduced apparent steel consumption by 20% in the last seven years, resulting in market overcapacity and weaker business confidence. It also blamed electricity outages, escalating energy costs, high transport and logistics costs, and SA’s well-publicised logistics failures.

Another reason cited by ArcelorMittal for the wind-down of the longs business is the preferential pricing system for scrap metal, a 20% export duty, and a ban on scrap exports that gave an artificial competitive advantage to producers using electric arc furnaces to produce steel as opposed to iron ore-to-steel beneficiation.

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“The ArcelorMittal South Africa Board and Management have reached this point after having exhausted all possible options,” said ArcelorMittal SA CEO Kobus Verster in a statement.

“As difficult as these circumstances are, we have a duty to ensure that the business remains sustainable in the long term, in the interests of the Company and its stakeholders. The remaining business, after the wind down, will be on a more sustainable financial footing and able to invest the appropriate capital in product development and available growth prospects.”

Sibanye, Impala, Glencore and Seriti

In October, Sibanye-Stillwater said it had commenced Section 189 consultations that could impact nearly 4 100 employees and contractors, about 8.6% of the workforce, as it restructures four shafts, two of which are mature, in its southern African operations.

Some of the shafts are loss-making, threatening the sustainability of the remaining operations. Recent declines in platinum group metal prices and above-inflation increases in electricity, water, wages and fuel contributed to the decision.

Earlier this month, Impala Platinum said it would offer voluntary retrenchment packages to reduce the headcount and save costs in the face of a 40% drop in palladium prices and a 14% drop in platinum prices this year.

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Glencore and Seriti announced they would cut jobs in response to a sharp drop in coal prices, while Thungela said it was scaling back some underground operations and redeploying affected workers.

As NUM pointed out a week ago, the slight improvement in unemployment levels trumpeted by government will likely disappear once the latest bout of job cuts is tallied and manufacturing firms such as ArcelorMittal join the deindustrialisation march.

This article was republished from Moneyweb. Read the original here