The document discusses several topics: 1) Prevailing high wages in Zimbabwe are pushing away potential investors in labour intensive industries, according to a labour expert. Linking wages to the Poverty Datum Line makes Zimbabwe an unattractive investment destination when national income is low. 2) Capital Bank has become insolvent and voluntarily relinquished its banking license, ahead of the June 30th deadline for banks to submit recapitalization plans to the Reserve Bank of Zimbabwe. 3) Ariston Holdings profit declined in the first half of 2014 due to increased borrowing to finance factory rehabilitation programs, which raised finance costs. Higher production volumes helped offset this.

1. News Update as @ 1530 hours, Thursday 5 June 2014
Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw
By Tawanda Musarurwa
Prevailing high wages have an effect of
pushingawaypotentialinvestorsinlabour
intensive industries, a labour expert has
said.
Industrial Psychology Consultants (Pvt)
Ltd managing consultant Memory Nguwi
said the effect of compelling companies
to pay Poverty Datum Line (PDL)-linked
wages had the detrimental effect of mak-
ingZimbabweanunattractiveinvestment
destination.
He said the move to link wages to PDL
at a time when national income was per-
formingbelowparwas'unprecedented'.
"A high wage economy militates against
those investors who are targeting labour
intensiveindustries.Whereinvestorshave
no option they normally resort to auto-
mation to reduce the impact of wages.
Where they have options they move to
lower wage economies where they can
produce competitively. "In developing
countries people aspire for PDL linked
wagesbutit’snotpracticalconsideringthe
levels of productivity. The Government’s
move to pay minimum wages linked PDL
whenGovernmentrevenueisdwindlingis
an experiment never seen anywhere in a
normalworld."
The country's National Employment
Councils (NECs) have been pushing firms
to adjust wages to the PDL, which is
around$550forafamilyofsix.
But industry says this is unrealistic in
view of depressed capacity which cur-
rently stands at 39,6 percent. Cooking
oil producer Surface Investments chair-
man Narottam Somani recently said his
company cannot afford PDL-adjusted
salaries. "Workers demands US$600 per
month, while the company cannot even
pay US$300, and still we are pushed to
negotiate. "Let us not expect the country
to afford to pay the highest salaries in
Southern Africa. We are now dealing in
USdollars,"hesaid.
However, Reserve Bank of Zimbabwe
senior division chief (economic research
and policy enhancement) Simon Nyarota
told industrialists at a Confederation of
Zimbabwe Industries event that it is a
misconception to use the PDL for a fam-
ily six when negotiating for a minimum
wage. He said it would be appropriate to
use the PDL for a single individual which
is calculated by the Zimbabwe National
Statistical Agency at around $150. Zim-
babwe's labour market environment is
borne out in the level of companies that
haveembarkedondown-sizingexercises.
OfficialfiguresfromtheMinistryofLabour
and Social Services indicate that 2 376
workers lost their jobs in 2013 after 165
companies embarked on staff rationalisa-
tionprogrammes.
The numbers show that although
retrenches went down to 2 376 in 2013
from 4 007 in 2012, the number of
companies downsizing maintained an
upward trend. Last year 165 compa-
nies retrenched their workers compared
to 147 companies which retrenched in
2012,asviabilitychallengespersisted. •
High wages driving away investors

2. 2 NEWS
BH24 Reporter
Capital Bank has sunk under financial
insolvency, voluntarily relinquishing
its licence just a few weeks before all
banks were supposed to submit their
comprehensiverecapitalisationplansto
the Reserve Bank of Zimbabwe.
In a statement yesterday the central
bank's Registrar of Banking Institutions
said it had cancelled Capital Bank’s
licencefollowingarequestbythebank-
ing institution.
"The Registrar is satisfied with the rea-
sons for the request and that the can-
cellation will be in the best interests of
the Capital Bank's creditors, depositors
and members.
"The bank has been operating in an
unsafe and unsound financial condition
characterised by critical under capitali-
sation, persistent losses, chronic liquid-
itychallengesandinordinatelyhighlev-
els of non-performing loans," said RBZ.
The cancellation comes just four weeks
before all banks were supposed to
present their comprehensive recapital-
isation plans to the banking regulator.
In January, then acting RBZ governor
Charity Dhliwayo announced (in her
Monetary Policy Statement) an exten-
sion of the deadline for banking insti-
tutions to comply with the $100 million
minimum capital thresholds to Decem-
ber 2020.
But she said all banks were now
required to submit "comprehensive
recapitalisation plans" by June 30,
2014.
"Capital requirements remain at cur-
rent levels of US$25 million for com-
mercial banks, US$25 million for Mer-
chant Banks, US$20 million of Building
Societies, US$15 million for discount
and finance houses and US$5 million
for microfinance banks.
Nevertheless, compliance with Cabinet
approved levels have now been moved
to 31 December 2020.
"In this regard, all banking institutions
are required to submit to Reserve
Bank, comprehensive recapitalisation
plans to meet the new deadline, by 30
June, 2014," she said.
The closure of Capital Bank also
appears to mark the end of its fraught
relationship with majority shareholder,
National Social Security Authority
(NSSA), which began in January 2012
when the authority acquired Renais-
sance Merchant Bank (RMB) (now
Capital Bank) and controlling stake in
Afre Corporation (First Mutual Ltd).
"While the institution is undercapital-
ised, the major shareholder, National
Social Security Authority, is no longer
willing to inject additional capital into
the bank," reads the statement by the
RBZ.
NSSA has always been unwilling to
inject capital into the bank, leaving it to
suffer liquidity challenges. •
Capital Bank capitulates ahead of banks recapitalisation plans deadline

3. BH24

4. By Rumbidzai Zinyuke
ListedagriculturalconcernAristonHold-
ings Limited recorded a reduced profit
after tax for the half year ended March
31 2014 on the back of increased bor-
rowings to finance plant rehabilitation
programmes.
In a statement accompanying the
group’s financial results, finance direc-
tor Martin Dzviti said finance costs
increased by 48 percent to $1 million
as borrowings rose to $14,1 million as
a result of the upgrades at the group’s
factories. Profit for the year stood at
$984 353 down from $2 million in
March 2013. The group’s revenues
were up 29 percent to $8,61 million
from $6,6 million in the prior period
while profit before tax and interest was
$2,34 million after a fair value adjust-
ment of $5 million. Dzviti said Clare-
mont estates’ turnover increased by 12
percent in the review period to $0,849
millioncontributing10percenttogroup
turnover.
Kent estate recorded a turnover of
$0,63 million which was an increase
of 98 percent over the prior year con-
tributing 7 percent of group turnover
while Southdown reported a turnover
of $4,1million. This represents 48 per-
cent of the group’s turnover. Favco’s
turnover was $3 million contributing
35 percent to group turnover. Dzviti
said macadamia harvest had been
slightly delayed by the persistent rains
although production was in line with
last year. However, tea production was
40 percent up from the same period
last year due to good weather condi-
tions. “This trend is likely to continue
into the second half of the year and we
expect to exceed forecast production
for the season,” he added.
He said investment in the tea factory
upgrades last year had improved tea
quality but global tea prices are sig-
nificantly lower than last year mak-
ing export tea prices marginal. In the
period under review, tea sales were 14
percent lower than last year with sales
are expected to increase in the second
half of this year.
“With half the export teas still to sell,
we expect a modest recovery in inter-
national tea prices in the second half of
the year. Traditionally, winter accounts
for the bulk of blended tea sales,” Dzviti
said.Stonefruitsyieldsandpriceswere
in line with forecast and potato produc-
tion is four times last season. Going
forward, Dzviti said the group would
strive to maximize on the underuti-
lized capacity in factories as well as the
rehabilitated ones. •
4 NEWS
Borrowings weigh down Ariston Holdings

5. BH24 Reporter
Mthuli Ncube's hopes of landing the
presidency of the African Development
Bank (AfDB) have been dashed follow-
ing an announcement by the South
African government that it will not
nominate anyone for the post.
Native Zimbabwean and current chief
economist of the AfDB, Ncube was
lobbying to head the regional financier
in view of the impending departure
of current president Donald Kabe-
ruka next year. But the South African
Finance Ministry yesterday said it had
takenadecisionnottonominateacan-
didate for the presidency of the AfDB,
effectively ending Ncube's prospects.
"The process of selecting a candidate
within the Southern African Develop-
ment Community (SADC) is currently
under way and South Africa will act in
accordance with the collective decision
of the region," said the ministry in a
statement..
The current president, Kaberuka, is
currently serving his second five-year
term. He was first elected in 2005,
becoming the seventh president of the
Bank Group since its establishment in
1963.
Members of the AfDB will elect a new
president in May 2015. •
5 NEWS
South Africa ends Mthuli Ncube's AfDB hopes
Guzha gets regional Unilever post
By Rumbidzai Zinyuke
Unilever Zimbabwe managing director
Nancy Guzha has been appointed vice
president of Unilever Southern Africa.
The appointment is a huge feat for the
first female MD Unilever Zimbabwe has
ever had and makes her one of the
few female executives at the helm of
the household products manufacturing
giant.
Guzha has been managing director of
Unilever Zimbabwe for almost three
years and has pushed the company to
regain its position as the most sought
after brand.
She was recruited by Unilever straight
after graduating from Reading Univer-
sity in the United Kingdom in 1997 as
management trainee in finance and
eventually changed to marketing. She
left to join Cairns Holdings Limited after
three years but came back to Unilever
in 2001.
She joined the Unilever office in Dur-
ban as brand development manager
responsible for Lifebuoy and Vaseline
in 2003.
In 2004 she came back to Zimbabwe
as marketing director but left again to
joinInnscor Africaindistributionwhere
she worked for 18 months. She finally
came back as managing director in
2011, a position she has held to date.
Unilever has been in Zimbabwe since
1943 and manufactures products such
as Geisha, Royco Usavi Mix, Sunlight
washing powder and Key bar. •
Mr. Ncube

6. Global food prices fell in May for the
second consecutive month as lower
dairy, cereal and vegetable oil prices
counteracted rising sugar and firm
meat prices, the United Nations Food
Agency said on Thursday.
The Food and Agriculture Organisa-
tion's (FAO) price index, which meas-
ures monthly price changes for a bas-
ketofcereals,oilseeds,dairy,meatand
sugar, averaged 207.9 points in May.
This was a fall of 2.5 points or 1.2 per-
cent from April, when food prices fell
led by a sharp drop in dairy prices due
to reduced buying in China and Russia
and an extended season in New Zea-
land that boosted stocks. Dairy prices
continued to fall in May, by 12 points
from the previous month.
FAO's cereal price index was lower at
204.4points,a2.4pointdecreasefrom
the previous month. The agency raised
its world cereal production forecast
for nearly 2.48 billion tonnes, almost
1 percent higher than it reported the
month before.
This would be 1.4 percent lower than
2013's record world output but would
still be the second largest production
ever. FAO forecast world cereals stocks
at the end of crop seasons in 2015 to
be 576 million tonnes, an increase of
almost 10 million tonnes from last
month's forecast.
Worldwheatproductionwasforecastat
nearly 703 million tonnes in 2014, 12.6
milliontonnesbelow2013'srecordhar-
vest.
Wheat prices, which had contributed
to price rises in recent months partly
due to fears of disrupted trade flows
from Ukraine, fell as shipping patterns
from the country remained regular
and weather conditions improved, FAO
said. — Reuters •
AGRICULTURE6
World food prices drop in May for second consecutive month

7. BH24

8. By Rumbidzai Zinyuke
The recent hike in consultation fees for
doctors by Government has put a dent
on the pockets of consumers as it has
increased their health bill and subse-
quently the cost of living.
According to the Consumer Council of
Zimbabwe, the cost of living went up
by 5,1 percent at the end of May from
US$559,42 in April to US$587,97.
The $28,55 increase was attributed to
the increase in medical consultation
fees. Last month, consultation fees for
general practitioners were increased
from $20 to $35 while consultations at
general practitioners’ rooms would now
be charged at $30. Initial consultations
at physicians and or pediatricians are
now pegged at $100 while subsequent
visits were set at $70.
The consumer body said the health
basket had gone up from $20 a month
to $55 as a result. The food basket
however decreased by $2,61 from
US$151,35 in April to $148,74 by the
end of May as a result of supermarket
promotions on most products and the
ongoing OK Grand Challenge promo-
tion. The price of detergents increased
by 12,79 percent from $9,07 to $10,23
as the price of laundry bars went up.
Increases in prices were recorded in
tomatoes which went up by 27c from
$0,80 to $1,07. Sugar went up by 10c
from $1,75 to $1,85 while cooking oil
slightly increased from $1,65 to $1,67.
The prices of laundry bars increased
by 23c from $0,96 to $1,19, washing
powder by 8c from 81c to 89c and salt
by 3c from 20c to 23c. Prices for beef
and tea leaves declined from $4,40 to
$4,10 per kilogramme and $1,87 to
$1,85 respectively. Onions went down
by 53c from $1,60 to $1,07 and flour
by 2c from $1,89 to $1,87.
The prices of the other basic commod-
ities which include fuel, margarine,
mealie meal, fresh milk, bread, rice
and bath soap remained unchanged
from the April figures. The cost of
water and electricity transport, rent,
education and clothing also remained
constant. •
8 NEWS
Medical fees hike pushes up cost of living

9. Selected heavyweights again drove the
equities market forward as the Indus-
trials Index gained 0.41 points (or 0.23
percent) to close at 177.04 points.
In industrials, counters that traded in
the green outweighed those in the red
8 to 4. Giant telecoms Econet surged
up 0.13 cents to close at 68.15 cents,
while Afdis was 0.10 cents firmer at
32.10 cents. Meikles rose 0.50 cents to
settle at 18.50 cents, while conglom-
erate Innscor advanced 0.36 cents to
73.06 cents Cement producer PPC
inchedup0.20centstotradeat213.20
cents, with Padenga also trading pos-
itively, adding 0.15 cents to close at
8.30 cents, Dawn Properties went up
5.56 percent to trade at 0.95 cents. On
the downside, First Mutual slipped 0.50
cents to 6.50 cents. Turnall lost 0.25
cents to 1.75 cents and ART retreated
0.10 cents to trade at 0.30 cents.
Volumes remain subdued but were
improved from yesterday, closing at a
value of trades of $1.090 million. The
increase in volumes was driven by
trades in Delta, FBCH and TSL.
The Mining Index added to yesterday's
gains, trading 4.07 points higher (or
12.07 percent) to close at 37.79 points
following gains into counters. Riozim
added 4 cents to close at 19 cents,
while Bindura pushed up 0.28 cents
to settle at 2.50 cents. Falgold and
Hwange maintained previous trading
levels. — BH24 Reporter •
9 ZSE REVIEW
Heavyweights drive bourse momentum

10. The failure of Capital Bank, which
came full circle yesterday when the
bank approached the Reserve Bank
of Zimbabwe to voluntary relin-
quish it licence, should serve as an
important lesson to the National
Social Security Authority.
NSSA has become renowned for
making bad investment decisions,
but acquiring a controlling stake in
2012 in the troubled bank probably
tops them.
Indications from the market point
to the fact that NSSA's new acqui-
sition was always headed south-
wards.
The bank - renamed Capital Bank
from Renaissance Merchant Bank
(RMB) after waywardness of previ-
ous chairman Patterson Timba - is
said to have inherited a bad loan
book, with at least 95 percent of
the loan book non-performing, it is
believed.
NSSA also took a bank that inher-
ited an overestimated asset on its
balance sheet in the form of Afre
shares (now First Mutual Holdings
Ltd).
The question remains: why?
Does NSSA have the right internal
capacities to carry out due diligence
before investing pensioners' funds?
If no, why did they not engage
external players who are better
capacitated?
NSSA seems to be stuck on "buy",
even when there may be nothing
worth buying on the market.
And with NSSA having injected
around $50 million in a now-de-
funct financial entity, the ques-
tion on many a depositor and the
general public is: will the authority
recover those monies, which - in
all proper sense - belongs to other
parties?
The money NSSA has "lost" so far
amounts to a little more than just
$10 million too. The whole story of
NSSA in business has been one of
"wrong choices made at the wrong
time".
General estimations point in the
direction of the authority having
squandered over $100 million of
pensioners' money in bad invest-
ments after buying shares in strug-
gling companies.
Additionally, NSSA has been mak-
ing these "investments" at inflated
prices.
Some of these "investments" to
date include the $50 million injec-
tion into troubled Capital Bank,
$2,5 million invested in the now
defunct CFX Bank, $12 million
splashed on overpriced Starafrica
shares and $1,5 million into Afri-
com Continental.
It is also estimated that $45 mil-
lion, which was placed with Interfin,
is locked in the financial institution
which is under curatorship follow-
ing an alleged abuse of depositors'
funds and high levels of non-per-
forming insider loans amounting to
$60 million.
These are the well-publicised ones,
but could just be the tip of the ice-
berg.
NSSA needs to get its act together,
because ultimately, it is the ordi-
nary pensioner who suffers. •
10 BH24 COMMENT
Capital Bank should be a lesson learnt...for NSSA

11. After 17 years, the timing is finally on
Kenya’s side as the government read-
ies its first Eurobond sale, betting the
nation’sgrowthprospectsandresurgent
demand for emerging-market debt will
keep borrowing costs contained.
Investors may demand a yield of about
7percenttobuythesecurities,lessthan
the 7.48 percent yield on similarly rated
Zambianbonds,accordingtoRazaAgha
at VTB Capital Plc in London. Aly-Khan
Satchu at Rich Management Ltd. in Nai-
robi sees a range between 7.5 percent
and 8 percent, depending on whether
Kenya sells $2 billion or $1.5 billion.
“Wearestilllivingthroughanothersixto
nine months of an environment which
is very, very beneficial for issuers given
the high demand for emerging mar-
kets,” Yerlan Syzdykov, who helps over-
see the equivalent of about $5.4 billion
as head of emerging markets bond and
high yield at Pioneer Investments, said
in an interview in London yesterday. “A
lot of countries, especially in sub-Saha-
ranAfrica,willusethisasanopportunity
to tap the market.” East Africa’s largest
economic growth will probably acceler-
ate to 6.3 percent this year, from 5.6
percent in 2013, driven partly by tea
and cut flower exports, according to
International Monetary Fund estimates.
African dollar debt returned 8.3 percent
this year, with the average yield drop-
ping to a one-year low of 5.06 percent
last week, JPMorgan (JPM) Chase & Co.
indexes show. Gains have been fueled
by speculation central banks in Europe
and the U.S. will keep monetary policy
accommodative.
Record Sales Kenya first considered
selling Eurobonds in 1997, and would
be following a record year for Africa in
2013. That included a first-time offering
by Rwanda, and sales by Nigeria and
Ghana. Zambia, which shares Kenya’s
B1 rating at Moody’s Investors Ser-
vice, sold $1 billion of Eurobonds priced
to yield 8.6 percent in April. The rate
was 7.51 percent yesterday, up from
a record low of 7.35 percent two days
earlier. “Kenya is a stronger credit, so
it should price inside Zambia,” Agha,
VTB Capital’s chief economist for the
Middle East and Africa, said yesterday.
“I expect there to be good demand for
the issue.”
Barclays Plc, JPMorgan, Standard Bank
Group Ltd and QNB Capital were picked
to organize investor meetings in the
U.S. and Europe from today until June
15, a person familiar with the deal said
yesterday. A benchmark dollar bond
may follow, according to the person,
who asked not to be identified because
they’re not authorized to comment. —
Bloomberg •
11 REGIONAL News
Kenya Readies Debut Eurobond after 17-Year Wait: Africa Credit

12. 12 DIARY OF EVENTS
The black arrow indicate level of load shedding across the country.
POWER GENERATION STATS
Gen Station
5 June 2014
Energy
(Megawatts)
Hwange 699 MW
Kariba 750 MW
Harare 46 MW
Munyati 18 MW
Bulawayo -- MW
Imports 105 MW
Total 1615 MW
5 June 2014 – Indigenisation
Policy Dialogue Place: SAPES
Seminar Room, 4 Deary Ave-
nue Belgravia, Harare, Time :
5pm-7pm
11 June - Rainbow Tourism
Group 15th Annual General
Meeting of the Shareholders,
Place: Jacaranda Rooms 2 and 3
at the Rainbow Towers Hotel and
Conference Centre, 1 Pennefather
Avenue, Harare, Time: 12:00
13 June 2014 - Securities and
Exchange Commission of
Zimbabwe 2nd Shareholders
Forum & Responsible Invest-
ing in Zimbabwe Conference
2014 Place : Cresta Lodge,
Harare, Time : 8am -2pm
26 June - Masimba Holdings
Limited Thirty-Ninth Annual
General Meeting of Mem-
bers for the period ended 31
December 2013, Place: 44 Til-
bury Road, Willowvale, Harare,
Zimbabwe, Time: 12:00
THE BH24 DIARY

13. BH24

14. 14 zse
ZSE
Movers CHANGE Today Price USc SHAKERS Change TODAY Price USc
Riozim 26.67% 19.00 ART -25.00% 0.30
BNC 12.61% 2.50 Turnall -12.50% 1.75
Dawn Properties 5.56% 0.95 First Mutual -7.14% 6.50
Meikles 2.78% 18.50 ZPI -2.44% 0.80
Padenga 1.84% 8.30
Innscor 0.50% 73.06
AFDIS 0.31% 32.10
Econet 0.19% 68.15
PPC 0.09% 213.20
Indices
Index Previous Today Move Change
Industrial 173.46 174.06 +0.60 points +0.35%
Mining 29.39 33.89 +4.50 points +15.31%
Stocks Exchange

15. 15 AFRICA StockS
Botswana 8,664.65 -11.96 -0.14% 12July
Cote dIvoire 246.37 +2.18 +0.89% 07Mar
Egypt 7,949.60 -75.68 -0.94% 06Mar
Ghana 2,324.35 +5.23 +0.23% 02June
Kenya 4,881.56 -13.57 -0.28% 30May
Malawi 12,662.47 +0.00 +0.00% 07Mar
Mauritius 2,074.51 -3.51 -0.17% 07Mar
Morocco 9,544.10 +21.01 +0.22% 07Mar
Nigeria 41,502.00 +27.60 +0.07% 02June
Rwanda 131.27 +0.00 +0.00% 24Oct
Tanzania 2,018.97 +25.40 +1.27% 07Mar
Tunisia 4,624.39 -39.32 -0.84% 07Mar
Uganda 1,503.90 +0.81 +0.05% 10Sep
Zambia 4,242.74 +14.95 +0.35% 10April
Zimbabwe 174.91 +0.02 +0.01% 02June
African stock round up Commodity Prices
Name Price
Crude Oil 1,300.91 -0.21%
Spot Gold USD/oz 1,292.63 -0.26%
Spot Silver USD/oz 19.38 -0.46%
Spot Platinum USD/oz 1,421.25 -0.33%
Spot Palladium USD/oz 798.50 -0.64%
LME Copper USD/t 6,770 -0.18%
LME Aluminium USD/t 1,780 -1.17%
LME Nickel USD/t 18,230 -1.73%
LME Lead USD/t 2,095 -1.41%
Quote of the day —"The merit in
action lies in finishing it
to the end." - Genghis Khan
Globalshareholder.com
Email to smartmoney@cbz.co.zw
or WhatsApp to 0783168249
CBZ SmartMoney is available on all
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electricity using
CBZ SmartMoney

16. 16 INTERNATIONAL NEWS
Gold holds near 4-month low as ECB move on rates awaited
Gold was little changed near a four-
month low on Thursday but faced a
risk of more losses if the European
Central Bank (ECB) meets expecta-
tions to cut rates, a move that could
strengthen the dollar and hurt bullion.
The ECB is poised to impose negative
interest rates on its overnight deposi-
tors at its Thursday meeting, seeking
to cajole banks into lending instead
and to prevent the euro zone falling
into Japan-like deflation.
A weaker euro and a stronger dollar
would make the dollar-denominated
gold more expensive for holders of
other currencies. Spot gold was flat at
$1,243.51 an ounce at 0642 GMT.
Themetalisclosetoitsfour-monthlow
of $1,240.61 hit earlier in the week.
"Technically, the trend for gold is very
clear. It is heading downwards and is
likely to test support level at $1,200,"
said Mark To, head of research at Hong
Kong's Wing Fung
Financial Group. "Financial markets are
quite bullish and investors are not risk
averse as they expect U.S. economic
data to be strong."
To noted that while an ECB move to cut
rates could theoretically support gold
as a monetary easing measure, tech-
nical momentum and a stronger dollar
could have a much bigger impact on
prices. The euro languished at four-
month lows early on Thursday, while
thedollarindexheldnearafour-month
peak hit earlier in the week.
Markets were also eyeing Friday's U.S.
nonfarm payrolls to gauge the strength
of the economy. A weak report could
burnish gold's safe-haven appeal.
In news on other precious met-
als, South Africa's AMCU union has
rejected a government wage increase
proposal aimed at ending a crippling
five-month strike by platinum miners,
the Business Day newspaper reported
on Thursday.
South Africa's new mining minis-
ter Ngoako Ramatlhodi had said on
Wednesday that he hoped to resolve
the strike this week. — Reuters •

17. By Frik Els
Labour negotiations at South Africa's
PGM mines are edging closer to a reso-
lutionastalksmediatedbyaministerial
task team continue.
July platinum softened for a fifth ses-
sion in a row on Wednesday to $1,433
an ounce and is down sharply from
the $1,493 level less than two weeks
ago over renewed hopes for an end to
the strike and tensions between Russia
and the Ukraine fading into the back-
ground.
South Africa and Russia combined
account for close to 80% of global sup-
ply of palladium and 70% of platinum
output which are mainly used to clean
emissions in automobiles.
Palladium has outperformed its sister
metal, with the price of June palladium
trading flat on Wednesday at $837 an
ounce,butnotfaroffathree-yearhigh.
Palladium hit a record price of $865 in
February 2011. More than 70,000
workers at the world's three largest
platinum and palladium producers,
Anglo American Platinum (LON:AAL),
Impala Platinumm (OTCMKTS:IMPUY)
and Lonmin (LON:LMI), have been on
strikesinceJanuary23.Newly-installed
Minister of Mineral Resources Ngoako
Ramatlhodi said the team hoped to
have a resolution by the end of the
week while leader of the militant Amcu
union Joseph Mathunjwa said the talks
"went well".
More meetings with both sides are
scheduled for Thursday. The latest
offer from mine management calls
for a monthly increase of R800 ($75)
a month every year for five years for
those at the bottom of the pay scale
and smaller hikes for those that earn
more. The R800 equates to 16% pay
increase for the first year for those
earning the minimum of some R4,500
($420) a month currently. Mathunjwa
described a previous similar offer as
simply a "repackaging".
The companies' have lost combined
revenue of R20.9 billion (some $1.9
billion) while striking workers have lost
almost $900 million in forfeited wages.
Roughly 10,000 ounces of platinum
production and 5,000 ounces of pal-
ladium are lost each day the strike
drags on. Even when strikers do return
to work it would take up to three
months to restart production. Despite
the recent softening, the strike and a
stand-off between the West and Russia
over Ukraine have pushed the plati-
num price up 4% this year, while the
palladium price has surged 16% this
year to three-year highs. A huge factor
boosting the palladium price has been
the launch of two new physical palla-
dium-backed exchange traded funds in
Johannesburg in late March.
Holdings in palladium-backed ETFs
rose to fresh record highs of more than
85 tonnes or over 3 million ounces
as at 30 May following the launch of
two physical palladium funds listed in
Johannesburg a few weeks after the
strike kicked off. Holdings in a platinum
ETFs are also at an all-time high.
Industry consultants Johnson Matthey
Plc said in recent report platinum con-
sumption will beat supply by 1.22 mil-
lion ounces while the palladium short-
fall will widen to 1.61 million ounces,
from 371,000 ounces last year and the
eighth year in a row of deficits. That
would constitute the largest market
deficits ever, based on Johnson Mat-
they data going back to 1975 for plati-
numand1980forpalladium.-Mining.
com •
17 Analysis
Platinum price correction underway as strike deal edges closer