No retrenchments at Hillside aluminium smelter

In addition to voluntary separation and early retirement packages, a salary freeze for the next three years has also been agreed.

Retrenchments at South32’s Hillside smelter will be avoided as an estimated 400, some say 500, employees have opted for voluntary separation and early retirement packages.

In a statement on South32’s website, the mining and metals company said the consultation on the restructuring of the business, had concluded with an agreement between all parties which would be ratified in the coming weeks.

According to Hillside Aluminium’s vice-president of operations, Calvin Mkhabela, in addition to the voluntary separation and early retirement, a salary freeze for the next three years had also been agreed and would provide certainty on labour costs. The smelter would also continue to implement other cost-saving initiatives.

Is the sun setting on South32’s Hillside?

In February, under Section 189 of the Labour Relations Act, the company notified workers it would embark on a restructuring process at the smelter and estimated more than 500 jobs were at stake.

Cornelius van Leeuwen, sector coordinator for the metal and engineering industries for trade federation Solidarity, said that about 400 employees had applied for voluntary separation and early retirement, although he said the union still awaited the final numbers.

Although a forced retrenchment process has been averted, the voluntary exit of workers will significantly reduce the number of employees at the Hillside smelter, which had a headcount of 1 370 prior to the conclusion of the consultation process.

In an interview with Business Day earlier this year, South32 COO Mike Fraser said the smelter had been burning cash in the six months ended December last year.

“The decision to restructure Hillside was not taken lightly. However, it was a necessary step to ensure Hillside’s long-term sustainability as a business and for all those in Richards Bay and surrounding communities whose livelihoods depend on the smelter,” said Mkhabela.

Hillside supplies 120 000 tons of liquid metal to the Isizinda project at Bayside and provides material to aluminium supplier, Hulamin. South32 has estimated that some 29 000 jobs in the wider value chain are dependent on the smelter.

Solidarity’s deputy general secretary of the metal and engineering industry, Marius Croucamp, said that although retrenchments were avoided the reduction in headcount was not a good outcome for labour. He, however, noted that the circumstances faced by the smelter had to be considered. “We have to live with it for now and take it from here. Hopefully, Hillside is now on the path to sustainability.”

The smelter, however, faces another threat to its sustainability as it continues to renegotiate its power supply deal with Eskom. The smelter’s existing power supply deal has been controversial. Because it is linked to the aluminium price, it’s seen as favourable for the company but detrimental to Eskom, which is in financial crisis.

The agreement made sense when it was originally entered into in 1997 because South Africa had surplus power at the time. Now, however, the utility is struggling to meet the country’s power needs. While South32 has recognised that a new power supply contract for Hillside is necessary, CEO Graham Kerr said in February that a good power deal was crucial to ensure the smelter’s future.