The shutdown was not the result of an escalating industrial-relations dispute. Rio’s workers were told to stay home in the name of safety. But not for fear that Rio’s sand miner or ilmenite processor was a dangerous place to be. Instead the risk lay outside the gates. Just getting to work had become too risky.
For at least two weeks Richards Bay Minerals (RBM) had effectively been under siege by two youth groups, the Mbonambi and Sokhulu “community groups”. Each has demanded full-time jobs at RBM and bursaries to cover workplace training.
The company has said there are no more jobs to be had at the sand mine or the processing facilities. Meetings between company and would-be employees have not gone well.
As a result, the youth groups’ demands have recently been reinforced with violent intent. Roads have been blockaded, vehicles and their drivers harassed and threatened and mining equipment wrecked. There are allegations that more than 20 schools have been burnt down as part of a swirling protest and that other infrastructure has been damaged.
Police escorts
The company says that employees had been unable to get to work during “times of public violence” and that some had refused to come to work even when the roads were declared safe or when police escorts were offered.
In shutting up shop on Saturday, management issued a statement blaming “a series of disruptions as a result of community protests and road blockages by the community”.
“After numerous engagements with relevant community groups, the situation remains volatile,” the company said before inviting a return to negotiations and a recovery of community consensus.
The gates remain closed until Wednesday after government intervention that resulted in a “cross-function task team” being created as a forum for airing local community grievances. In bringing this mini-crisis to an end, the government noted that RBM “benefited the entire country and was not bound to employ only people from its host communities”.
This is an incident worth describing in Australia because it is the story of South African mining in microcosm. And that matters for investors in a business like, say, South32, which is more heavily exposed to the South African mining sector than any other listed Australian company.
Creep of corruption
For the better part of a century South Africa has been a natural and productive home to the mining industry. But the welcome has eroded with the mood of a nation now, once again, openly struggling with itself. At exactly the wrong time of the commodity cycle, confidence in government national and local has been shattered by the steady creep of corruption and bureaucratic stasis.
At the same time a new cohort of militant community leaders are replacing the first post-apartheid generation and there is increasing evidence of a new schism between communities and the miners they host.
South Africa is suddenly a frontier mining destination but one with barely enough of the giant immature geological attractions that make taking frontier investment risks worthwhile.
Now, you can understand why the socially and financially disenfranchised of Zululand might expect that a big employer like RMB might employ more locals. And you can understand why they have no comprehension of the forces that have shattered operating models of miners around their nation to the point that an icon like Anglo-American finds itself racing against time to find a pathway to survival.
The brutal truth is that South African mining needs to employ less, not more, people. The industry generates less revenue and profit than its Australian counterpart but employs more than twice as many people. Less than 200,000 Australians work for miners and minerals processors. In South Africa the industry employs 500,000.
The South African government has predicted that 32,000 mining jobs could go this year. The miners put the toll of the commodities recession at 50,000 this year with more to come given the work that needs to be done on productivity. A recent PwC review of the South African industry found that it lagged the rest of the mainstream mining world in productivity of almost every class of mining machinery.
A coal porky or two
There is a fair bit to admire in the productive restraint displayed by the coal and construction union’s submission to the Queensland Parliament’s inquiry into the state’s labour hire industry.
Outside of a silly recommendation that Queensland urge the Commonwealth to ban 417 and 462 working holiday visa holders from employment by certificated labour hire firms, there is not a whole lot to object to in the bank of advice to the parliamentary inquiry made by the Queensland branch of the Construction, Forestry, Mining and Energy Industrial Union.
But there are a few points made that we cannot leave unchallenged.
The union has offered a defiantly singular perspective on events at two coal mines that are presented as evidence of the disruptive perversity of the labour-hire industry.
The first is Glencore’s century-old Collinsville mine and the second is the Blackwater complex that BHP manages on behalf of its half-owned coking coal joint venture, the BHP Billiton Mitsubishi Alliance.
Profound shift
As the union observes, Blackwater has twice adjusted the way it works during the term of a 2012 enterprise agreement that is currently the subject of contested renegotiation. The most recent and profound shift saw BMA outsource core mining and maintenance rolls to EDI Downer.
The contractor is promising to do those jobs 60 per cent cheaper than they were being done by Blackwater’s own people. It was able to do that because of a new agreement negotiated with, you guessed it, the CFMEU.
So, for all of the pretty ugly criticism of EDI Downer in the CFMEU submission, the inescapable fact is that it won new business with BMA because its employment agreement allowed it to undercut existing terms and conditions.
Informatively the union reports that BMA has actively investigated whether it might reopen the shuttered Norwich Park mine. Through union eyes this is a bad thing because it would, again, undercut the terms of the BMA employment agreement.
As you might imagine, the BMA view is a little bit different. Norwich Park had been consistently cash-flow negative when it was closed in 2012. If outsourcing allowed it to be run profitably then hundreds more miners would have jobs, the state would earn more royalties and BMA would be more competitive.
Where is the crime in that?
The union also claims that: “Despite the downturn in the price of coal, the mine at Blackwater was still making a considerable profit with the BMA employees at the mine meeting every target set by BMA in relation to production.”
Financial concern
This is just not the case. From the moment BMA closed the Norwich Park mine in 2012 it was made clear that Blackwater was the next target of serious financial concern. It does not make anything like a “considerable profit”.
BHP does not break out individual mine performance in Queensland. But over the first half it made a spare $US188 million digging up coal in the sunshine state. And after accounting for depreciation and amortisation, it lost $288 million.
The union’s view of Collinsville is equally prismatic. Until 2013, the mine had been operated by Thiess on behalf of owner Xstrata and it employed 160 local people. But things changed with Glencore’s takeover of its mining offspring.
Glencore wanted to introduce bigger equipment to make Collinsville more productive and to reduce costs. The union resisted because that meant changes in work practices and, likely, fewer workers.
So Glencore decided to dump Thiess and temporarily close the mine. It was subsequently reopened with a contract staff. The union reported a local resistance complaining that there are currently only 20 locals working at the mine. But that is because production at the mine pretty much ceased in March this year because of a collapse in demand for the lesser quality coal that this aged giant of Queensland coal currently produces.
Source: The Australian Financial Review
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