JOHANNESBURG (miningweekly.com) – As gold industry wage talks break down, with gold producers refusing to entertain above-inflation wage hikes, the industry is bracing for a possible strike that could result in economic losses of R597-million a day.

This comes as the gold wage negotiations, which kicked off in July, hit an impasse on Thursday when the unions rejected the 6.5% final offer tabled by the gold producers, which include Harmony Gold , Sibanye Gold, AngloGold Ashanti and Gold Fields, besides others, through the Chamber of Mines (CoM), which represented the gold companies.

“We haven’t had any strike notice and we hope we don’t get a strike notice,” he said, inviting union bosses to continue engaging industry on the final offer, as the companies had “no more to give”, Harmony Gold CEO Graham Briggs said.

Speaking at a CoM briefing in Johannesburg, he noted that this would be the third wage hike within 18 months, with the previous increase having been between 7.5% and 10% last July. The latest rise would cost R1.2-billion, in a sector that was severely under strain.

He warned that multiyear wage hikes would “destroy jobs”, with the impact extending to the nation’s economy and the fiscus, citing the R5-billion loss to industry during last year’s strike action.

If the industry’s 140 000 workers embark on industrial action, the daily cost would amount to R349-million in lost revenue, R100-million in lost salaries to employees, R43-million in stores and materials not being bought, R29-million in electricity paid for but not used and R9-million in taxes lost to the State.

Briggs also said that, despite the gold mining sector “going down”, it was still a significant contributor to the country’s growth, being the largest mineral exporter at R72-billion.

Of the R77-billion earned from the sale of 167 t of gold last year, about R22-billion went to labour costs, R2.1-billion was paid in corporate taxes and R1.2-billion in dividends.

This excluded the loss of confidence in the industry, relationships and reputation, besides others.

He added that the aftermath and damage caused could not be repaired.

Miners were already the top 75% earners in South Africa. “The mines pay well, with many years of above inflation increases [paid out],” Briggs said.

Currently, entry-level workers were earning a R9 100 basic salary, including contributions to provident funds and medical aids, housing, holiday leave and food allowances, besides others, with workers’ wages reaching R10 920 a month with overtime and bonuses.

This was more than the salary of a qualified person, such as a secondary high school teacher, Briggs stated, adding that the same level employee in the manufacturing sector was paid R4 500 a month.

Using the automotive industry’s looming wage settlement as a benchmark was flawed when applied to the gold sector.

While the automotive industry could pass on rising labour costs, which only accounted for 15% of the total operational costs, and electricity costs to the consumer, the gold industry, which spent between 50% and 55% of total costs on labour, was a “price taking” sector that had no control over such costs and had to absorb them.

Sibanye Gold CEO Neal Froneman commented that the National Union of Mineworker’s and the Association of Mineworkers and Construction Union’s demands for wage hikes between 60% and 150% bore indications of union rivalry, with chief negotiator Dr Elize Strydom adding that the unions have not budged “at all” within the past two months.

“We have to be prepared, secure our assets and prepare ourselves mentally and financially [in case of strike action],” Briggs said.

He concluded that “this is it, this is our final offer”.