ARTICLES

Showdown at Sibanye

16 January 2019 By PDSNET

It is no secret that, for this country�s economy to really begin to make progress, the populist power of the union movement is going to have to be curtailed at some point. The unions embody the so-called �structural problems� in our economy which economists constantly and euphemistically refer to for three reasons:

1. The high unemployment level is a direct result of employers being reluctant to take on new employees because, once employed, it is extremely difficult to get rid of an employee. The labour legislation requires three letters of warning, meetings and negotiations. It is a time-consuming and expensive process. From an employer�s perspective it is often better to simply avoid employing new people. What needs to happen here is that the labour legislation needs to become considerably more employer-friendly to level the playing field in collective bargaining.
2. At the same time, we have a completely excessive civil service with far too many ministers and far too many people employed by government and quasi-government organisations. Probably, the civil service could be cut in half. Our government cannot afford to pay so many civil servants and ministers � nor does it need to.
3. And then there is the question of the 200-odd state-owned enterprises (SOE) which are sucking the life-blood out of the South African economy and which are a major concern for the ratings agencies. The simple truth is that many of them do not need to be government-owned and should be privatised as soon as possible. They are a constant drain on the fiscus. We desperately need to return to Adam Smith�s idea of laissez-faire, which is that �the least government is the best government�.

Of course, the unions would vigorously oppose any of these moves and President Ramaphosa is surely avoiding any sort of direct confrontation with them until after the election.

THE SHOWDOWN

In the meantime, Neal Froneman, CEO of Sibanye, is in the process of confronting the strongest and most populist of the unions � The Association of Mineworkers and Construction Union (AMCU) and its vociferous leader, Joseph Matunjwa. We believe that this confrontation is a microcosm of the conflict which is to come between the government and the union movement in the country. Matunjwa and AMCU successfully staged a five-month strike in the platinum industry in 2014 and now seek to repeat that success. Froneman has built Sibanye into a formidable force in the platinum industry both locally and internationally. Both men are strong leaders and well matched in this confrontation. The trouble began when, after months of negotiations, Sibanye managed to get agreement with the three other unions (The National Union of Mineworkers, Solidarity and UASA) at its gold mines � but AMCU, which was at the time Sibanye�s largest union, did not agree and went on strike from 21^st November 2018. Sibanye follows a strict �no work, no pay� principle � so those AMCU workers on strike are coming under increasing financial pressure. On 13^th December 2018, Sibanye announced that, as the three unions with which it had concluded an agreement now represented more than half of its gold-mining employees, it had declared the AMCU strike illegal and extended the terms of that agreement to all employees in terms of the Labour Relations Act. This meant that the AMCU strike became unprotected and that its members could be fired for not coming to work. The next move was that AMCU gave notice that a sympathy strike at Sibanye�s platinum mines in South Africa would begin on 22^nd January 2018. Such strikes are permissible in sympathy with a legal strike. AMCU represents 56% of Sibanye�s Kroondal operations and 71% of its Rustenberg operations. One of the most important factors in this confrontation is the fact that, since buying the Stillwater mine in America, Sibanye is not nearly as dependent on its South African mines. Stillwater mines palladium and the palladium price has been rocketing � which supplies Sibanye with a growing positive cash flow. Consider the palladium price over the past six months:

Palladium Price July 2018 to January 2019 - Chart by ShareFriend Pro

This means that time is on Froneman�s side. He can afford to wait as AMCU members run out of money. Of course, the strike has been marred by violence with four people killed so far and many others injured. Matunjwa is desperately trying to prevent all employees from working at Sibanye�s South African mines, but he has no power over Stillwater in Louisiana. To us it looks as though Matunjwa is in a very difficult position. He has committed himself and his followers to a battle that he will probably lose. Sibanye is not under any financial pressure, but AMCU members are. And if Matunjwa loses this battle it will probably destroy his reputation as a fiery populist and it will be a significant victory for sensible economics in South Africa.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:

PDSNET ARTICLES

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments

Sibanye takes off

We have been writing about Neal Froneman and Sibanye for years now. Beginning in 2013, Froneman assembled the Sibanye group over a period of 7 years, buying up mining operations both in South Africa and America at bargain prices. Initially he bought precious metals producers, but more recently he has been diversifying into base metals like zinc and lithium which

The 16 Year Bull Trend

Since the Second World War, the stock markets of the world, including the JSE, have always tended to follow the New York Stock Exchange (NYSE) - and the NYSE is best measured by the S&P500 index (S&P) of its 500 largest companies.

For this reason, we believe it is important for private investors to constantly

CA Sales Revisited

Retailing in Africa is difficult with many of our leading retailers having attempted to open stores in countries to the North of us without notable success. These countries are often unstable and volatile politically. Getting adequate stock to branches has proved problematic and expensive.

It is not surprising therefore that a company has been

Bluetel

Bluetel (BLU) is a company involved in pinless top-ups, prepaid electricity, ticketing and universal vouchers. As such it is a company with substantial repeat business from existing customers. This type of business model is attractive to investors because it implies minimal working capital and strong cash flows.

Bluetel’s purchase

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately