Dreams of platinum plenty

South Africa's platinum promise of prosperity has turned into a heap of broken dreams for Vusimuzi Mathonsi, one of 2000 workers laid off by Aquarius Platinum at its Everest Mine.

"This place can only be sustained with platinum. What can we do now?"

Mathonsi poses this question in a dilapidated township on the outskirts of Lydenburg, Mpumalanga.

He belongs to the Association of Mineworkers and Construction Union, whose bloody war for members with the dominant National Union of Mineworkers was the backdrop to Thursday's killing of 34 striking platinum miners by police at Lonmin's Marikana mine.

When Aquarius, the world's fourth-biggest producer of the precious metal, closed production at Everest, it cited worsening industrial relations stemming from the AMCU/NUM war, which has turned workers into warriors across the platinum sector.

More mine shafts might be forced to shut because of union militancy, soaring costs and low platinum prices due to the sluggishness of the global vehicle industry.

Platinum is essential in the manufacture of motor emissions-cleaning catalytic converters.

The gold sector embarked on a painful process of restructuring more than a decade ago as the price of bullion slumped, leading to tens of thousands of job losses and South Africa's fall from world No1 gold producer to fourth place.

"I think the platinum guys are just starting to work out what the gold industry has been through. So they have some hard decisions to make," said Mark Cutifani, CEO of AngloGold Ashanti.

The path blazed by gold, which has made the South African industry lean, mean and profitable, will not be an easy one for platinum to follow in this highly charged new era of social discontent, union rivalry and global economic woes.

But about 80% of the world's known platinum reserves are in South Africa.

Social conditions for mining communities in the platinum belt have not improved, according to a report released this week by the Bench Marks Foundation, an NGO backed by churches.

In harsh criticism of most of the principal mining companies, the report faulted Lonmin's operations.

The report lambasted Lonmin for "high levels of fatalities, very poor living conditions for workers, community demands for employment opportunities and negative impacts of mining on commercial farming".

When platinum was king it laid the groundwork for the current troubles by staying out of the collective bargaining arrangements that define talks between employers and unions in gold and coal.

Platinum-sector companies felt no need for a unified front. The three biggest platinum producers - Anglo American Platinum, Implats and Lonmin - employ about 135000 people between them in South Africa.

The mining sector has for years been dishing out above-inflation pay agreements but this has failed to quell wage demands because the lower-paid workers come off such a low base and often have many dependants.

Citigroup has estimated that South Africa's platinum group metal reserves are worth over $2-trillion (R16-trillion). The sector was to have succeeded gold as the jewel in the country's mining crown.

But high costs and low prices are squeezing the industry. Power and labour costs have been soaring and are far higher than a decade ago when the gold sector was slashing jobs on its way back to healthy profits.