Thank you for your reply to my e-mail in your comment of the day. Yes, South Africa has many plusses especially if one is lucky enough to live in Cape Town as I do - but there are negatives as well, ie high level of crime and violence, lack of government leadership and management capability, corruption and enrichment of the people at the top ie "tenderpreneurs", steady decline in level of basic services provided, unemployment rate in excess of 25% (of those who want to work), etc.
But to try to answer your question about the current labour problems, the quantum of the Lonmin settlement and the way it was achieved (through labour agitation and violence rather than through collective bargaining - the norm here in the mining industry) has created a very difficult situation/precedent where expectations have been raised amongst the rest of the mining community, which cannot be met. Either the demands must be radically reduced or mining managements, who in my view have been very tolerant so far, will have no choice but lay off workers. Further, South Africa's cost of production already exceeds many of our world wide competitors and further cost increases will simply lead to potential investors going elsewhere."

And:

"In response to your request for further comments on the labour relations situation in South Africa I can only add that the immediate future looks bleak to me. My wife and I are UK expats who have lived here for the past nine years and have indeed had the benefits you comment upon.

"As I write this there are approx 75,000 miners who are either out on strike or are prevented from going to work The ignominious cave in by Lonmin granting workers a 22% wage increase has only made things worse as, lo and behold, everybody else wants the same. To cap it all, we now have a truck drivers strike with extreme violence being visited on those who want to carry on working. It would appear in the present climate that violence is all that is necessary for the employers to cave in. Red Robbo with a South African twist.

"In short I cannot see how severe supply disruption regarding precious metals can be avoided. Of course Julius Malema, a demagogue, is exploiting the current turmoil. He is a master of turning these events to maximum advantage and working the crowd. South Africa now, I would say is a far cry from the vision that Nelson Mandela had for the country as basically the mass of South Africans living in poverty have seen no change in their plight since 1994."

David Fuller's view Thanks for your views on South Africa's current mining problems, which I am sure will be of interest to many among the Collective of Subscribers.

All of us who have visited South Africa, as I have been privileged to do on a number of occasions, have found much to admire. We have also marvelled at the stability of the political transition led so ably by Nelson Mandela, relative to what might have occurred.

Currently, the mining industry is the focal point of labour unrest in South Africa and I too suspect that these problems are far from over. The biggest difficulty, as I see it, is that these mines are very obviously wasting assets, now in the latter phase of their productive lives. We know this because production has been declining for a number of years, despite technological advances in the mining industry. Meanwhile, most South Africans and not least the miners themselves will feel that these mines belong to them rather than to foreign shareholders.

Most of South Africa's gold and platinum mines are very deep, with some seams now over 2 miles beneath the earth's surface. Consequently, mining conditions are dangerous and costs continue to rise. There is no easy resolution to these problems because laying off mine workers would be incendiary and invite further calls for nationalisation. Additionally, higher metal prices, while good for the mining companies, will also lead to higher wage demands.

I can remember buying leading South African mining shares when several of them yielded over 13%. It must have been in the late 1970s or early 1980s although I cannot recall precisely. Those days are obviously long gone. I regard these companies as very speculative today, although they should have a good tailwind in the form of precious metal prices over the next year or more. Meanwhile, I much prefer the metals and any production problems in South Africa can only help to boost prices for gold and particularly platinum, as we have already seen.