Is the dog in control of its tail
A biography based on the life of Cyril Ramaphosa describes his work as a unionist, constantly at battle with the mighty Oppenheimer’s. What struck me the most about reading the biography was a need for him to stick his neck out for the miners, often telling Harry Oppenheimer how he loved the sweaty workers who had played a significant part in mining the diamonds Harry loved.
At a press conference earlier on in the week for a moment I reflected and thought back to when I read the biography. In a packed boardroom where the Namdeb execs who explained the economics involved in mining diamonds profitably and the hurdles they faced, a fluctuating exchange rate, the difficulty of mining in low resource areas, and the fact that they had tried to offer their employees significant wage incentives in contrast to other mining operators in the country.
Namdeb Holdings General Manager, Riaan Burger went as far as to explain the economics behind running a diamond operation, using a computer generated model to show how marginal increments in the wage bill had on the zones in which they mined, explaining that a 5% increase in the wage bill would leave Namdeb no other choice but to lay-off 20 workers at that given time.
According to Burger, the ballooning wage bill would result in Namdeb having to shelve plans to mine in planned resource rich areas, with government having to foot the bill by way of a loss in taxes and royalties.
Fair enough I am certainly no expert on the matter and we should probably sympathize with the mining house. I would certainly hope a repeat of the Lonmin saga does not present itself here.
I am no expert but a hundred years of continuous mining in the former Sperrgebiet and the failure to discover more alluvial diamond rich areas is perhaps but only the start of a labour battle with no clear end in sight.
Understandably, unit costs will rise for as long as the status quo persists. Proof of this is the fact that workers are negotiating a more favourable wage settlement. Mind you the negotiated settlement reached in 2011 has just expired. The union bosses and Namdeb exco will be meeting behind closed doors to seek out a favourable outcome for all the parties involved and there is no telling how long this is expected to take, but we should hope that an amicable solution can be reached to ensure mining continues again, after all, Namdeb execs proudly boast that they lead the pack in terms of corporate tax contributions payable to government. While Namdeb continuous to mine into less resource rich areas, I would expect it to be a highly profitable operation. Couple that with the royalty it has to pay as well as the fact that half the profit has to be split with parent company Anglo American plc.
Anglo American subsidiary De Beers mines various mines around the world profitably, there would surely be reason to cunningly exist and sell off their concessions to other operators, most notably Petra Diamonds who have a reputation for turning redundant South African mines into profitable mining operations again. Whatever the case may be I do hope a settlement can be reached, more importantly however is the need for government to move away from a dependence on diamond mining. Even more important is a serious need to ensure that the situation does not repeat itself when black gold starts to flow.