Recent job cuts in mining sector: input on negotiations by Department of Mineral Resources

Meeting report

The Chairperson noted media reports that two suspects were arrested in Kempton Park housing estate with approximately R255 million worth of illegal gold and about 3 000 identity documents (IDs) of deceased people. The first suspect had been released on bail of R20 000 with strict conditions. The other accused was not granted bail. The Committee had often been seized with the issue of illegal mining for some time, so they would follow this case with interest.

Briefing by Parliamentary researchers on recent employment trends in mining
Mr Martin Nicol, Committee Researcher, discussed the trends in employment in the mining sector since 1994. There had been significant changes since then. In 1994 most of the employment in the industry had been in gold. Since then there had been a decline in the predominance of gold, partly because of economic changes and partly because of the age of gold mining and depth of mining that was now required to reach gold deposits. Employment in the sector fell to a low point of 400 000 jobs in the year 2000, this was half the number of people working in the industry in 1988. Since then there had been a recovery to over 500 000 by 2012. Since 2012 there had again been a falling off because of the difficulties of the economy. However, the mining sector was increasingly diverse. There had been significant growth in platinum-group metals (PGMs) and also coal and iron ore.

The latest trends in employment in the sector had seen total industry employment from the mining sector drop to 493 000 from 508 000 during the 2013/14 financial year. Mine job losses in 2014 included 5 428 jobs lost from gold mining and 1 225 jobs lost from PGMs. This amounted to 7000 jobs lost in the industry, a percentage fall of 1%.

Recently, Lonmin had announced 3 500 possible job cuts, which was around 10% of their labour force, and was still under discussion. The platinum price fell about 35% since 2012, putting a great deal of pressure on the platinum industry. Discussions on restructuring were ongoing, both in Lonmin and Anglo American Platinum. Anglo American Platinum, the biggest employer in the sector, had announced 474 job cuts with more possible. The most job losses continued to be in gold sector. Harmony was planning restructuring in Doornkop mines which may cost 3000 jobs and had announced 400 job cuts in Masimong mine and 1 271 jobs cut from Kusasalethu. There was a serious discussion about this but as wage negotiations approached, it should also be borne in mind that this could be an effort to “soften up the unions”. Sibanye had cut 430 jobs in February 2015. This company had old mines but employed a lot of people.

The loss of jobs was distressing as it undercut the predicted increases in mine employment in the National Development Plan, but mining was always prone to fluctuations. The gold industry because of its age was by necessity on a path of contraction. Mining had a tradition of negotiation around economic realities dating back over 20 years. Strong provisions were present in the law around labour relations in mining, specifically in the Labour Relations Act and the Mineral and Petroleum Resources Development Act (MPRDA). There was legal support for the structures of negotiation within the industry to discuss matters and reach accommodation. In many cases it was resolved win as positive a manner as possible given the economic circumstances.

The MPRDA stated that a social and labour plan (SLP) had to be in place for every mine in South Africa. Part of this was to have a Future Forum so that if a mine had to downscale then the miners were a part of the conversation of how this should be managed. This had to provide for managing and sharing the burdens of downscaling and retrenchment. Every mine had to have a plan for downscaling, just as every mine had to have a plan to spread the benefits of mineral wealth more widely when it was profitable. Retrenchments were regrettable but were written on the wall as they were part of a trend in the industry.

Mr Nkosinathi Kweyama, Content Advisor, Portfolio Committee on Mineral Resources, described the economic context which was putting mining jobs under pressure. The world economy was still recovering from the 2008 crash. Gross Domestic Product (GDP) had grown 3.4% in 2014, and was expected to grow 3.5% in 2015, which was a marginal increase. Chinese growth had decelerated from 7% to 10%. The European Union (EU) was showing marginal improvement with a growth rate of 0.4%, while the United States of America (USA) had shrunk with 0.7% growth. Therefore growth was not convincing in major trading partners and this did not auger well for the mining industry.

Moody’s rating agency had recently released a report saying that two conditions had to be met for the mining industry to grow and sustain jobs: the Purchasing Managers Index (PMI )should exceed 55 for three consecutive months in China, EU and USA; and the International Monetary Fund (IMF) should forecast world growth of 4%.

The PMI was an index used to measure activity in the economy. Anything above 50 meant that economic activity was increasing, below that it was contracting. At the time of the meeting, China had a PMI of 50, which had been stuck there for some time. The EU had 52, and the USA had a 51 reading. The IMF forecast was at 3.5%. Given these conditions, the labour market in the industry was expected to remain tight.

Mr Nicol commented that South Africa would need to replace employment lost in gold mines with new investment in other mines and encouraging exploration. This was in the capacity of the industry to achieve.

Department of Mineral Resources on recent job cuts announced or under negotiations in mining sector
Mr Thibedi Ramontja, Director-General, Department of Mineral Resources (DMR), briefed the Committee on the recent job cuts announced or under negotiations by the mining sector. He conveyed apologies from the Minister and Deputy Minister who were unable to attend the meeting. The declining trend in mining employment dated as far back as 1986. In 2004 employment reached a trough of 449 000, but this decline was arrested after the introduction of regulatory reform in the form of the MPRD Act (2002). Following the promulgation of the MPRDA in 2002 the platinum industry had become the leading employer within the mining industry, overtaking the gold sector.

The recent declining employment levels in the mining industry were attributed to a number of factors which included the global economic challenges and slowing down of demand for major commodities by South African major trading partners such as China.

Despite challenges being faced in the country and in the industry, there was still good news in the industry. Recently released statistics by Statistics South Africa showed that mining performed quite well in terms of growth, at 10,2%, compared to other industries this was a good performance. Therefore, there positives coming out of mining, this just needed to be sustained.

There were three important initiatives to address socio economic conditions of mineworkers, not only in terms of job losses but also broader sustainability. These were the Special Presidential Package for the Distressed Mining Towns, the Framework Agreement for a Sustainable Mining Industry, and strengthening of the Mining Industry Growth Development and Employment Task Team (MIGDETT).

The Special Presidential Package, which was led by an Inter-Ministerial Committee focuses on the following key issues: integrated and sustainable human settlements, led by the Department of Human Settlements (DHS) and supported by its agencies; improved socio-economic conditions, led by the Department of Cooperative Governance and Traditional Affairs and Department of Rural Development and Land Reform (DRDLR); improved working conditions of mine workers led by the Department of Labour; and decent living conditions for mine workers and meaningful contribution to the development trajectory of mining towns and labour sending areas, led by DMR.

Fifteen mining areas in five provinces and their associated labour sending areas had been prioritised for the revitalisation in Sekhukhune, Waterberg, West Rand, Bojanala, Dr Kenneth Kaunda, Nkangala and Lejweleputswa District Municipalities. Further, twelve labour sending areas in two provinces had been prioritised for revitalisation in OR Tambo, Alfred Nzo and Zululand District Municipalities.

The Framework Agreement for a Sustainable Mining Industry was led by the President, and had the following key objectives: ensuring the rule of law, peace and stability; strengthening labour relations; improving living and working conditions of mineworkers; providing short to medium term measures to support growth and stability; and identifying long-term measures to support growth and stability. The stakeholders included government, labour and the labour federations, and business, including the Chamber of Mines and South African Mining Development Association.

With regard to MIGDETT, three work streams had been designed with the purpose of addressing pertinent issues in a more detailed manner. These streams were focusing on industry stability; transformation, growth and competitiveness; and sustainable development.

Due to recent job losses facing the mining industry, a special team had been constituted on job losses to assess the situation and advise MIGDETT principals. The team which was formed after the MIGDETT principals meeting of 14 May 2015 met on a weekly basis. There were other processes that were looking at commodity specific matters, such as coal and platinum.

A total of R2.1 billion over the Medium Term Economic Framework (MTEF) period was ring-fenced funding for housing project implementation in mining towns. R290 million had been approved for Informal Settlement Upgrading for the 2014/15 period in the mining towns in Mpumalanga, North West, Gauteng, Northern Cape, Limpopo and Free State.

There were 82 informal settlements being assessed or planned through National Upgrade Support Programme (NUSP). Twenty of these settlements had been moved into the implementation phase by the provinces. The Human Settlements Project was implementing 66 projects and tenure work was being done on a further 40 projects.

The mining sector was cyclical in nature, due to fluctuations in the commodity prices. The mining and mineral regulatory framework encapsulated in the MPRD Act (as amended) had built in mechanisms for the management of downscaling and retrenchments through Section 52 of the MPRDA.

As part of the management of job losses, mining companies had to commit in their SLPs to establish effective and formalised Future Forums. These forums existed to address, amongst other things, productivity, employment, promotion of efficiency and competitiveness of the company.

The SLP further required that the mining companies develop a plan for portable skills training in order to ensure that mineworkers were equipped with the necessary skills that could be utilised outside of mine employment. In other words, portable skills training referred to the skills that the mine workers could keep or still use when moving from one job or situation to another.

With regard to the current challenges relating to shedding of jobs, the DMR was driving the engagements with affected stakeholders at the mines and also through the MIGDETT task team. The objective of the engagement was to save jobs. The sessions were convened with mining companies guided by their SLP as part of the management of downscaling.

A total of 19 companies had the potential to shed jobs and DMR interventions were underway. Companies were being engaged to explore ways of saving jobs and alternatives to job losses. The Department was currently engaged, for example, with Optimum coal mine and parties were all committed to finding a solution.

The depressed commodity prices were negatively affecting South Africa’s mining operations. Platinum and gold were the major employers and their situation had a greater impact on the industry. The DMR through the involvement of MIGDETT as well as the Mineral and Petroleum Board would continue to play an active role to save jobs in the industry. The Department would continue to involve all stakeholders, including the Department of Labour, organised labour, organised business, and Productivity SA in interventions to save jobs.

A process had been put in place to effect the alignment of MPRDA (section 52 processes) with Section 189 of the LRA. As an example, for Optimum Coal the Department had lodged a Section 52 notice and convened meetings were attended by the Department of Labour and the Commission for Conciliation, Mediation and Arbitration (CCMA).

Discussion
Mr I Pikinini (ANC) said that pro-activeness was needed when dealing with these matters. What interventions did the Department have planned to deal with job losses? There had been downscaling in the past and the Committee had felt that South Africa was turning a corner, now there was a surprise move in the opposite direction again

Mr Ramontja responded that pro-activeness was an integral part of how the Department managed downscaling in South Africa. SLPs were intended to address pro-activeness in dealing with issues relating to downscaling. This also addressed the question of when the Department came into the processes, before or after retrenchments were decided on. Through SLP, companies had to have plans to manage downscaling. In the Future Forums, companies sat with organised labour and discussed business issues related to the operations of the mine, with the objective being to save jobs. In some instances when ideas were put on the table, the mining company reconsidered it and a positive outcome was achieved, such as people being transferred rather than fired.

Mr J Esterhuizen (IFP) said that there was no way that government had done enough to aid the sustainable building of the mining sector. Anglo American Platinum had announced 14 000 job cuts, and while there had been negotiations since then, the announcement was made in challenging economic times. The Minister of Mineral Resources came out strongly against this move and claimed that the company’s licence would be scrutinised if they did that. This was not the right way to approach the situation in a democracy. Mr Nathi Mthethwa, acting Minister of Public Service, said after a protest march in Pretoria that government could only afford to offer a 5, 8% wage increase, against Congress of South African Trade Union (COSATU) demand of 15%.

Globally, the mining sector was facing the effects of uncertainty and a lack of confidence. The mining industry was now required to protect downstream businesses which would also have a negative effect on the industry. Industrial action in South Africa was associated with violence. Government had to show leadership. Mining would never be the same after Marikana, where government had showed a lack of political leadership.

Brazil created 17 million jobs, without the resources that South Africa had. It must be possible for South Africa to do the same through negotiations, by being more investor-friendly, and creating confidence for employer and employee. There was a need to relook at wage structures, living conditions, and also at foreign labour. Although Mr Esterhuizen was opposed to xenophobia, there were many foreign labourers working in South African mines and this meant that communities around the mine did not benefit. 

Mr J Lorimer (DA) said that it was good to be discussing the important issues in mining, and it made one wonder if the Committee did this enough.

He agreed with that the aging mines in South Africa and deeper economic problems worldwide contributed to the job losses in the sector. However, he felt there were two major points missing from the presentation: a lack of confidence in South African mining caused by harmful legislation, and problems caused by poor productivity. He was glad to hear the Director-General mention that productivity was under discussion in the forums. The MPRD Bill was passed over a year ago but still stalled in implementation. The DA had warned that it was a bad Bill and that it was unconstitutional. The President had agreed but Parliament did not. It now had to come back to Parliament and may be changed. Thus mines were operating without certainty.

The government had now decided to reopen debate around the bill amending the MPRD Act. Changes to the bill in 2014 had ignored agreements that had been reached after months of negotiation. Mr Lorimer quoted Mr Mark Cutifani, Chief Executive Officer, Anglo American Platinum, as saying “to even think about putting in place a pricing regime that takes one of the bedrocks of the economy and subsidise another industry that can’t stand on its own two feet is absolutely crazy. The rest of the world is looking at us and saying are you guys crazy.” This could not be ignored.

Mr Lorimer said the Director-General was being optimistic about the MPRD Act when he attributed the climb in employment in 2012 to the Act. The only part of it that the MPRD Act influenced was that it provided certainty. In the late 90s there was talk of mines giving up 50% to Black Economic Empowerment investors, which scared away investment and employment dropped. While mines had not liked the MPRD Act, it had provided certainty which meant that employment increased again. The moment changes to the Bill were announced employment had dropped again, this was not a coincidence. Mining was a long term investment and investors had to wait more than ten years to see a return on their investment, therefore they needed to know what costs would be down the line.

Mr Lorimer said the Social Labour Plans were not sufficiently defined, which meant mines were under continual pressure to build schools, provide housing, and so on. The business of mines was to mine and pay tax, they were not supposed to be agents of social delivery. They were being forced to do it because local government and other structures were too weak to provide these services themselves. Doornkop mine was closing down, following on from Kusasalethu mine, which had to be closed after underground fires started by illegal mining made working the mine untenable.

The figures reported by the Department did not report on other sectors. Big companies were easy to keep track of, but smaller companies should also be considered. The former president of an organisation representing small diamond miners had recently said that around the time of the MPRD Act they were employing 20 000 people which was now down to 4000. These figures could not be confirmed as small mines were hard to keep track of. But they indicated that job losses may be bigger than the picture that was drawn by looking only at large companies.

Turning to the problem of poor productivity, the amount of gold mined per worker in South Africa was about the same as it had been 70 or 80 years ago. This was because the grades were lower, at five or seven grams a ton, whereas before they were at eight or nine. Wages had increased dramatically, which was good as historically mining was a brutal business. This had largely changed. However, the unions were brutal, which had not changed. That was the missing piece of the puzzle. Unions had continued since the dawn of democracy to talk as if they were in a war with management. The Twitter feed of the National Union of Mineworkers (NUM) said that management was on the offensive, cutting jobs and destroying livelihoods, and accused the mines of genocidal practices against workers. This was why mineworkers were radicalised and why they turned to support the Association of Mineworkers and Construction Union (AMCU) when NUM made deals they felt were not radical enough. One could not talk war and expect peace.

The unions continued to resist changes to employment practices, thus pay had increased but productivity had not. The mines were aging but at the same time technology was increasing. Only half of South Africa’s mineral wealth had been mined after half a century of mining. It would cost more to get it but the mineral wealth remained. It was appreciated that the presentation spoke about mitigating job losses. That was positive but South Africa was sitting on mineral wealth and not making the most of it. The fact that the country did not have greater export earnings and more jobs indicated failure.

The Ivanplats mine in Limpopo were going after an 80cm wide platinum reef. In some places it was 27 metres wide. The reef had other metals as well, it was very rich and should be driving the economy forward. The best way to mitigate job losses was to keep mines open and keep them growing. It was important to look at why that was not happening.

Mr Ramontja responded that certainly it was important to have certainty in legislation, that was a given. The process was currently in Parliament, and he was sure that it would be given priority. The Department was always available to come on board and assist. The MRPD Act did arrest unemployment. An analysis of how many platinum mines were operating prior to 1994 compared to 2015 would show an entirely different board game. Many companies had come on board, increased production and employed people. Employment in platinum had shown an increase. If the MRDP policy was not in place he doubted there would have been an increase in employment in the platinum industry.

The Department had worked very closely with Statistics South Africa on the data. It was significant in that it captured the big companies, and the reliability of the data was not questionable.

It was not the intention of the policy to force mining companies to protect downstream beneficiators. The intention was to ensure that mining companies made available mineral products for local beneficiation, and to make part of process of driving manufacturing in South Africa. The mining Phakisa would take place soon and would look at these issues. The companies and the Department had the same objective of industrialising South Africa, and would try to work together for this outcome.

The Chairperson said that it was a sensitive topic and that Mr Lorimer’s meaning could be misconstrued, he hoped that the misconception would not arise that the other issues that the Committee had been dealing with were not serious. The Members all came from different political backgrounds. It was important however to focus on the crux of the issue at hand and not to be distracted by other challenges. The Committee should try to deal with the present issue so that they could assist in finding a solution on the matter. He agreed with Mr Matlala’s point that it would not be productive to start a blame game, especially if the persons in question were not present as they would not be able to respond. Jobs were going to be shed and there was no way to deny that this was a problem, and one that could not be dealt with exhaustively in the meeting. The real challenge was that it was hard to identify the root causes of the problem. Global economic trends would have a direct bearing on domestic challenges. Everyone would have different interpretations of the problem.

He appealed to Members that regardless of their own conviction, they should be careful not to pour petrol into a volatile environment. He did not want to close the discussion but they may need another forum to discuss this. For this meeting the focus should be economic rather than issues of political flavour.

Ms M Mafolo (ANC) asked about the relationship between mining companies and DMR. What was the Department doing to make sure that there were strategies in place so that they did not come to the situation of job losses. What was being done about jobs that were already lost? Did companies inform DMR in advance of job cuts so that there could be negotiations? DMR should not only focus on big companies as manipulation also happened in small companies. 

Mr Raphela said that when it came to saving jobs the Department took a risk-based approach, focusing on big mines without leaving out small ones. This would have a bigger impact in terms of the numbers of jobs they could save. 

Ms Mafolo was not satisfied with this and asked what was being done to monitor smaller mines. The employees of those companies also needed attention; was it acceptable to ignore smaller miners and their jobs?

Mr M Matlala (ANC) said that Members should not bring the politics of NUM and ANCU into the meeting. They were not representing the unions but the 54 million people in South Africa. Members of Parliament were there to address the interests of the entire population of South Africa. They should not discuss NUM and ANCU without their presence, if this issue was to be discussed it should be in a separate workshop. Who was represented in the Special Task Team? Would the implementation of the Human Settlement Project benefit ex-mineworkers as well as mineworkers? Given the international economic dynamics, what was the future of mining in South Africa compared to other countries such as China?

Mr Ramontja responded that the important thing was to address the geological infrastructure of the country. That was where the industry could grow and government had put in place initiatives to grow this.  South Africa was leading in terms of mineral wealth in the ground, which was estimated to be worth USD2,5 trillion. South Africa was very fortunate and there was still the potential to discover more. The Waterberg project referred to earlier was an indication of this, new deposits were still being found.

The Task Team included organised business, solidarity, and DMR, and it met weekly to look at issues confronting the country.

Mr Joel Raphela, Deputy Director-General: Mineral Resources, DMR, said that the projects referred to in the funding for the Special Presidents Package were not only for miners but in an integrated manner sought to incorporate mineworkers’ settlements integrating mineworkers into communities.

The Chairperson said that an area of concern for him was that the presentation did not seem to be dealing with the underlying problem. The intervention from the Department did not seem to be acting pro-actively. Factors such as commodity pricing and building investor confidence needed to be addressed. There was a lack of coordination on addressing all the issues.

To what extent was there a relationship between the three main interventions that had been highlighted? The actual focus should not be on job losses but sustainability of the industry.

The issue of legislative certainty need to be addressed, and should have been covered in the report.

It was easy to say that the MPRD Act had halted job losses without looking at other interventions that had happened since the Act was passed. The Department should not run away from looking at whether the interventions had had an important bearing.

Managing job losses was addressing the problem at the tail end, it was managing a decision that had already been made.

How much work has been done to create alignment of MPRDA Section 52 processes with Section 189 of the LRA? Clarity would be needed on which took precedence.

To what extend had there been cooperation amongst stakeholders in order to mitigate this challenge? Was there a consideration by the Department to deal with the actual problem, not to deal with the consequences without taking away the issues of self-sustainability?

Mr Esterhuizen’s comment sounded xenophobic although he said that he did not mean it to. Mineral wealth in South Africa was built on the back of foreign labour. South Africans could not say at the eleventh hour that they no longer wanted foreigners on the mines. Borders in Southern Africa were in any case not natural borders. South Africa had used its neighbouring countries and invaded them. Perhaps Mr Esterhuizen’s comment had been misunderstood, he was no longer in the meeting to respond, but the impression could not be allowed to stand that the Committee had a problem with foreign labour.

Mr Ramontja took the Members’ point on the need for interventions and pro-activeness. The way that the presentation had been structured was to focus on the immediate challenge of job losses.

There were initiatives to ensure that the government enhanced the geological infrastructure of the country, in adding value to the industry and research around mining and mineral processing. The Phakisa process would be addressing the issue of beneficiation and a win-win situation should be developed.

Regarding legislative certainty, the Department was available to provide any information which Parliament may require.

There was no legal framework which governed the alignment of Section 189 and Section 52, the legislation could be strengthened to cover this. The Department had invited the CCMA to monitor the process of Section 52 and hand over to them to implement Section 189.

Cooperation from stakeholders was important and the history of the mining industry was based on working together. This had been done to develop the White Paper, in working on the MPRD Act and on health and safety. There was now a need to work together on issues of job losses. Some stakeholders had concerns in terms of the task team the Minister had created, but the Department would engage and ensure that they all came on board.

The Chairperson asked that everyone respect the freedom of speech of other Members of the Committee. There were internal processes that must be respected. Parties had agreements on collective bargaining and the Committee should not be seen to be interfering with those processes. The Department was engaging on trying to find a solution on the standing matter. The Committee and the Department should facilitate a process to consider the substantive issues and not the consequences of the issue.

Mr Matlala said this was a very serious matter that needed to be attended to. He suggested the Department provide a report on this.

The Chairperson said that this would not be a once off meeting. The Committee would need to ensure an over-arching intervention happened. Department knew it would have to develop that programme. There was anticipation for Operation Phakisa, but this should not be the only approach as it may come too late.