NEWS ANALYSIS: Transnet woes signal mining job losses

Domestic and international factors have been identified by economists as reasons why SA’s mining companies are looking to retrench thousands of workers to stay afloat, a move labour has condemned and vowed to fight because it would relegate breadwinners to unemployment lines. 

Business Day spoke to four of the largest mining companies in SA, unions represented at those mining houses and industry experts, who have all pointed to myriad factors that have led to looming retrenchments across the industry.

They include falling international commodity prices and SA’s “own goals” relating to load-shedding and the deteriorating rail infrastructure operated by Transnet Freight Rail (TFR) preventing the movement of goods from mines to harbours for export. 

TFR is Transnet’s  largest division, contributing almost half  its revenue. It is also the most challenging division as it battles the escalation of theft and vandalism of its infrastructure as well as the lack of locomotives.

The mining industry provides about 478,000 people with formal employment, according to data from Stats SA, and it provides the fiscus with critical income in the form of corporate taxes, mineral royalties and individual tax from employees. 

A report from PwC, “SA Mine 2023”,  released this week says data issued by the SA Revenue Service for the first six months of 2023 shows exports of mined materials totalled R575bn, which amounts to 58% of total exports from SA.  

However, threats of a looming jobs bloodbath in the sector have led to the industry’s two biggest unions, the National Union of Mineworkers (NUM), and the Association of Mineworkers and Construction Union (Amcu), saying they will fight any attempts to lay off workers.

Sibanye-Stillwater said in September that it would enter into a consultation process with labour and other stakeholders about the future of its Kloof 4 shaft in Johannesburg. The possible restructuring of the company’s gold operations was due to “ongoing losses over an extended period and operational constraints at the Kloof 4 shaft”. 

“The possible restructuring of the Kloof 4 shaft could potentially affect 2,389 employees and 581 contractor employees. Through the formal section 189 consultation process, the company and affected stakeholders will together consider measures to avoid and mitigate possible retrenchments and seek alternatives to the potential cessation or downscaling of operations and associated services,” the company said. 

“We will engage with all relevant stakeholders in an effort to avoid job losses while attempting to limit the impact on the remainder of the operations and employees at the SA gold operations,” said Richard Cox, executive vice-president and head of the company’s SA gold operations. 

Coal mining company Seriti Resources, responding to a list of questions from Business Day, said: “Seriti can confirm that the company has commenced a section 189 process at the Klipspruit Colliery which is expected to  affect up to 605 roles.” 

Klipspruit is an opencast colliery which produces about 3-million tonnes of coal per year from two opencast pits. “The combination of Klipspruit’s high cost structure and a lack of sufficient export rail means the mine is unsustainable in its current opencast form. Klipspruit’s secondary product is a 4,800 kcal/kg product which has historically been exported. However, a lack of available Transnet rail capacity to export coal through RBCT [Richards Bay Coal Terminal] has forced Seriti to find alternative domestic markets.” 

RBCT, the largest coal export facility in Africa, is owned by 13 mining companies, including subsidiaries of Glencore, South32, Sasol, Anglo American and Exxaro. 

Seriti said its formal consultations under the auspices of the Commission for Conciliation, Mediation and Arbitration (CCMA) are ongoing. “A section 189 process is a consultative process in which mitigating measures are proposed and considered. It would be inappropriate to make pronouncements on the outcome of these and hence we cannot comment further at this stage,” the company said. 

Business Day reported in July that the missed export opportunity due to the disruption of rail services cost SA’s largest iron producer, Kumba Iron Ore, about R6bn in earnings during the first six months of 2023. 

NUM president Dan Balepile said that besides Sibanye and Seriti, there are other mining houses contemplating retrenchments but he did not name them as the talks are still informal at this stage. 

“We are engaging these companies with a view to oppose the retrenchments. We want the Chamber of Mines to also be involved in this process together with the department of minerals & energy,” Balepile said. “In fact, we want the government to take  over the mining licences of the companies seeking to retrench workers and give them to our black brothers and sisters who have interests in mining, in order to empower them.”  

Harmony Gold head of investor relations Jared Coetzer said: “We are not going to any retrenchment process at this present time.” 

Efficient Group chief economist Dawie Roodt said the looming retrenchments do not come as a surprise: “The international commodity prices have been under pressure, and the stuff we are exporting has been falling recently because there is not enough electricity, and we can’t get it out to harbours because of the failing rail infrastructure.” 

Roodt said the combination of these factors means mining companies will look to cut staff numbers to stay afloat, a move that could also affect the economy. “Mining is crucial in SA for the fiscus. The finance minister gets a lot of revenue from mining.” 

The domestic mining sector rode the wave of the global commodity price boom in 2021, which drove net profits of SA’s mines up 285% to R274bn, leading to record dividends for shareholders and a tripling of taxes paid to the government to reach R91bn. 

Stanlib chief economist Kevin Lings said: “I suppose the problem is you’ve got two big aspects to mining in SA. The one is about what’s happening to international commodity prices, and the international demand for commodities. If world economy is doing well, prices are doing well, then mining companies do well. We had load-shedding and other difficulties but mining guys were in better shape as they were receiving a lot of money for what they were mining. 

“Now the global demand for commodities is not a lot, and the domestic factors are quite significant: the cost of doing business, electricity, labour costs, equipment and machinery have all gone up enormously.” 

Lings said the industry is sensitive to small changes: “When price comes down internationally, then they [mining houses] are under pressure very quickly, and there’s not a lot they can do about it, hence labour becomes a key focus point in reducing the cost base ... It’s a tough game at the moment.” 

TFR CEO Siza Mzimela resigned on Thursday while Transnet’s National Ports Authority head, Pepi Silinga remains in his position despite pressure from business lobby groups and unions for him to fall on his sword.

CEO Portia Derby and CFO Nonkululeko Dlamini resigned last week. Derby is set to leave at the end of October while Dlamini is set to join Telkom as its CFO in November.

As part of measures to fix Transnet’s infrastructure woes, thereby improving its bottom line, the entity is considering bringing back some of the hundreds of employees who left the company in 2020, opting to take voluntary severance packages after a retrenchment process.

“Let’s try to engage people who were there before, especially those that left without corruption allegations. There are people who came with Portia but they don’t know Transnet,” SA Transport and Allied Workers Union (Satawu) general secretary Jack Mazibuko said.

Industry lobby group African Rail Industry Association (ARIA) said that in light of the high-level resignations at Transnet, the government should speedily implement rail reform.

“ARIA believes the biggest challenge facing Transnet Freight Rail is the collapsing physical track and signalling infrastructure and we have been highlighting for 12 months the fundamental underinvestment in maintenance,” said CEO Mesela Kope-Nhlapo.

“This has continued into the current year, with capex underinvestment by R4.4bn. In addition, ARIA estimates that Transnet Freight Rail should have spent R6bn but actually spent R2.8bn, taking the total underinvestment in maintenance over the last decade to R30bn.”

The board of Transnet, led by Andile Sangqu, is expected to hand over a performance turnaround plan for the ailing entity at the end of October, which includes a review of skills in management.

mkentanel@businesslive.co.za
maekot@businesslive.co.za