South Africa: Global Platinum and Gold Prices Intensify Mining Struggles

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Low global platinum prices have diminished profits in the platinum sector, and this year major mining companies in South Africa faced further profit losses during the five-month strike by the Association of Mineworkers and Construction Union. The perceived inability to reform labor and energy costs in South Africa will lead to a greater mechanization of platinum and similar mining sectors in the coming years.

Labor costs are only one part of the problem. Many of South Africa's platinum, gold and diamond mines have operated for years, leading to lower ore quality and deeper and narrower mines. Narrower mines limit the amount and type of equipment miners can use. Deeper mines mean that mining companies have to enact more health, safety and environmental measures and laboriously move people and machinery into place. This requires more time, more labor and more expenses. Moreover, South Africa's platinum sector suffers from the rivalry between the Association of Mineworkers and Construction Union and the National Union of Mineworkers. This competition, which is especially fierce in the platinum sector, leads to disruptive strikes that hurt mining companies' bottom lines.

Companies are moving toward mechanization to obviate these issues, but such a move would inevitably lead to job losses in the platinum and gold sectors. Although mechanization could offer higher wages and safer working environments to some miners, laying off the rest could put stress on the South African government, which is already struggling with unemployment in the country. This means the government will try to shape the mining environment by balancing the needs of businesses with those of laborers. In the past, workers criticized the government for being too friendly with the mining companies, but the mining corporations are likely to issue criticism of their own if the government speaks up for laborers by discouraging the use of greater mechanization in mining.

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