More platinum wealth lies beneath South African soil than anywhere else on Earth, and for decades the companies that extracted the precious metal promised to help improve the lives of the impoverished people who live above their mines. Those communities are getting tired of waiting.

Demonstrations by residents around mines — many living in improvised shacks without running water — have disrupted operations run by producers including Impala Platinum Holdings Ltd., Lonmin Plc and African Rainbow Minerals Ltd. The protesters demanded jobs and money, saying that investments outside of the mines haven’t been enough. Last month, a bus that ferries Lonmin workers was torched, forcing the company to halt operations at two shafts.

While South Africa’s mining industry is no stranger to social unrest, the latest clashes are heaping more pressure on a business already squeezed by prices that are about half what they were in 2010. Companies say they support local economic development but have limited scope to hire and invest until profits improve. South Africa produces about 70 percent of the world’s platinum, which is used in jewelry and mostly as a catalyst to reduce auto-engine emissions.

“The mines don’t appreciate how upset people are,” said Vladimir Mogale, a spokesman for the Bapo Ba Mogale community, which lives close to Lonmin’s Marikana mine. “People feel like they have to burn a bus to get a response.” Mogale said he condemns any violence.

It’s been a difficult few years for platinum producers and the people who live near the mines. In 2012, 34 protesters were killed by police near Marikana in the deadliest state shooting since white minority rule ended in 1994. Three years ago, about 70,000 mineworkers went on a five-month strike that stifled economic growth and led to job losses.

As platinum prices fell and industry costs rose over the past decade, dividends paid to local community trusts dried up and many pledges to improve living conditions went unfulfilled. Frustration is now bubbling over in mining communities, which typically include a mix of mineworkers, job-seeking migrants and rural populations who have been living there since before mining started.

Platinum is down almost 60 percent from its 2008 peak and traded 0.6 percent lower at $939.20 an ounce at 12:46 p.m. in London.

Read: South Africa mine communities ignored in design of social plans

The Chamber of Mines, which represents producers, accepts that companies need to do more to involve black people in the economy, outgoing President Mike Teke said last month.

Besides Lonmin’s, other operations facing community pressures include:

  • Impala’s Marula mine, in Limpopo Province, which may cut a quarter of its workforce after “continued community protest action” hurt performance.
  • African Rainbow Chairman Patrice Motsepe has told protesting community leaders he’s willing to close the Modikwa mine in Mpumalanga if it keeps losing money.
  • Northam Platinum Ltd. says it’s faced “sporadic” interruptions since more serious civil protests in 2015 that blocked roads and employees’ travel to work.
  • Impala and African Rainbow’s Two Rivers joint venture has had disruptions from protesters blocking roads to demand better public services from government.

“We’re dealing with a fire,” said Mxolisi Mgojo, newly-elected president of the Chamber of Mines, which represents producers. “It’s the cry of a need to be involved and participate in the economy.”

Poverty and joblessness are not limited to mining regions in South Africa, which has slipped into its second recession in eight years and has an unemployment rate of 28 percent.

But tensions are heightened by the historic injustice of apartheid, where the whites-only government allowed mining companies to profit from the country’s resources with little regard for the black majority or the working conditions of black mineworkers. The improvement in standards of living since Nelson Mandela ushered in democracy in 1994 has also been slow in many areas.

For more about the challenges facing the platinum industry, click here

In 2006, Lonmin pledged to build 5,500 houses but had completed just three of them six years later, according to Amnesty International. The company estimates that half its workforce lives in “substandard” conditions. It has converted all its single-sex hostels into homes and has built 493 of a targeted 1,240 new apartments.

The company is currently conducing a review of its housing strategy with unions and will complete it in the middle of this year, spokeswoman Wendy Tlou said by email. Lonmin will “continue to engage with the unemployed youth and find sustainable ways to address these issues,” including offering career guidance for young people, she said.

In Madibeng, Lonmin’s local municipality, only 27 percent of households had flushing toilets connected to sewerage, according to census data from 2011, the latest available. In Greater Tubatse, where Impala, ARM and Northam Platinum Ltd. have nearby operations, only 6.3 percent of households had flushing toilets and unemployment stood at 50 percent.

So far, protests have had little real impact on platinum output or prices, and global platinum supply is expected to exceed demand this year. However, the disruptions are inflating costs that may mean more cuts in output and jobs. More than half of the industry’s production already is losing money, according to top producer Anglo American Platinum Ltd.

“Without growth how do you bring people further into the economic stream?” said the Chamber’s Mgojo. “You need to have growth as a catalyst.”

Source: Bloomberg


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