Platinum gets center stage in South Africa’s politics

Turmoil in South Africa’s mining industry.

The most immediate and obvious impact will be on global supply of the platinum group of metals. But since the big mining companies involved produce copper, gold, and other metals in their mining of platinum and palladium, the global market for those commodities will get tighter too.

At issue are laws designed to redress the inequalities of apartheid. The laws stipulate targets for black ownership, the employment of black mangers and women, and the economic development of communities near the mines. One goal of the legislation is to make up for the use of cheap black labor in the mines during white rule. Mining companies must sell a minimum 26% stake to black South Africans by 2014.

Mining industry leaders Anglo American (AAUKY.PK) and Lonmin (LNMIY.PK) say that the government has deprived them of mining rights. And that this threatens overseas investment (and therefore jobs—the two companies employ 100,000 in South Africa) in the country’s mining industry. (The industry as a whole accounts for almost 500,000 jobs in the country and for a little more than 5% of South Africa’s GDP.) With mine nationalization on the agenda of a September meeting of the ruling African National Congress, the disagreement seems headed to crisis.

The ore hit the fan in March when the national Department of Mineral Resources awarded a fifth of the prospecting rights in Anglo American’s Sishen iron ore mine to Imperial Crown Trading. Anglo American subsidiary Kumba Iron Ore filed suit to reverse the award.

The award to Imperial Crown Trading is the mining industry’s worst nightmare come true. Read more