Job cuts to escalate in South African mines as global economy slows

The government has warned that 32,000 workers in the mining sector could lose their jobs.

FILE: Underground at Glencore’s Kroondal chrome mine in South Africa. Picture:

CAPE TOWN - Job losses in South Africa's mining sector are likely to accelerate with mining companies such as Glencore and Anglo American battling to cope with a global commodity price slump.

The government has warned that 32,000 workers in the sector could lose their jobs as metals prices fall due to slowing economic growth in China, the world's biggest metals consumer. Industry officials predict more than 50,000 job cuts.

Companies in the industry, which employs about 500,000 people and contributes around 7 percent to South Africa's GDP, say they have little choice but to cut jobs and close struggling mines to cope.

But with more than a quarter of the working population unemployed the job losses could trigger labour unrest and erode support for the ruling African National Congress (ANC) in local government polls expected after May.

Roger Baxter, chief executive of the Chamber of Mines, which groups mining firms, said the industry shed around 47,000 jobs between 2012 and the first quarter of 2015.

"Some parts of the industry are in the intensive care unit," Baxter told Reuters at a mining conference in Cape Town.

Anglo, the world's fifth-biggest diversified global mining group by stock market value, started paring operations in 2013.

Chief Executive Mark Cutifani said last week the company would take even "bolder action" and it planned to exit more mines. He warned "things may still get worse before they get better".

Anglo American Platinum, the world's top producer, and Kumba Iron Ore have announced they will cut thousands of jobs in South Africa.

Prices of platinum, used for emissions-capping catalytic converters in cars, are down about 30 percent year on year.

Besides cutting jobs Lonmin is closing shafts after issuing a rights issue to shore up its balance sheet. CEO Ben Magara has said he will not shy away from a takeover or merger.

Miner and trader Glencore is also considering closing its Eland platinum mine in South Africa, putting just under 1,000 jobs there at risk.

"You can bet on your own mother that 30,000 to 50,000 jobs will be lost in the South African mining industry this year and the only reason it's not worse is because of the rand's performance," Cadiz mining analyst Peter Major said.

The rand lost 25 percent versus the dollar last year and hit its lowest level last month, offering some support to mining companies which pay costs in rands and earn in dollars.

There is also the prospect of labour unrest, as unions gear up for wage talks expected to begin in April. The typical miner supports eight to 10 people, according to industry data.

Association of Mineworkers and Construction Union (Amcu) treasurer Jimmy Gama said companies would cut jobs even without the pressure of higher wage bills.

Last year, Amcu demanded a more than doubling of basic wages to 12,500 rand a month in the gold sector, and plans to strike at Sibanye Gold to enforce its demands.

Sibanye Chief Executive Neal Froneman said unions should share the pain and the rewards of metal prices.

"You can't just keep on demanding and demanding, because you are putting people out of work," he said.

Amcu led a record five-month strike in 2014 in the platinum sector that left several mines financially weakened.

The mining ministry has held talks with companies and unions over the planned job cuts, as President Jacob Zuma's government and ruling African National Congress fret over high unemployment ahead of local government elections due after May. No specific plans to save jobs have emerged.