A series of bloody clashes at Lonmin's beleaguered Marikana mine have resulted in the deaths of 10 people, including two police officers. The news sent Lonmin's share price tumbling, while simultaneously driving up spot prices for platinum. Above all, though, it served to highlight the growing militant tendency within South Africa's trade union movement - an increasing risk factor for investors in the country.
Trouble initially erupted at the mine, located 60 miles north-west of Johannesburg, when 3,000 Lonmin workers staged an illegal work stoppage over pay and conditions. An already fractious situation at the site escalated into outright violence between two rival unions - the long-established National Union of Mineworkers and the break-away Association of Mineworkers and Construction Union.
The unions are essentially setting militant factions against each other in a bid to monopolise union membership, and the financial and political influence that comes with it. Although extreme, this is hardly the first instance in which the rivalry has spilled over into violence. Other platinum producers, such as Aquarius and Impala, have also had to contend with disruptions in recent months. The deterioration of the security environment for these companies has major implications for global industry given that South Africa accounts for around 80 per cent of the world's platinum production.
Naturally, the Congress of South African Trade Unions condemned the violence, but the underlying problems could become intractable due to endemic political patronage and graft. Regional analysts point out that the union 'turf war' actually reflects internal power struggles that are destabilising the ruling African National Congress (ANC).
Investors with South African interests need to follow the struggle for ascendancy within the ANC closely. If hard-line interests - as characterised by ANC youth leader Julius Malema - came to power, it's likely that companies would be saddled with increased provisions under Black Economic Empowerment legislation, and even full-scale nationalisation could not be ruled out. Certainly, the operating environment within the 'Rainbow Nation' is no longer as favourable due to rising labour costs, worsening industrial relations and continual tariff increases and unreliable supply issues relating to state energy utility Eskom.
