South African trade unions threaten share prices

Mining companies in South Africa have viewed with dismay the recent decision of the South African National Union of Mineworkers to take strike action.

The union is in dispute over pay with De Beers, the world’s largest diamond producer. The company is offering 8% and the union is demanding an 11% pay increase.

Sector analysts are concerned that increasing pressure from South African trade unions could affect the stock value of London-listed gold and platinum mining companies.

South African workers are being affected by high levels of inflation and are also aware that strong global demand for metals gives them the opportunity to demand higher salaries.

According to Numis, the investment bank, Anglo American, AngloGold Ashanti, Lonmin and Aquarius stock could be badly affected and this will leave the way clear for companies that have highly mechanised production techniques and contract-based labour to benefit from higher commodity values.

AngloGold Ashanti, one of South Africa’s biggest gold miners, has recently raised its offer of a 7% wage increase to 7.25% but this has been rejected by unions which are seeking a 15% rise.

The South African mining sector is also struggling with its safety record. Two miners died at the AngloGold’s Moab Khatsong mine last week, bringing the number of deaths this year in South African mines to 110.