Sibanye-Stillwater sharpens its axe
The six-month moratorium on job cuts at Sibanye-Stillwater’s Marikana operation expires in December. In what may be a strategic gamble, the company has already issued a notice of retrenchment
News that Sibanye-Stillwater may lay off more than 5,000 people at the former Lonmin mine at Marikana is hardly news at all. In 2017, management of the ailing operation had already identified the need to cut as many as 12,000 jobs — and nearly 6,000 have been shed since then.
But when Sibanye’s acquisition of the business was considered by the Competition Tribunal late last year, it was clear that the head count would have to be reduced further to ensure the sustainability of the business.
The tribunal approved the deal, but stipulated that Sibanye not embark on retrenchments for six months (excluding voluntary separation packages).
With that moratorium due to expire on December 7, the company is getting ready to restructure. Last week it issued a section 189 retrenchment notice, saying it intends to close three shafts and two plants, putting a possible 5,270 jobs on the line.
Hurbey Geldenhuys, head of equities at Vunani Securities, sees it as a fairly straightforward matter. "The bulk of retrenchments speak to those shafts which simply ran out of ground — there is nothing left to mine."
For shafts to be loss-making even at current, elevated metal prices, means "the sooner you can cut those the better", he says.
The announcement comes in the midst of wage talks in the sector.
The majority union, the Association of Mineworkers & Construction Union (Amcu), indicated early on that Sibanye’s offer to workers at the former Lonmin operations of a R300 increase in the first year was a "slap in the face". Sibanye has said the business cannot afford anything more.
Following the retrenchment notice, Amcu indicated it "will spare no resource to ensure the job security of workers".
Despite the business rationale underlying the decision, this is also a strategic move on Sibanye’s part, says Solidarity’s Gideon du Plessis. He notes that during the recent protracted strike in the gold sector — from November to April — Sibanye also announced a retrenchment process for some of those gold mines "to try and break the strike".
But Geldenhuys believes it’s a matter of necessity rather than a broader power play.
Sibanye, which moved into a net debt position in the second quarter, has committed to aggressive debt reduction in the current financial year. "The debt [is] something a lot of investors are focusing on," says Geldenhuys. "If they are seen not to do anything about losses at Marikana, they will come in for criticism that they don’t deliver on promises."
Du Plessis says issuing the section 189 notice now could also mitigate the extent of disruptions at the old Lonmin operations. Labour could potentially strike over the wage dispute and also over a retrenchment-related dispute, he says. "If they are going to take a strike either way, rather combine them."
A possible strike on the volatile platinum belt is a matter of grave concern. Mining companies’ relations with employees and communities remain fragile, and union rivalry in the area is particularly fierce.
But following a number of difficult and protracted strikes, and in the context of an ailing economy and a failing Lonmin, it’s questionable whether the workforce has the appetite to strike. "They could literally strike themselves out of a job," Du Plessis says.
While employees have a constitutional right to refuse to strike, in practice workers typically vote by a show of hands, which leaves them vulnerable to being influenced or intimidated to vote a certain way.
This time it ought to be different, as new legislation has come into effect that requires a secret ballot to determine whether or not a union embarks on strike action.
The National Union of Metalworkers of SA has, however, recently flagged its intention to challenge the legislative change at the Constitutional Court.
Lonmin’s long-running troubles mean there has been no cash to develop existing resources. But with Sibanye at the helm, and following a restructuring, the business has potential.
It’s imperative, however, that cool heads prevail and mining companies in SA grow, says Mergence Corporate Solutions mining director Peter Major. "Lonmin has reserves for 100 to 150 years," he says. "If these metal prices just stay where they are, it can, in my view, be hiring people 12 months from now."
This week, Sibanye was notified that Amcu had referred the wage negotiation process for both the Rustenburg and the former Lonmin operations to the Commission for Conciliation, Mediation & Arbitration.
At a subsequent press briefing, Amcu said Sibanye’s insistence on parallel engagements for the two operations was a key issue. "They are trying to isolate their different operations and avoid the principle of harmonisation and cross-subsidisation," said Amcu president Joseph Mathunjwa.
On the section 189 notice, Amcu said it had opposed the merger from the very start on the grounds that it would lead to mass retrenchments. The union said the Lonmin operations had returned to profitability when Sibanye acquired them, but that the company’s main interest was in the processing plant, which has given it "mine-to-market capability".