This reduction was in line with a portfolio review commissioned by its parent company, Anglo American Plc. this intervention by government, with even a threat of revoking its mining licences, sent a clear message to other producers to avoid contemplating large scale headcount reductions given the volatile social economic environment. These actions have brought widespread negative reaction from many investors given the inability of many of these producers to fund losses over the medium to long term. What has also become evident to all is the key role the industry plays on the fiscus as the reduction in mining revenues has adversely impacted tax revenue, necessitating the need for government to commence cost cutting initiatives to reduce its own fiscal spending.
PGM prices initially rallied given the production uncertainty but have gradually softened over the year despite intermittent industrial action as producers struggled to stabilize the labor environment. Producers have however received some relief in the form of a weaker Rand to US$ exchange rate on their local cost base. There has also been a shift towards extracting costs through operational efficiencies as producers moved away from large scale head count redundancy programs.
The Association of Mineworkers and Construction Union (AMCU) also consolidated its position during the year and by August all three main producers had signed recognition agreements making AMCU the dominant union over the National Union of Mineworkers (NUM) in the Platinum industry in South Africa. tension between these two unions continues to persist. There is also support amongst a number of stakeholders for a centralised bargaining agreement similar to that in other industries to be established as a matter of urgency. Additionally, a holistic revision of the existing labor model, including regulation, needs to be undertaken soon to create a sustainable labor operating platform for the industry. Needless to say we anticipate the next six months will continue to be bumpy as parties seek to find a workable solution.
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