A potential powder keg for miners and investors as police kill 34 striking workers [South Africa] – by Danny Deadlock (Stockhouse.com – August 17, 2012)posted in Africa Mining, Mining Conflict |
Institutional and retail investors are (wisely) avoiding many countries because of political risk – including risk of resource nationalization and heavy-handed taxation. But what happened in Marikana, South Africa this week is an entirely different ball game.
As you likely saw in the media, 34 people were killed when police opened fire on 3000 striking platinum mine workers who failed to leave. Many were carrying machetes or sticks and apparently the police felt threatened. Someone made the decision to open fire with automatic weapons and in doing so, they have potentially created problems for the entire mining industry of Africa.
This may be hard to relate to if you live in the city or have never dealt with the unionized mining industry, but around the world mine workers share a common bond. During the 1990’s, I worked in the Canadian mining industry and even the difference between mountain mine workers and prairie mine workers can be dramatically different. But when the smoke settles, they will fight tooth and nail to support their fellow union workers.
During mine disasters or funerals, mine unions will typically send representatives and this was evident during the highly-televised underground mine disaster in Chile (Aug 2010). Mine workers from around the world flew in to help and lend moral support. It is a common theme amongst miners (the brotherhood) and while Africa tends to be more violent, I suspect the same bond exists within that country.
The relevance to Thursday is that this violence will have far reaching implications across South Africa and possibly the entire region. Many countries within Africa have experienced political instability this past year and because the natural resource sector is critical to their economies, the unions are very important and influential. This extreme violence against fellow union workers in South Africa will not be easily forgotten.
Mines in South Africa (PGM mines in particular) have been under extreme cost pressure during 2011 and 2012. The last thing they need is worsening labour and union problems. From the perspective of an investor in South Africa, a person has to second guess the reason for investing there.
When we know they are running into budget problems, the idea of further strikes and escalating violence is simply piling risk on top of risk.
For the rest of this column, please go to the Stockhouse.com website: http://www.stockhouse.com/Opinion/ticker-trax/Aug/17/Review-your-risk-exposure-to-South-Africa–Stockho