Sibanye under pressure as 1 959 employees could be impacted by a restructure

In a News24 article, Kevin Lings (a respected South African economist) pointed out that consumer inflation and interest rates will make the next six months quite tough for South African consumers. This is a further indication that we are in the middle of an economic crisis that is showing signs of worsening instead of improving.

The current crisis has already impacted Comair, one of South Africa’s biggest and oldest brands, as well as Tongaat Hulett (another one of South Africa’s much-loved brands) which was recently placed in business rescue. Statistics from Statistics South Africa shows that liquidations are increasing as opposed to decreasing which is worrying signs for the turnaround profession. “This current period of volatility is extremely concerning. After a golden period, the turnaround profession may be in for some tough times ahead,” said a prominent turnaround professional who spoke exclusively to Turnaround Talk but wished to remain anonymous.

Traditionally, South Africa could count on the mining industry to be a major growth lever for the economy. There is potential to find new growth in the gold mining sector with the hydrogen by-product that is created during the mining process, and there is significant demand for South African coal as many countries around the world battle with energy crises. However, even the South African mining sector is now feeling the pressure of a volatile operating environment.

Section 189 consultations

The News24 article points out that Sibanye-Stillwater’s gold division will enter into Section 189 consultations regarding the future of two gold operations, where possible retrenchments could affect 1 959 employees and 465 contractors.

On 1 November, the company said it will enter into talks with organised labour and other affected stakeholders regarding the possible restructuring of its South African gold operations following ongoing losses at the Beatrix 4 shaft and the impact of depleting mineral reserves to the Kloof 1 plant.

The article adds that the formal consultation process has been launched in terms of Section 189 of the Labour Relations Act and will consider measures to avoid and mitigate possible retrenchments and look for alternatives to the potential cessation or downscaling of operations and associated services.

Possible retrenchment avoidance measures include natural attrition, retirements, voluntary separation and the transfer of suitably skilled employees to vacant positions.

Far reaching impact

The News24 article points out that the move comes after Sibanye’s gold business and workers clinched a wage deal in June, following a three-month strike.

Sibanye said the proposed restructuring could potentially affect employees at Beatrix 4 shaft, as well as those employees who provide support services to the shaft, and Kloof 1 and 2 plants. In addition, employees may be affected at associated companies, including Sibanye Gold Protection Services Limited and Sibanye Gold Academy Proprietary Limited.

“Ongoing engagement with stakeholders through regular future forum meetings to address the plight of Beatrix 4 shaft and Kloof 1 plant have been unsuccessful. It has become increasingly evident that, due to increasing costs and an inability to achieve targeted productivity levels, it will be difficult to secure the profitability levels required for the sustainability of the mine and plant,” the company said in a statement.

The article adds that to allow shafts and operating plants that are no longer sustainable to continue operating at a loss, will threaten the remaining life of mine of the other South Africa gold operations, and ultimately also the employees of the broader Group, said Sibanye’s Chief Regional Officer for Southern Africa, Richard Stewart.

“We are committed to minimising the impact of the proposed restructuring and will constructively engage with all relevant stakeholders in an effort to avoid job losses, while attempting to limit the impact on the remainder of the operations employees and the sustainability of the group,” he said.

External influencer

Sibanye has negotiated a period whereby it had to negotiate wage increases while it was facing operational issues. This is never easy and may be an early sign of financial distress if the operational issues are not improved following the restructure.

There is also an external influencer. While there is a demand for South African commodities, Transnet is facing its own issues. The SOE has itself come off a period whereby it had to deal with mass action at its ports and the entity’s operational challenges are well known.

How will this influence the political space over the next two years? While our general elections are only in 2024, the ANC selects a new leader at the end of this year. Top of his/her agenda will no doubt be the energy crisis as well as the unemployment crisis. They will have to come up with an action plan to boost our economy or we will see many more Comair’s and Tongaat Hulett’s in the future.