The current strikes in South Africa’s mining sector come at a bad time for a country whose currency breached a five-year low of 11.20 rand against the U.S. dollar on Jan. 27, the fifth day of work stoppages.

At least 70,000 workers at the world’s three biggest platinum producers, Anglo American Platinum (Amplats), Lonmin and Impala Platinum (Implats), stopped work on Jan. 23.

Members of the Association of Mineworkers and Construction Union (AMCU), which dominates South Africa’s platinum sector, are demanding a minimum entry-level wage of 12,500 rand (1,116 dollars) a month, more than double the current starting rate.

They are also seeking a living-out allowance of 6,000 rand (536 dollars) a month, which is more than three times their current allowance.

A strike also looms in South Africa’s gold mining sector, which was for more than century the largest in the world but is now struggling to hold on to fourth place behind China, Australia and the U.S..

Moody’s rating agency said this week the strike is credit negative for platinum mining companies in South Africa, “as it raises the risk of wage increases in an underperforming industry which has already been affected in recent years by production stoppages and above-inflation wage increases.”

Experts said that if mine owners did accede to the demands there would ultimately be job losses, especially in South Africa’s platinum sector. This is because, at the current price of about 1, 446 U.S. dollars an ounce, platinum production is barely viable.

South Africa possesses more than 80 percent of the world’s platinum group metal reserves, according to South Africa’s Mining IQ database.

Roger Baxter, Chief Operating Officer for the South African Chamber of mines, told Xinhua that at current prices and costs, the platinum industry is not able to pay for long-term capital out of existing cash flow.

“We estimate that 45 percent of the country’s platinum production is marginal or loss-making at the current platinum price of 1,446 dollars per ounce,” he said.

Baxter explained that in 2013 total revenue for the three large South African platinum companies, Amplats, Lonmin and Amplats, was 198 million rand (17.68 million dollars) per day and total expenditure (including stores and materials, sustaining capital expenditure, labor, taxes, dividends, etcetera, but not including long-term capital was 215 million rand(19.2 million dollars) per day

He added that a significant increase in wages will push more South African mines into non-viable territory. “The platinum sector needs time to stabilize and reposition itself for investment and growth in the future.”

The Chamber of Mines is an umbrella body representing major mine owners in South Africa.

When asked whether agreeing to the demand of a 12,500-rand-a- month entry-level salary would mean more job losses, Baxter said the wage was “simply not affordable without closing a significant portion of the industry.”

The South African platinum mining companies have offered pay increases of 8.5 percent in a country where consumer price inflation is 5.3 percent. Although the international platinum price reached more than 2, 000 U.S. dollars an ounce before the 2008 global recession, falling demand has seen the price drop.

Historically the biggest demand for South African platinum has been from the motor industry in Europe, where it is used in catalytic converters. As car sales in Europe waned, the platinum price followed. Despite recent hints of a possible recovery in the European auto market, a new source has emerged with the recycling of up to two million ounces a year. This is approximately 50 percent of South Africa’s annual production.

Although the latest strikes in South Africa caused a slight rise in the platinum price, any positive effect will be negligible in the absence of production.

Amplats, the world’s biggest platinum producer, expects to lose about 4,000 ounces of production, Lonmin about 3,100 and Impala 2, 800 ounces, all dependent on how long work is disrupted. At current prices, that could translate to about 14 million dollars.

Ross Harvey, research fellow at the South African Institute of International Affairs, said that because about 60 percent of South Africa’s foreign exchange is earned through mining, these figures would have an adverse impact on the country’s already weakening currency and its “dismal current account deficit.”

Harvey added that repeated productivity losses have a ripple effect through the South African economy.

“First, they contribute to industry contraction, which inhibits productivity upstream and downstream. Every aspect of the value chain is negatively affected,” he wrote in the influential Johannesburg newspaper, Business Day.

“This undermines productivity growth in the broader economy, something South Africa can scarcely afford in the context of already anaemic growth.”

As of Jan. 28, union and mine bosses were still locked in mediation under the auspices of South Africa’s Commission for Conciliation, Mediation and Arbitration (CCMA). This came after the intervention of two South African cabinet members on Jan. 24.

Susan Shabangu, Minister of Mineral Resources, and Mildred Oliphant, Minister of Labor met with AMCU President Joseph Mathunjwa and 40 AMCU shop stewards before meeting the chief executives of Amplats, Lonmin and Implats. Only then did the union leaders sit down with the mining executives.

Three days were then set aside for talks under the auspices of the CCMA, mostly in the absence of the executives. These talks were set to conclude on Jan. 29.

Although the country’s economy faces other pressures, including a large current account deficit of 6.8 percent, South African economist Mike Schussler says protracted strikes could exacerbate the problems.

Schussler said that contrary to some expectations, the weakening of the South African rand would not provide much in the form of increased exports.

“We cannot export our way out of trouble because the capacity in the economy is not there. There is no electricity to produce more chrome or aluminum or gold, no railway capacity to increase iron ore or coal shipments, and no capacity at our ports.”

South African Finance Minister Pravin Gordhan also warned about the negative impact of the strikes. Shortly before the platinum strike began on Jan. 23, Gordhan told national radio broadcaster SAfm that the country could not afford another round of labor unrest in the platinum industry.

Cautioning against the effects on the South African economy, Gordhan said, “I think the platinum industry needs to seriously get around the table. We can least afford another round of strikes that will act as a destabilization to the platinum sector which has had increasing difficulties over the last 18 months.”

South Africa’s Minister of Planning, Trevor Manuel, speaking at the World Economic Forum in Davos, Switzerland on Jan. 24 , warned that South Africa’s labor movement was damaging industrial relations. Manuel added that internal divisions in the Congress of South African Trade Unions and AMCU were creating a dysfunctional labor market.

This did not bode well for South Africa’s industrial relations environment, “because there are too many forces who kind of want to thump their chests. The country needs a labor market that operates efficiently,” Manuel said.

The strikes are occurring in South Africa’s platinum-rich North West Province, whose Premier Thandi Modise said work stoppage was not in the interests of anyone.

In a statement to the media, she said the parties involved should strive for a win-win solution so that the strike could be brought to a speedy conclusion.

This view was echoed by the Chamber of Mines’Baxter, who told Xinhua, “We hope agreement will be reached soon.”

All role players seem to agree on the need to end this vicious cycle where strikes lead to contractions of a mining industry in trouble. However, they do not agree on how to get there.

One of the sore points for workers is the disparity between the pay of chief executive officers (CEOs) and those who work underground. Figures gleaned from annual reports show that, for example, Chris Griffith, CEO of Amplats, received 6.9 million rand (616,000 dollars) in 2012.

In that year Implats boss David Brown received 7.05 million rand (629,000 dollars), while Ian Farmer, who was head of Lonmin, took home 13.85 million rand (1.24 million dollars).

Employers justify these packages by arguing that the CEOs possess scarce skills and are competing in a global market where global salaries are demanded.

Hanging over the strikes is the memory of an incident which saw 34 striking mineworkers shot dead by police at Lonmin’s platinum mine at Marikana in South Africa’s North West Province on Aug. 16, 2012.

Surrounding this event was a decisive shift in worker support away from the more established National Union of Mineworkers to the more radical AMCU. Led by the controversial Joseph Mathunjwa, AMCU is renowned for taking a hard line in wage talks.

Reports in several South African media indicate that AMCU may be intimidating others who want to work. On Jan. 25, South African Police Brigadier Thulani Ngubane cited three criminal cases where AMCU was involved in mine-related violence in the North West Province.

Under South African law, the strike in the platinum industry is legally protected because the union has gone through the correct procedures. However, the proposed strike in the gold sector has not received the same protection, following legal challenges by mine owners.

In January 2103, Amplats said it would need to reduce its workforce by 14,000. However, under pressure from the South African government and unions, this figure was lowered to 6,000 by May 2013. Negotiations on these job cuts have not been concluded. In a country where the official unemployment rate is 25 percent, the government sets a high premium on job creation, and seeks to avoid job losses.