Strikes and South Africa seem to go hand in hand nowadays, you only need to search platinum or palladium price online to be confronted with the latest negotiation or more commonly re negotiation news.
Not only do these strikes cause disruption to precious metals market, but they can also be deadly.
So what causes so many strikes in an already turbulent economy?
South Africa’s economy is unlike the democratic system we have in the United Kingdom, in SA power is confined to a very small segment of the population who have a position within the ruling party, causing friction in itself. Therefore often the strikes are a political tirade, a way of exploiting political gains.
Usually the primary reason for the strike will be over pay. People are angry over the lack of the improved quality of life since the apartheid era, which they were promised would happen. Inequality of wealth is very pronounced in South Africa.
Despite the number of people living in poverty, SA has an abundance of natural resources to harvest which only further highlights the discrepancies within the economy and its political system.
With only 3% of workers showing up to their job in some mining firms many families are now living in poverty. Selling off cattle to feed their children who no longer are able to attend school. Local business dries up as workers move back home and crime rates increase as people become desperate.
The mining sector alone is said to have lost $920m in revenue and feel it is irresponsible of the unions to encourage the length of the strikes with such unrealistic expectations. Production costs increase year on year meaning margins are squeezed more and more. Additionally as technology naturally advances there will be less jobs available as machinery operated by computers take over.
What’s the current position?
Although there has been “an agreement in principle” in relation to wages which has sent the platinum and palladium price down, what AMC Union leader Joseph Mathunjwa and mining employers stated appear to have several differences.
The most notable difference is over pay. Mathunjwa has also requested that workers that have been dismissed during the strikes are to be re-instated.
It’s hard to see what is true and what is false when reading the statements from both parties.
Investors for now will keep a watchful eye over what is going on but also keep a close track on PGM prices.