South Africa’s economy is struggling to recover after a five-month strike by platinum miners. However, the effects of the strike are more far reaching than that. The price of precious metals around the world has gone up, and it is affecting the global economy. It could take several months for the market to return to prestrike conditions.
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70,000 Platinum Workers Participated in the Strike
According to the International Business Times, 40 percent of the world’s platinum is produced by three companies in South Africa — Anglo American Platinum, Impala Platinum, and Lonmin. These companies all faced a massive strike from approximately 70,000 workers over the cost of labor. The strike lasted a historic five months before a resolution was reached between the worker union and platinum producers.
The metal strike started because of wage disputes. In January 2014, the Association of Mineworkers and Construction Union (AMCU) demanded a basic wage increase for workers to 12,500 rand per month. This new wage was supposed to be implemented over three to four years with monthly increases. That means that the desired wage wouldn’t fully go into effect until 2017. Disputes from the owners of the platinum companies led to the strike, causing miners to forfeit nearly $1 billion in lost wages.
Strikers Suffer Because of the Strike
During the strike, none of the workers were paid. Many families struggled to put food on the table. This means they will have to recover individually from the lost wages before the economy in South Africa will start to improve. Unions are good in that they try to make working conditions and wages better for everyone, but there are still immediate consequences to a strike. Most of the strikers are hurting financially because of the whole situation — the opposite of what their Union was trying to achieve. This has negative effects on the economy of South Africa.
Platinum Prices Will Take a Long Time to Recover
The global economy is seeing the effects of the strike in South Africa, too. Because of the strike, the price of platinum went up over fear of supply constraints. It peaked in July at $1,502. The price has since come down, but not to prestrike levels. This was not unexpected. The price of precious metals will see a long recovery because it will take the platinum companies in South Africa several months to ramp up to prestrike production levels. Additionally, some companies may never get back up to their previous output.
More than likely, many platinum producers will cut down on production because it is no longer as profitable as in the past because of the wage increases. Some platinum companies could simply go out of business because they don’t have the money to pay their workers. So, just because strikers demand higher wages, it doesn’t mean that this is a good thing for them in the long run because they might be out of a job permanently. As a result, the price of platinum could remain high around the world. [/show_to]
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