Chances are slim that this year’s bargaining season will run smoothly for the local mining industry, says strategy firm Virtual Consulting Inter-national global mining strategist Gideon Malherbe, who predicts that “unavoidable chaos” will ensue this year, owing to an unprecedented degree of complexity in the labour relations sector.

“There are no rules to this game and nobody knows how to play it,” he says, highlighting key labour industry players, including formal labour institutions, government and mining companies as the “established entities”, and the Association of Mineworkers and Construction Union (AMCU) as the emerging union currently representing disgruntled lower-wage employees.

Chamber of Mines (CoM) senior executive for employment relations Dr Elize Strydom agrees that this year’s negotiations are not likely to be easy, pointing out to Mining Weekly that one would be naïve to not be concerned about peace and stability ahead of the wage negotiations, which will soon be under way.

“It is a justified fear, and for that reason it is incumbent on all of us to have a focused approach, not only in terms of upcoming negotiations, but also in terms of workplace relations,” she says.

A lot hinges on this year’s wage negotiations, which industry analysts consider to be a watershed moment in the history of South African labour relations, owing to the fact that they follow on the heels of damaging wildcat strikes that marred the industry last year, culminating in the tragic events at platinum major Lonmin’s Marikana mine, where more than 40 people died during a six-week-long unprotected strike.

As a result of continued unrest in the sector, South Africa has seen a significant drop in investor sentiment and a below-par gross domestic product growth rate of 0.9% for the first quarter of 2013, indicating the need for a stable and growing mining industry.

Government responded to this by launching a new programme of action for the troubled mining sector. Deputy President Kgalema Motlanthe and three Cabinet Ministers, namely Finance Minister Pravin Gordhan, Labour Minister Mildred Oliphant and Mineral Resources Minister Susan Shabangu, have been charged with the task of restoring stability and certainty in the industry.

President Jacob Zuma announced government’s new plan of action at a special media briefing in May that focused on developments in the mining sector. Zuma called on industry stakeholders to recognise the impact of the industrial relations environment on jobs and development, given the approaching collective bargaining season in mining.

“We call for fair and expeditious settlements of wage negotiations that can contri- bute to the attainment of the country’s job creation and job retention goals,” said Zuma, urging business, organised labour and government to continue engaging with one another constructively.

“Everything we do must be designed to strengthen and stabilise the sector and ensure that it serves all stakeholders – the investors and owners, workers, government and society,” he added.

Heeding mounting fears over the instability, govern- ment, business and labour agreed to ratify, by the end of June, a draft document on ensuring sustainable mining in South Africa. The parties also committed to quarterly meetings over the next 12 months, or as frequently as required, under the leadership of the Deputy President, to ensure common action to overcome impasses and address new issues, should they arise.

Motlanthe revealed at the press briefing where the draft was made public that the elements of the draft document, or agreement framework, are to ensure that industry stakeholders restore order, end violence and conflict and bring about changes for peaceful and sustained development to reposition the mining industry as an attractive investment destination and a meaningful contributor to job creation.

“The restoration of industrial peace means that the peace accord, agreed to in February, will be given effect to. The parties commit to ensuring that we restore industrial peace and that, where there are disputes, those disputes will evolve through engagement, where it is necessary, with the assistance and support of government,” he said.

Back to Basics

With the President’s recognition that the growth of the mining industry is integral to the growth of the country as a whole, the industry seems to be responding well to government’s renewed method of facilitation, considering its initial lukewarm approach post-Marikana.

Top labour mediator and Bowman Gilfillan director John Brand tells Mining Weekly he was disappointed when, one week after Marikana, the CoM and the Mineral Resources Minister announced their intention for the platinum industry to bargain centrally in the future, as opposed to its current decentralised, company-to-company approach.

“It might be a solution, but we shouldn’t start with solutions. We should unpack the problem and try to understand it in all of its complexity,” says Brand.

He explains that wages are not the only issue plaguing the mining industry and highlights living and working conditions, migrant labour, transport and racialism as some of the challenges that need to be tackled, in addition to wage negotiation structures.

Brand puts forward the notion that, while wages in the mining sector are relatively higher than in many other industries, it still has the highest strike rate – not only among local industries, but within the mining industry globally.

This contradiction points to a general unhappiness in the sector that cannot solely be attributed to unhappiness about wages.

Reviewing Bargaining Structures

Brand tells Mining Weekly that reviewing South Africa’s current collective bargaining structures could be the key to resolving some of the issues entrenched in the country’s current labour relations system.

He believes the mining industry’s bargaining processes may be too centralised, which makes it difficult to deal with “distinct and disparate communities of worker interest”.

“The more centralised the bargaining becomes, the more aggregated it is, further removing employers from their workers.”

Brand believes that, while the platinum industry is currently bargaining on a decentralised basis, it is still not doing enough to meet the very specific needs of its disparate groups of workers – such as rock drill operators and miners – and that the suggested move towards multiemployer centralised bargaining would aggravate the problem.

He further emphasises that the reason for the state of disarray of South Africa’s collective bargaining system is not solely to be found in decentralised bargaining but, rather, in playing centralised and decentralised bargaining structures off against one another.

Brand maintains that the bargaining system could work if it were approached as a two-tier bargaining system. This would mean that central-level negotiations would deal with framework agreements and the determination of minima, such as minimum wages and working conditions. It could also deal with benefit schemes like medial aid, where economies of scale would help.

Brand suggests that actual wages be negotiated at enterprise level so that, if a mine is producing out of a particularly rich orebody, or develops its own innovative productivity improvements, it could build on the minima that have been agreed on at industrywide level, and further meet the particular interests of its workers at this two-tier level.

Labour economist Andrew Levy is, however, overtly critical of any centralised wage negotiations, describing it as “completely incompatible with a worldwide competitive economy”.

Addressing a conference hosted by Stellenbosch University’s Bureau for Economic Research, in Johannesburg, earlier this month, Levy slammed industry- level negotiation, stating that the system makes it impossible to link wage increases to worker productivity and puts countries that adopt the system at a competitive disadvantage.

“Virtually the entire world has moved in the direction of decentralising their bargaining arrangements over the last three decades. South Africa is the only country that has gone the other way.”

Brand agrees that the global trend has moved away from centralised bargaining, but says he is unaware of countries that entirely prohibit it. He adds, however, that those who do permit it place far greater restrictions on the system than South Africa does.

“In Canada, for example, a multiemployer bargaining unit will not be certified unless the union party or one of the union parties is representative of the employers involved in the negotiation process,” he explains.

He adds that, unlike the practice in South Africa, anticompetitive deals made by employers and unions in other countries under multiemployer bargaining are outlawed.

In Defence of Centralised Bargaining

Meanwhile, the gold and coal industries in South Africa have maintained centralised bargaining processes with the CoM, while AMCU vehemently defends the platinum industry’s decentralised vision, says Malherbe.

“This lack of standardisation, however, opens the bargaining process up for random collapse and failure. It further fragments any coherent approach to the negotiation process,” he avers.

Malherbe believes that a centralised system promotes speed and cohesion, with the bene-fits of standardisation. He explains that a decentralised system, while legitimate as a defined negotiation process, does not hold water when unforeseen hurdles enter the fray.

“A decentralised system is probably preferable in more mature jurisdictions, but inappropriate when the drivers of change are unclear, or when the industry is already vulnerable,” he argues.

Strydom adds that centralised bargaining is less adversarial than company-level bargaining, as unions are unable to play mining companies against each other.

“Further, the CoM receives only one set of demands from a union, which does not differ from company to company. We, therefore, look at the demands collectively and prepare a collective response. It helps to have the same terms and conditions of employment across an industry,” she says, explaining that different employment conditions often lead to unrest and increased demand from one company to meet or exceed the conditions that another company has set.

Strydom further mentions that centralised bargaining saves manpower and time for both labour unions and mining companies, as unions do not have to approach individual companies to negotiate a settlement.

Communication Is Key

Still, whether at industrial or enterprise level, the collective bargaining season always poses significant challenges.

As one of the negotiators for the gold mining industry, Strydom tells Mining Weekly that AMCU might be present at central-level negotiations for the yellow metal, though this was yet to be confirmed at the time of going to print.

“The Chamber is aware of the tension between the NUM and AMCU, in particular, and that this tension might bring a new dimension to the negotiations. However, as a representative for the gold mining industry, the Chamber is committed to approaching these negotiations in a professional manner,” she says.

Strydom admits that these types of challenges are likely to translate into violent strike action across the mining industry, but can only emphasise that the CoM and its members will seek to properly inform mineworkers on the ground.

“We’re definitely going to have to make a greater effort during the negotiations to properly communicate what was said during the negotiations and what offers were made.”

Strydom emphasises that the Chamber in no way seeks to undermine labour unions, but will work in cooperation with the unions to ensure that all proceedings are properly communicated.

Strike Season

Nevertheless, Malherbe believes that most mining companies will have conducted scenario-planning exercises to prepare for labour unrest during the ‘bargaining season’ – where downing tools is the weapon of choice in South Africa’s wage negotiations.

The downside of this is that workers, convinced by their unions to strike for their rights, are attacking an industry already on its knees, as many mines in South Africa are currently running at a loss, says Malherbe.

“The union movement is looking for credibility, but if it pushes too hard, there will be strike action, causing union members to sustain the biggest loss in the long run.”

He adds that, while mining companies always lose as a result of strike action, the loss is much more subtle, taking the form of impaired investor sentiment and an exodus of skilled labour to other industries, which is compounded by an estimated loss of R1-billion for each day of strike action.

Meanwhile, Malherbe argues that labour institutions also lose in the long run, despite a possible win on the negotiation front.

“This is because of the hardship sustained by their members during the strikes. Unions lose because they end up with a bitter and twisted membership community, with less confidence in their labour organisation.”

A Lose-Lose Situation

Worried for the future of mineworkers should the current method of wage negotia-tion continue, Brand tells Mining Weekly that striking employers will always sustain the hardest knock, even when there is apparent gain after the negotiation process.

“On the surface, it will look as though the workers have scored, but you only realise their loss when you subtract from their winnings what they lost as a result of the strike.”

Brand explains that, on average, workers lose 2% of their yearly wages for each week of strike action on the basis of the ‘no work, no pay’ principle. Citing an analysis of eight of the highest-profile strikes in 2011, he reports that in seven of the eight strikes, workers lost more in wages than they gained.

The report identifies that every mining sector, except coal, lost significantly more than they gained as a result of strike action.

“If our country is to extricate itself from this lose-lose situation, it needs to realise that it has a collective bargaining crisis on its hands. The number of man-days lost owing to strike action and the violent nature of strikes in South Africa are not normal. On the contrary, we are among the most strike-prone countries in the world, and the violence that accompanies our strikes is unprecedented.”

Moreover, with deals up for renegotiation this year, Brand’s industry analyses suggest a potential peak for this year’s strike season. However, Malherbe believes that existing strike fatigue might soften the blow of potential strikes this year.

“Chances are that this year’s strike season will comprise random, flash strikes, rather than deep, strategic ones,” he says.