CAPE TOWN - The fatal police shooting of 34 striking miners sends a negative message to investors in Africa’s biggest economy, as it tries to fight widespread joblessness and poverty, analysts said Friday.
“It does not augur well nor does it indicate a type of foresightedness to avoid a crisis of this nature and avoid preventable complexities in very tough times in global economic and financial conditions.”
Chilling scenes of police firing live ammunition at an angry and armed mob, reminiscent of apartheid brutality, is an image South Africa can ill afford to send into a world that it is wooing for desperately needed foreign capital. President Jacob Zuma cut short a regional summit Friday to return to South Africa where he slammed the violence as “unacceptable” and directly referred to the country’s relationship with foreign investors and development partners.
“We assure the South African people in particular that we remain fully committed to ensuring that this country remains a peaceful, stable, productive and thriving nation,” he said. The latest deaths, with 10 people already killed during the week at the mine, have rallied the platinum price but seen Lonmin’s shares slump by almost six per cent in Friday morning deals on London’s second tier FTSE 250 index. The violence flared in a deadly turf war between rival unions and has shut down the Marikana mine near Johannesburg.
“The unions are very powerful in the country. There’s no doubt about that,” said Owen Nkomo, executive partner at Inkunzi Investments.
“It’s not just about going to a boardroom and sitting and talking, people go to the streets and sometimes unfortunately it gets violent.” With its growth rate lagging behind Africa’s booming markets, South Africa is struggling to rein in massive joblessness and poverty which frequently boils over into violent protests. Strikes are annual events with more than 2.8 million working days lost to stayways last year.
“Foreign investors are now used to this kind of thing happening in South Africa,” added Nkomo, saying companies probably “priced them in” when doing evaluations. While setting a negative tone for foreign investors, the stoppage could see the platinum price continue to rally amid an oversupply, he said. South Africa has the world’s richest platinum reserves but the industry has faced toughening conditions.
The sector was also hit by violence earlier this year when three workers were beaten to death in a six-week wage protest at an Impala Platinum mine.
“The environment hasn’t been great but now I think this might just put a further sort of dampener on potential foreign investment into the mining sector.”
said Hugo Pienaar of the Bureau for Economic Research at Stellenbosch University.
“It’s really tragic what has happened in the past week but it’s not in isolation. Even before this, we’ve heard some of the major platinum players in South Africa curtailing their investment plans just because of the weak fundamentals in the platinum market,” he added.
The scale of the violence has put a new question mark on South Africa’s industrial relations environment as an investment destination, said Abedian.
“It’s one thing to have strong unions,” he said.
“It’s a totally different thing when 30 workers are shot dead, which means neither business leadership nor union leadership nor political leadership have come to the party in time to anticipate and to avoid this type of thing. That is the new question mark.”