Political Faultlines Underlie Southern African Platinum Veins

Political faultlines underlie southern african platinum veins

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JOHANNESBURG (Reuters) – Platinum markets have avoided an eruption that would have shakenthem to the core with mine nationalisation effectively killed aspolicy in South Africa, which sits on about 80 percent of theglobal supply of the precious metal. But they should brace for aftershocks. The world\’s richest platinum veins lie along the politicalfaultlines of South Africa and Zimbabwe, where income disparities,labour strife and political populism are fuelling intense brands ofresource nationalism. \”All platinum supply, bar bits and pieces, come from southernAfrica. In almost any other mining sector you would be able to docross-geography comparisons about political risks, security oftenure and labour relations,\” said Nic Borain, an independentpolitical analyst based in Cape Town ahead of the London PlatinumWeek gathering.

\”But on platinum you are stuck in the area of the world whereresource nationalism or the social demands on those miningcompanies are most intense,\” he said. Start with South Africa, where the mother of all risks -nationalisation – has been dodged for now. A mining study submitted to the ruling ANC rejected nationalisationas an \”unmitigated disaster\” for Africa\’s largest economy butproposed a 50 percent tax on profits. Such a tax could prove hard on smaller producers in an industrywhere the two biggest, Anglo American Platinum and Impala Platinum,between them account for around 65 percent of global production.

Even bigger producers may find it squeezes margins as they grapplewith cost pressures on a range of fronts: sharply higher powercosts, deeper shafts and annual wage increases that have typicallyreached double digits and exceeded inflation. UNION MILITANCY Into this mix just throw in labour militancy and stir. The risks of having most of your metal in one country – and onewith radical unions – was underscored earlier this year when anupstart union tried to muscle in on Implats\’ Rustenburg operation,the world\’s largest platinum mine. The violence that erupted between the radical Association ofMineworkers and Construction Union (AMCU) and the dominant NationalUnion of Mineworkers (NUM) cut global platinum supplies by 15percent, pushing up the price and ultimately costing Implats120,000 ounces in lost output. There are now signs that inter-union rivalries are bubbling beneaththe surface at world No.

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3 producer LonMin. South Africa\’s platinum mines are ripe for union militancy: thereis a rich tradition of radicalism in the shafts and AMCU is linkedto the black nationalist Pan Africanist Congress, which takes a dimview of white-controlled capital. Inequalities remain wide, and unlike in the gold sector, mostplatinum miners are not in mine-controlled hostels but live intheir communities, where activists can freely work. GIVE US YOUR SHARES North of the Limpopo River, neighboring Zimbabwe has the world\’ssecond largest known platinum reserves and the government has itseyes firmly on a prize worth at least tens of billions of dollars.

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Foreign miners there are being squeezed to yield 51 percent stakesin their local operations to black Zimbabweans, a policy thegovernment has dubbed \”indigenisation\” and says is needed toredress the racial imbalances of the colonial past. Much of the detail remains muddied as the cash-strapped governmentdoes not have the capital to buy such stakes. Many analysts see it as a populist and money-raising electoral ployby President Robert Mugabe\’s ZANU-PF Party ahead of elections whichmay be held later this year. \”You got to understand that there is a high degree ofelectioneering by ZANU-PF,\” said Tony Hawkins, a professor at theUniversity of Zimbabwe\’s Graduate School of Business.

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As in South Africa, Hawkins does not see outright nationalisationof assets. But miners there will have to contend with an intensebrand of resource nationalism for some time. \”The issue of indigenisation will be with us for a while,\” he said. \”So we will see platinum mines playing for time. They will take thelong term view that \’we are gonna be here for a long time\’ and hopethat perhaps a new government will be more reasonable,\” Hawkinsadded.

Thomson Reuters 2012 All rights reserved SUBSCRIBE to Mineweb.com\’s free daily newsletter now.

RG (Reuters) – Platinum markets have avoided an eruption that would have shakenthem to the

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