25 October 2012: A day of reckoning at Marikana

The core of the strikers at Lonmin’s Marikana facility, the rock drill operators, will apparently get a 22% increase after the month-long stay away. In the aftermath of the bloodiest strike since Fordsburg in 1922, miners managed to get the almost mythically aloof and absent Lonmin management to agree to sizeable wage increases.

Yet the miners of Lonmin anxiously await what their salary slips will reveal.

One of the drillers, Zeacks*, spoke to DM about being back at work. Zeacks has been the subject of previous articles in the DM, including why miners went on strike, and what happened to them at the horror of Small Koppie on 16 August.

He is warily excited about his upcoming increase, due to land in his bank account this week. He hopes his salary is to be increased to about R11,000 a month. This would be enough to pay off, over a couple of months, the money he owed the mashonisa, or moneylenders.

Ever since he had “a problem” last November, Zeacks has borrowed R3,500 per month, every month. Every payday, the garnishee order takes off the principal amount plus interest, which comes to R4,100.

This means that with his pre-raise salary, he could not come out. Coming out includes supporting his wife and children back in the Eastern Cape, and existing in his one-room shack on the outskirts of Marikana. So, every month, he returns to the moneylender and gets that R3,500 to see him through until payday.

Come either Thursday 25, or Friday 26th October, Zeacks is hoping to see his new increased salary recorded, but he is starting to have doubts that the amount will match his expectations.

A fellow worker went to the Lonmin pay division office as he was applying for a home loan. He needed proof of payment for the bank, and the expected hefty increase would help secure the mortgage. When staff there told him his salary was now R6,000, he said they were confused, as that was just a little above his old salary. They shrugged, and said that they were just telling him what they saw on the system.

Word has spread; and Zeacks and his colleagues are nervous. Many of them are even deeper in hock to the moneylenders as they borrowed more to survive the strike. They took a short-term gamble, which might have devastating long-term effects.

The DM has obtained a copy of the document agreeing to the salary increase for Lonmin workers.

Point 3.4 had already been agreed to (through the National Union of Mineworkers) before the strike, and was meant to come into effect October. This is the most substantive part of the increase:

The Drilling Allowance, had also been agreed to previously, but had not been implemented by Lonmin. This allowance is where a driller works without an assistant, or without a malaisha, etc, making their job that much more difficult and dangerous. It was one of the strikers’ main complaints. The signatories to the agreement are the NUM, the Association of Mineworkers and Construction Union (Amcu), Solidarity, UASA the Union, “The Striking Workers’ Delegates” and Lonmin.

A table (see below) that was part of the amendment shows what miners will actually get. The rock drillers do proportionately best, as was expected. If a driller was earning a basic wage of R5,405 a month, he will, come weekend, have a basic wage of R6,296 – an increase of R891. A winch or loco operator on a basic of R5,298 will now get R5,934 –R636 extra. Let us remember that much of this was already due to have been part of their increase.

So in fact, Zeacks and his fellow drillers will get the 22%.

Yet this increase is certainly not enough to clear the driller Zeacks’ debts, or make up for wages lost during the strike. When asked what the miners would do if upset by their wages, Zeacks shrugged and said “Majority rules.”

Lonmin has agreed to these raises, despite an extended worldwide downturn and escalating costs in South Africa, which make the platinum business not as lucrative as it once was.

The Daily Maverick has reports by three international risk analysis companies, including JP Morgan, that paint dire pictures for the mining giants dominating the Rustenburg platinum scene.

Anglo American Platinum and Lonmin seem to be the ones closest to the edge of the financial drop-off. In fact, as Marikana fever spreads and strikes take hold across the sector it seems it has been a game of seeing which of the big players would blink first and fire strikers en masse and close shafts.

These mining operations are the size of small towns. Lonmin’s Marikana facility is massive, with several shafts dotted across dozens of kilometres of bushveld, a processing plant and a smelter. The Lonmin mine complex employs some 28,000 workers directly and the same number through contractors and labour brokers. Tens of thousands more are reliant on the operation indirectly. They are a major provider of revenue to the state.

If Lonmin actually closed its gates, the loss to the country, community and individuals could not be replaced by the most aggressively successful public works programme imaginable. Nationalising the mine would simply require another experienced miner to be sub-contracted to the state to run it; and the lot of workers is unlikely to improve.

In a report on 5 September, JP Morgan said, “Our modelling indicates that Lonmin may need $1.25-billion in external funding to see it through its problems and the current down cycle…. This would require an equity capital raising.” Meaning the company might have to issue more shares of stock, diluting the value of the shares held by current investors. It’s an action akin to the treasury printing more and more money to make up for trade deficits.

While Lonmin lost production and earnings during the strike, its mineral assets remain safely underground and for the duration of the strike it as able to save on most of its lower level salaries and a good part of its operational costs.

In the meantime, the platinum supply was threatened, and with supply down the price rose rapidly, especially after the Marikana Massacre. An insider reckons that this is all that allowed Lonmin to stay afloat. Lonmin spokesperson Sue Vey has said its ore grades were great and they have a good relationship with their banks. (Lonmin is in a closed financial period leading up to its 9 November results.)

In 2008, Xstrata moved to take control of Lonmin, buying 25%, just short of a controlling stake. Xstrata liked Lonmin’s grade of ore and assets, and believed that the company was poorly managed. It was inefficient, Xstrata believed, and it could make a healthy profit out of Lonmin if it were run to Xstrata’s standards. The global downturn put a spoke in that wheel, and left Xstrata as an impotent hanger on. To cut costs, Lonmin moved its entire management to Johannesburg from London and downgraded its office premises.

The firm’s CEO was ailing when the labour crisis hit, however, and the rudderless ship was finally taken in hand by the chief financial officer, a man who apparently had no mining experience.

This could explain the inertia from the top, as drillers asked for meeting after meeting with management, but were then stood up, fuelling anger. Still, the inexplicable refusal of any of the many managers and shaft bosses at Lonmin to simply listen to the miners’ demands is open to conspiratorial interpretation: Did Lonmin have a strategy of playing out the strike as long as possible to push platinum prices up and save on payroll and operating costs?

The Farlam Commission has heard from the police counsel that Lonmin abrogated responsibility in what was a labour dispute to the police. From evidence led by various counsel at the commission, it seems clear that the shunned NUM and the major Black Economic Empowerment shareholder in Lonmin, Cyril Ramaphosa, asked police to “deal with” the miners.

In a statement issued by the union on 13 August, NUM said:

“The National Union of Mineworkers (NUM) condemns in the strongest possible words the continuous killings of innocent poor mineworkers in Rustenburg. The NUM is alarmed that the situation in the platinum mines and its escalating violence has been allowed to continue unabated by the law enforcement agencies in that area in North West Province. Six people which includes two members of the South African Police Services, two miners and two members of the mine security team have died in the senseless violence ravaging Lonmin.

“‘We call for the deployment of a special task force or the SANDF to deal decisively with the criminal elements in Rustenburg and its surrounding mines’ says Frans Baleni, the NUM General Secretary…  ‘We appeal for the deployment of the Special Task Force as a matter of urgency before things run out of hand. For months on end we have argued that the situation in Rustenburg requires special intervention and we seeing no difference." says Baleni.”

NUM is seen by the Marikana miners as a sell-out union co-opted by the bosses. Ramaphosa is derided by the miners, and by politically exiled populist Julius Malema as a man who bid R18-million for a buffalo cow and calf while “his” workers live in squalor.

Perhaps the truth of what happened behind closed boardroom doors will eventually reveal itself. Maybe it will even be the Farlam Commission that will winkle out the truth, but come Thursday or Friday, miners will be tearing open their pay envelopes with a mixture of hope and dread.

JP Morgan claims it would be unsustainable for Lonmin if the miners were really to get the top end increase. The handling of the Lonmin affair, it said, might be looked back at as a watershed moment for the SA mining industry.

On top of these “unsustainable” increases, Lonmin has already put in place bonuses for aggressively higher targets for the miners. This will allow the company to achieve faster production at a substantially reduced cost.

Yet JP Morgan’s report finds that “(i)f Lonmin surprises us by rapidly restoring production to pre-strike levels it may be able to ‘get away’ with considerably less funding than we have assumed. Moreover, lenders may be more accommodating than otherwise they might be if peace and production are restored rapidly.”

But if the miners pay slips this week are a huge disappointment, it is unclear there will be “peace and production”. And the Daily Maverick has heard that construction sub-contractors want to go on strike 28 October, for a similar increase to 22%.

An industry insider said Lonmin is in danger of “breaching debt covenance,” which means, to you and me, it will default on its debts. He added that Lonmin has “already borrowed themselves to death,” and their last chance is raise money from shareholders, yet Lonmin shares are already perceived by some as overvalued.

Could a platinum company as large as Lonmin actually go into liquidation? Is the well nearly dry? Would further demands by workers push them to the edge, or force them to start cutting other costs like external corporate spin-doctors? DM

*Not his real name, which is known to Daily Maverick

Photo: Neighbours at the compound where Bangile Mpotye lives, and where he was arrested from on Sunday October 14th by police. Photo Greg Marinovich. Nkaneng, Marikana, North West. South Africa