Rob Rose Editor: Financial Mail

Eighteen rands to the dollar. That’s Neal Froneman’s prediction for where the rand will be in a year’s time, partly because President Cyril Ramaphosa is frozen in the headlights. Of course, if the rand falls from its current R14.79 to R18, it’ll be mighty helpful to Froneman. He is, after all, CEO of Sibanye-Stillwater, created in February 2013 when Gold Fields spun out three soon-to-be-depleted gold mines.

Froneman, known in banking circles as "Neal the deal" and once described as "clever, ruthless and lucky" by veteran mining journalist David McKay, was never going to settle for quietly shepherding a mine towards its sunset.

As an engineer who began his career at the Libanon gold mine in Carletonville, there’s still an air of the West Rand frontier entrepreneur about him. He has a pilot’s licence, he likes long-distance shooting and says his ideal meal is an executive breakfast at Wimpy.

So instead of accepting its fate, Sibanye began buying mines. First, it gobbled up Anglo Platinum’s Rustenburg mines in 2016; then it paid $2.2bn to buy the Montana-based Stillwater, the only producer of platinum group metals in the US; and finally, last year, it swallowed the 110-year-old Lonmin.

It’s a trajectory you wouldn’t have bet on. But today, this one-time no-hoper mines more platinum than anyone in the world, and is one of the top 10 gold producers globally.

Companies have to assert their right to say ‘no’ to unreasonable union demands. And this is what SAA must do

In six years, Sibanye has become a vital cog in the SA machine, employing 88,000 people — more people, in fact, than any other single company outside of the government. So its view on where the economy is heading, matters.

Says Froneman: "That R18 to the dollar expectation is obviously good for our company as we sell platinum and gold in dollars, but this rand weakness isn’t great for the rest of the economy."

The reason for this downward slide, he says, is that Ramaphosa’s government seems unable, or unwilling, to make the hard choices to avoid "hurtling into a debt trap". If the debt-to-GDP ratio hits 80% (a level that finance minister Tito Mboweni seems to believe is likely unless drastic changes are made) then Froneman says it’ll be too late.

"Already, I’m not sure the rate at which we can fix things — and there are big problems in state-owned enterprises [SOEs] — can have a positive effect on the rand," he says.

The non-negotiable first step to saving the economy, he reckons, is for Ramaphosa to deal with the cost of government debt by halting gargantuan bailouts to SOEs.

And he can start at SAA, where 3,000 employees went on strike last week over its lower-than-expected salary offer and plans to retrench 944 staff.

Even though SAA has clocked up R28bn in losses over 13 years, the SA Cabin Crew Association and the National Union of Metalworkers of SA (Numsa) have rejected a 5.9% salary hike offer, demanding 8% instead.

Froneman says this is where the buck should stop. "If the unions keep doing what they do, regardless of SAA’s finances, close it down. Now is the time for the government to take a stand against unions that are destroying the country’s fiscal sustainability."

It sounds easy, but for the ANC, wedged in an alliance with Cosatu, it’s an inherently political, rather than financial, problem.

Froneman responds: "Well, yes, it’ll test the alliance, but the government needs to remember it has to do what’s best for the country, not their narrow interests."

And Froneman has shown the resolve of a field marshal in standing up to the unions — notably Joseph Mathunjwa’s Amcu — on his mines.

In November last year, Amcu led 15,000 Sibanye employees on a gold mining strike, as Mathunjwa rejected the agreement made with the other unions for miners’ salaries to rise by R650 in year one, R700 in year two and R825 in year three.

Five grim months later, in which those miners didn’t earn a cent, Amcu settled with Sibanye in April — for exactly what they were offered in the beginning.

Froneman says this was about doing what’s fair for business, labour and government. "Companies have to take back their right to manage. They have to assert their right to say ‘no’ to unions that make demands that are unreasonable and unsustainable. And this is what SAA must do," he says.

It’s a tension that will become increasingly significant, as Mboweni demands that other SOEs trim their wage bill. And while SAA could easily shut down, it’s not the same story at Eskom, where a strike could properly cripple the country.

On Tuesday, Cosatu fired the first shot across the bow, warning Eskom that it "will not accept any attempts to retrench workers".

In Sibanye’s case, standing its ground last year had a positive outcome. This month, Amcu signed a three-year wage deal with Sibanye and other producers without any strike. But had they not taken a stand last year, it might have been a different story.

"There’s no doubt in my mind that our investment in the gold mining strike last year created a far fairer outcome for everyone this time around," says Froneman. "A strike never solves problems, and the unions told us they wouldn’t want another strike over Christmas."

It’s an approach that SAA and Eskom would do well to consider, because the alternative is awful. But you’d get long odds on the government finding the courage.

Wits economics professor Lumkile Mondi told Bloomberg he believes the government is looking to strike a deal at SAA. "Get ready for the downgrade — there’s no imagination in this regime whatsoever," he said.

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.