Petra Diamonds averts NUM strike with one-year, above-inflation wage deal

PETRA Diamonds confirmed it had concluded a one-year wage agreement with the National Union of Mineworkers (NUM) which said last week it was preparing to launch strike action at a number of mining firms, including Petra.

“We thank our partners in the NUM for their positive and constructive engagement that has resulted in this agreement,” said Richard Duffy, CEO of Petra Diamonds. “This now allows us to renew our focus on continuing to deliver operationally as we reposition the business in emerging from what has been a particularly challenging period.”

The agreement, which covers Peta’s South African mines for its 2021 financial year ending June 30, offers a once-off ex gratia payment at the end of November 2020 of between R5,000 and R8,500 to employees graded in the A and B Paterson Bands.

Employees in the A band, which according to the Paterson system used in South Africa, refers to semi-skilled employees, will receive a 5.5% increase in their cash earnings, effective from January 1, whilst employees in the B Paterson band will receive a 5% lift.

The NUM said last week it had received a certificate to embark on a protected strike at Petra after the union failed to get a R1,000 wage increase for employees and parity among all the firm’s operations. In response, Petra had offered a 4% pay rise.

William Mabapa, NUM deputy general secretary and chief negotiator at Petra Diamonds, said: “Our members are excited and they gave us the mandate to sign this agreement”.

South African inflation slowed for the first time in three months in August, remaining close to the bottom of the central bank’s target range, said Bloomberg News citing data from Statistics South Africa. Consumer prices rose 3.1% from a year earlier, compared with 3.2% in July. Core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, quickened to 3.3%, the highest level since March, from 3.2%.

In addition to wage increases, the agreement with the NUM identifies “discussion points” that will be settled at a defined stage in the future. Petra has also undertaken to continue discussions on a wage agreement for the 2022 financial year, beginning July 1, 2021.

The agreement removes at least one headache for Petra Diamonds which is currently involved in discussions that may see it reduce high debt levels.

Petra said in mid-September that discussions regarding a new capital structure may involve significant dilution to shareholders. It emerged in March the company was struggling to pay interest to bond holders representing some $650m in debt.

Strike risk in the South African mining sector, however, is still live. The NUM said last week that discussions over wage increases with Exxaro Resources had “collapsed” whilst it hoped to finalise picket rules regarding some De Beers operations following the failure of wage negotiations with the Anglo American controlled company.

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