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 unemployment and poverty, analysts said on Friday.
Violent protests and strikes led by powerful labor unions are customary in South Africa, but Thursday’s bloodbath at a mine run by Lonmin, the world’s third-largest platinum producer, is the worst since apartheid’s end in 1994.
“The message is pure and simple: It’s a negative message,” Pan African Investments chief executive Iraj Abedian said, saying it reflected badly on the company and unions, but also political leaders. “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.
South African President Jacob Zuma cut short a regional summit on 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 platinum prices, but seen Lonmin’s shares slump by almost 6 percent 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,” Inkunzi Investments executive partner Owen Nkomo said. “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 unemployment and poverty that frequently boils over into violent protests.
Strikes are annual events with more than 2.8 million working days lost to stayaways last year.
“Foreign investors are now used to this kind of thing happening in South Africa,” Nkomo said, adding that 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.”