The world's biggest platinum producer, Anglo American Platinum, has announced plans to cut 6,000 jobs from its South African mines, triggering fears of a major battle with trade unions as the platinum sector struggles with mounting losses.
The announcement was immediately greeted by furious criticism from South Africa's powerful unions, raising the spectre of another season of violent clashes in a country where dozens of workers were killed last year.
But the company, known as Amplats, insisted that it had to reduce production in its platinum mines after suffering heavy losses last year. One study estimated that 70 per cent of all South African platinum mines were operating at a loss last year because of rising costs, oversupply and falling prices.
Amplats had originally intended to cut 14,000 jobs from a work force of about 56,000 employees. But when its plan was first mentioned in January, the South African government was outraged, accusing the company of behaving like "a child."
The company agreed to suspend the plan while it discussed the issue with the government, but on Friday it announced that it would still go ahead with deep cuts to its production and job levels.
The decision is expected to cut production by about 250,000 ounces at the Amplats mines next year – about 11 per cent of its total production – and it will be followed by further cuts of 100,000 ounces in following years. Three mine shafts in the Rustenburg area will be idled. The restructuring of its mining operations will cost the company about $250-million (U.S.).
The restructuring plan "retains flexibility, reduces complexity and will position us to achieve our goal of creating a sustainable and profitable platinum business," Amplats chief executive officer Chris Griffith said in a statement.
South Africa and Russia, which control about 90 per cent of the world's supply of platinum group metals, announced in March that they will try to create an OPEC-style trading bloc to control exports and limit supply. Many analysts are skeptical that the idea will work, since private companies largely control the supply, but it was a symptom of the growing crisis in the platinum industry.
Most of South Africa's biggest platinum miners are based in Britain or South Africa, but several smaller Canadian companies are involved in developing mines here.
While the latest Amplats restructuring plan seems to have the government's unofficial approval, the reaction from workers will be much more pugnacious. Labour leaders were already vowing to fight Amplats after they heard the job-cuts announcement.
"It is a spit in the face to the workers and people of South Africa," said Patrick Craven, spokesman for the Congress of South African Trade Unions. "Thousands of families face losing their only breadwinner, and communities around the mines and in far-flung rural areas will be devastated."
More than 50 people were killed in labour clashes in South Africa last year, including 34 protestors who were shot by police in the infamous Marikana massacre at the Lonmin platinum mine in August. It was the deadliest use of lethal force against protestors in South Africa since the apartheid era.
The wave of illegal and often violent strikes across the mining sector, however, led to double-digit wage increases for many workers, a lesson that they have not forgotten. There are warnings that further turmoil could be triggered by wage talks that begin this month in the mining sector, including platinum, gold and coal.
A more militant new union, the Association of Mineworkers and Construction Union, has gained a strong position in the platinum sector over the past year, representing about 40 per cent of the Amplats work force. Its presence could complicate the wage talks. The older union, the National Union of Mineworkers, was considered more pliant.