One of the most violent events in post-apartheid South Africa took place on August 16 when 3000 miners demanding higher salaries in an illegal strike clashed with police forces, killing 34 mineworkers at Lonmin’s Marikana platinum mine. The context of the incident lies in violent rivalry between the dominant National Union of Mineworkers (NUM) and the Association of Mining and Construction Union (AMCU), an upstart populist splinter union. The AMCU currently operates through illegal worker militancy and challenges the established NUM for representing platinum mineworkers. It is frequently alleged by AMCU-members that NUM is not sincere and pairs off with the patronizing elite as South Africa’s ruling ANC is in a governing alliance with COSATU, the national union confederation that is affiliated with NUM. The growing revolt against NUM stems from the same popular anger that has been fuelling public protests lately, namely the ANC’s inability to counter long-lasting issues of chronic unemployment, poverty and widespread inequality that worsened since the end of the apartheid regime in 1994. The initial use of the ‘common purpose’ law to charge 270 of the striking workers with the murder of 34 colleagues shot by the police, ignited public rage as the law stems from the time of anti-apartheid activism and applies to situations where armed people, who confront the police after which a shooting takes place, are held responsible. After days of national turmoil and embarrassment for President Zuma, prosecutors provisionally withdrew the murder charges until investigations are completed.

Impact on country risk

The platinum sector was already facing soaring costs and low prices caused by the sluggish global car manufacturing industry, making many shafts unprofitable. Since the ‘Marikana Tragedy’ mining operations at the world’s third largest platinum producer have been frozen, sending spot prices up and Lonmin-share prices down, while government and Lonmin officials are trying to broker a peace accord with the South African unions. Even though South Africa is getting more accustomed to violent strikes, speculations about a wider impact on inves- tors’ confidence in the country’s entire mining sector were prompted immediately after the incident. However, the platinum sector differs from other mining industries in some key aspects; it entails the most dangerous work, living conditions are more precarious compared to gold or ferrochrome mines where housing facilities are provided and platinum does not retain a tradition of negotiating through collective bargaining which the gold sector does. Either way South African stocks are being pulled down on growing investors’ anxiety for spreading labour unrest to other sectors. Moreover, a political evolution is taking place as it becomes increasingly tolerable to challenge the established institutions and ANC heavyweights based on growing grass-root discontent over the government’s dealing with socio-economic glitches. Combined with the  mounting  leadership issues and intrigues, speculation on leadership instability is growing in the run-up to the ANC elections in December.

Analyst: Louise Van Cauwenbergh, l.vancauwenbergh@credendogroup.com