South African gold producers offer 4 percent pay rise - CNBC Africa

South African gold producers offer 4 percent pay rise

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This is a fraction of the 60 to 100 percent demanded by trade unions in salary talks billed as the toughest since the end of apartheid in 1994.

The Solidarity union, which represents mainly white-collar workers, said the gulf between the two sides was a sign of the "exceptionally challenging" weeks of negotiations that lie ahead.

The country produced just 167 tonnes of gold in 2012, down from its zenith in the 1970s, when South Africa was digging up 1,000 tonnes a year.

South Africa's mines operate at 4 km or more underground, a depth that imposes huge costs on companies that have also seen a 25 percent fall in the bullion price since January.

They have also had to cope with a sharp increase in the price of electricity.

"They are pleading poverty," Solidarity General Secretary Gideon du Plessis told Reuters of the seven gold companies around the negotiating table. "The Chamber would have to raise its offer dramatically to create the atmosphere for a settlement."

Elize Strydom, the industry's lead negotiator, denied trying to provoke the unions and said that at the current gold price of $1,285 per ounce, two thirds of the companies involved were loss-making - a ratio that rises to 100 percent if capital costs are included.

Despite the tough economic times, she remained confident that a settlement could be reached in the sector, which has also been hammered by wildcat, violent strikes in the last year.

"It is in the best interests of everybody to make progress because this uncertainty is not good for anybody. You want to conclude an agreement and you want everyone to get back to the business of mining," she told reporters.

For the first time, the negotiations include the Association of Mineworkers and Construction Union (AMCU), whose emergence in the platinum sector 18 months ago has turned labour relations in South Africa's mines on their head.

The negotiators were meant to sign a set of "house rules" for the talks but failed to reach agreement even on this basic procedural matter, Solidarity's du Plessis said.

The Chamber of Mines represents firms employing 120,000 of the gold sector's 140,000 workers. It has said that the talks could be dragged out well beyond the normal two months.

Analysts say a final settlement is likely to come in at close to 10 percent, a premium to inflation currently at about 6 percent and more than the companies say they can afford.

The gold mines have shed 14,000 jobs in the past two years and if wage bills rise dramatically they could be forced to make further cuts - an eventuality causing concern in the ruling African National Congress (ANC), which faces an election in the first half of 2014.