The spill over effect of industrial action on the profitability of platinum mining companies
DOI:
https://doi.org/10.17159/Abstract
Synopsis
The purpose of this study was to determine the effects of industrial action on profitability. This study compared South African platinum mining companies with employees engaged in industrial action (affected companies) to competing platinum mining companies without such action (competing companies). Contrary to international literature that suggests that spill over effects of industrial action have a positive impact on competing companies, this study shows the opposite. The results show profits in the platinum sector decreased significantly during the strike period for both the affected companies and the competing companies. The results signal to management of the mining companies that industrial action is a threat to profitability and that employee demands should be treated with priority and negotiated with labour unions with urgency before they result into deadly industrial action. Improved dialogue between management, labour unions and employees in the platinum mining industry is recommended. The study contributes to the scarce literature on the spillover impact of industrial action on the profitability of mining companies affected by industrial action and unaffected competing mining companies in a developing economy. T - statistics of significant differences in revenue and earnings before interest, tax, depreciation and amortisation of affected and non-affected platinum companies was conducted. Platinum mining companies examined are those listed on the Johannesburg Securities Exchange from 2012 to 2015. Industrial action refers to strikes by rock drillers, as these labour strikes typically result in the shutdown of production at the mines affected.
Keywords
Industrial action, firm profitability, platinum mining, mining industry
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