Bernard Swanepoel, Harmony Gold's [JSE:HAR] chief executive, eased his company's troubles today by pulling off an eleventh-hour agreement with the National Union of Mineworkers (NUM), ahead of a major strike. But he didn't thank rivals AngloGold [JSE:ANG] and Placer Dome South Africa for breaking ranks at the weekend and settling independently with the union, a development he said jeopardised the country's smaller gold miners.
Harmony was joined by Gold Fields [JSE:GFI], which made its workers an identical offer. Durban Roodepoort Deep also confirmed it had settled with the NUM.

The labour action was to have involved about 55,000 workers and would have brought the industry to a virtual standstill, as workers stood firm on their demands for a R2000 a month minimum wage, an 8.5 per cent across-the-board increase and additional holiday benefits.

No formal agreement has been signed between labour and management, but Frans Barker, the chief negotiator for Chamber of Mines, says union leaders had recommended their members accept the revised offer at a series of mass meetings held on the mines today.

Willie Jacobsz, a spokesman for Gold Fields, said the company was pleased to have reached agreement in principle with the unions. The offer tabled by Gold Fields and Harmony provides for the lowest-paid miners to reach a R2000 a month minimum wage by July next year.

"All other employees will get between 8 per cent and 9 per cent increases in the first year and between 7.5 per cent and 9 per cent by year two. Working off a base of 21 days' leave, two days will be added in the first year and another two in the second year," said Jacobsz.

Durban Roodepoort Deep [JSE:DUR], the producer furthest from the NUM's R2000 a month minimum wage demand confirmed last night it had reached a two-year wage agreement with the National Union of Mineworkers to conclude the 2001 to 2003 review of wages and other conditions of employment for category 2 to 8 employees."DRD acknowledges the NUM's understanding and support of the company and looks forward to constructive engagement with both the union and its members, as key stakeholders in the company, in the years ahead," the company said.

Speaking on Moneyweb's Classic Business show, Swanepoel said four of Harmony's five local operations had already voted in favour of the new offer, only an hour before the strike was due to kick off.

All for one - not quite

Earlier today, Swanepoel lashed out at the wage negotiation process and the decision by AngloGold and Placer Dome to break away from the collective bargaining unit and settle the wage dispute separately to their peers.

"The problem is that we are so easy to fragment … this industry will just not be sustainable if one party reaches an agreement on their own and the rest of us have to play catch-up. You have to realise that we do not operate 13 g/t gold mines," said Swanepoel."This is the first time that I've been party to negotiations where [union] demands are not met but exceeded."

AngloGold's final offer is said to be around 11 per cent, if additional leave days and other concessions are taken into account. This translates into around a 5.5 per cent to 6 per cent increase to bottom-line costs for AngloGold and Placer if one considers that labour makes up about 50 per cent of South African gold miners' costs.

Wage increases will have long-term impact

While the strike appears to have been averted for the meantime, Swanepoel sounded a stern warning to the union's that onerous wage demands would push the labour-intensive industry over the edge.

"A 6 per cent increase at cost level wipes out 8 per cent to 10 per cent of reserves if nothing else gets done," he said."The unions can do permanent damage to the industry. We can't allow 50 per cent of our costs to get out of control again. The last time we went down this road the strike cost 50,000 jobs. And that's not brinkmanship; its an economic reality," said Swanepoel.

The immediate solution for Swanepoel, and no doubt his counterparts at DRD, would be to have site-specific wage negotiations instead of the central bargaining process currently entrenched in South African legislation."It is ineffective for the industry but a magic tool for the unions. We have pursued decentralised bargaining since the NUM became the force that they are. As things stand, the rich mines get away with a lower increase than the poorer mines," said Swanepoel, criticising NUM's R2000 minimum wage rallying point.

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