The last thing investors in SA’s troubled gold mining shares need are protracted, uncertain wage talks, culminating in a strike or a settlement that squeezes narrow profit margins at a time when the rand gold price is subdued.
Analysts speaking about the mining sector point to a series of above-inflation wage increases and cripplingly high electricity price increases as the two major factors inhibiting the industry.
For SA’s gold mines these two issues are most heavily felt. The mines are labour intensive, requiring large numbers of people in narrow working areas using brute force to drill and extract ore. They are also among the world’s deepest, needing high levels of refrigeration and ventilation, both of which use large amounts of electricity.
SA’s mines are, by and large, old, with working areas drifting further and further away from the shafts that lower employees into the earth. Over the years, combined with falling grades of gold, this has meant productivity has fallen.
The gold sector is not attractive for investors anymore.
So far in 2018, the JSE gold index has fallen a chunky 18%, with the big faller being Sibanye-Stillwater, which is by far the most dangerous gold company to work for in 2018, with 21 people killed at its operations, making up nearly half of the 46 people who have died on South African mines in 2018.
AngloGold Ashanti, the world’s third-largest gold producer, has cut its exposure to SA to a single underground mine and a tailings retreatment business, drawing a firm line under its historical base as it looks for growth abroad in shallower, cheaper, safer mines.
There is a reality at play that the well-intentioned demands from four unions may well run up against in this round of wage talks. The gold sector is in deep trouble and unrealistic demands, if implemented, could bring its demise forward.
Edcon’s shift towards locally sourced products is a win for job creation but a loss for the fashion-conscious consumer. Yes, the group’s decisions to exit chains like River Island and to shut the flagship Topshop store in Sandton make perfect business sense. These international brands are probably just too expensive for the South African consumer.
Partly because of bad timing, a number of Edcon’s international chains failed to gain real traction in SA. At the same time, Edcon has been struggling under a hefty debt burden and competition from foreign chains like H&M and Cotton On, so it is understandable that tough decisions need to be made, and focusing on the core is probably the wise approach.
For those who can afford it, Topshop and (the now closed) River Island offer what is arguably a far more impressive and trendy range than Edcon’s private label products. If Edcon is to make a long-term success of its house-brand strategy, it will surely need to up its fashion game and get with the times. Encouragingly, data show private-label products can work.
According to a report by market research firm Nielsen, published recently, the private-label retail category is growing faster than the branded products segment. Partly because of the strain on consumers, "there is excellent growth potential within SA’s R43bn private-label retail category", Nielsen says.
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