New mines minister faces platinum baptism of fire

September 23, 2015 1:02 PM

Investec Securities described the reshuffle as a "key obstacle" to progress. "Just as the minister gets to grips with all/most of the issues in the sector, we start with a new minister," it said in a note.

Workers leave Lonmin's Karee mine at the end of their shift, outside Rustenburg, northwest of Johannesburg July 29, 2015. REUTERS/Siphiwe Sibeko

For South Africa's new mining minister Mosebenzi Zwane, until now a little-known provincial agriculture official, it was not the ideal first day in the office.

Taking over a sector already bleeding jobs due to the commodity price slump, Zwane was confronted with the price of platinum, one of South Africa's most valuable exports, hitting a 6-1/2 year low due to the Volkswagen emissions tests scandal.

The concern is that any European consumer backlash against diesel cars, which use platinum in catalytic converters, could torpedo already shaky demand for the white metal, nearly all of which is produced in South Africa.

Platinum's biggest daily drop in two years is a stark reminder of what lies in store for Zwane as he tries to walk a line between hostile unions, hardline communists in the ruling ANC and mining firms that have done little to change their ways since the end of apartheid two decades ago.

And the platinum sector is still reeling from a five-month strike, the longest in South African history, last year that has forced shaft closures and mine sales.

Given that ousted minister Ngoako Ramatlhodi, known for his no-nonsense approach, was credited with helping mediate an end to that strike, analysts and mining executives are questioning President Jacob Zuma's wisdom in pushing him out.

Zwane's previous jobs, which include stints as provincial minister for agriculture and rural development in the Free State, do little to boost confidence in the future of a sector that accounts for 7 percent of South African GDP.

Ramatlhodi, who will be minister in charge of public service and administration, a largely box-ticking department, would not be drawn on what amounts to a demotion.

"I'm quite pleased and grateful to my partners in the industry and with the progress we have made together," he told Reuters.

In August he oversaw the signing of a declaration to slow down and ease the impact of job cuts in the struggling mining industry.

TOUGH TALKER

Gold firms have not faired much better than platinum, with its spot price down about 20 percent from last year's peaks. There is also a possibility of a strike emerging from a round of wage talks still rumbling on.

Both labour and management lamented Ramatlhodi's exit.

The National Union of Mineworkers praised him for forcing Glencore's Optimum Coal mine to close after a supply dispute with state power utility Eskom, and "sending a message" to mining companies that they had to follow the rules.

The militant Association of Mineworkers and Construction Union (AMCU) also said it would miss his tough approach to compliance in regard to affirmative action regulations and black ownership targets.

"We feel very strongly that the president should have maybe waited and seen Ramatlhodi pulling through to 2016," AMCU President Joseph Mathunjwa told Talk Radio 702.

Chamber of Mines chief executive Roger Baxter said he appreciated Ramatlhodi's openness to tough and frank conversations intended to achieve the best for the industry.