S Africa mining bloodshed has global implications

Shocking scenes of South African policemen gunning down a mob of striking miners will reverberate far beyond the country's shores. The sharp escalation of the union turf war at a Lonmin platinum mine is both a sovereign challenge and a global concern.

The human toll is devastating. More than 30 miners were shot and killed during the police action on August 16, according to South African authorities. Ten other people, including two policemen, died earlier this week during clashes between rival unions. About 3,000 angry miners, many armed with clubs and machetes, have been gathering on a nearby hilltop since last week, demanding a doubling of their daily pay.

So far only Lonmin, the world's third-biggest platinum producer, has been forced to shut production. But rival platinum producers Anglo American and Impala Platinum, must be worried that agitators will try to exploit the bloodshed to stir up trouble at their mines.

A broader shutdown would be felt globally. Some 80 per cent of the world's platinum deposits sit deep underground in a 'reef' near Johannesburg. The white metal, essential in the manufacture of car exhausts, has few practical substitutes. That helps explain the five per cent rise in platinum prices as the violence unfolded this week.

The industry is no stranger to labour strife. Platinum is one of the most labour-intensive metals to extract. The work requires miners to tunnel deep underground to chip out cramped and fragile rock formations that frequently collapse and kill their comrades.

Backed by militant unions, workers' pay has been rising about 10 per cent per year for several years. Add in a recent slide in prices due to depressed automobile demand, and many platinum mines are either barely profitable or are now losing money. But supply is slow to adjust because the mines' unusually deep locations make it expensive to shut excess capacity.

Lonmin has repeatedly called for calm. Its falling share price reflects the reality that there is little else it can do apart from hope that the police can break up the mob without the bloodshed spiralling further out of control. South Africa has tremendous natural resources and the country deserves to benefit from a vibrant, well-run mining industry that is a draw for foreign investment. A reset in relations between labour, miners and the government is now more important than ever.