Reference no: EM13493281

African Gold, Inc.-Ethics and AIDS in the Workplace

Harry Goldstone, head of human resources for African Child, Inc. in South Africa examined the stack of newspaper and business magazine clippings on his desk. In the last few weeks, there has been numerous stores about the company's decision to stop paying transport, coffin and funeral costs for employees who die from non-mining related causes. The decision was linked to the depletion of the funding source normally used to cover these costs. In the last few years the fund had decreased rapidly because of the increasing number of HIV/AIDS deaths among miners working for African Gold, Inc. Goldstone has come to South Africa from the headquarters of Newtown Mining  Inc.(a U.S. company), which had recently purchased a 49 percent share in African Gold. As part of the deal Newton had agreed to assign some of its staff to help build management and technical skill capacity in African Gold, Inc. The deal was a good one for Newton and part of its strategy to increase gold production and global acquisition of gold properties. The company already had global operations in Australia, New Zealand, South America and Central Asia. African Gold Inc was its first investment in Africa. Government laws did not allow a foreign company to have a majority share; Newton held a 49 percent stake in the company. South Africa has some of the largest gold reserves in the world. Goldstone and his new-found colleagues at African Gold had been working to review and revise human resource policies. As part of that review, the company planned to continue its education program on HIV/AIDS for employees.

       Although African Gold, Inc. did not have exact figures of the prevalence of HIV among its present labor force, recent data indicated that, countrywide, there was an average of 20 funerals a month for workers who has succumbed the disease. The average cost of funeral is 10000 rands (about $1,250). Additionally, the costs of the company's medical aid and disability programs were skyrocketing because of HIV/AIDS related diseases (e.g. tuberculosis, pneumonia). Goldstone also realized that these amounts would be even higher if the cost of absenteeism, productivity losses, recruitment and training were calculated. The increased costs were coming at a time when the profits of many gold mining companies were falling because of the growing strength of South African currency (i.e. the rand). The price of gold in rand terms fell 6% over the last few quarters. Decreasing profits hit smaller mining companies like African Gold, Inc. greater than the largest producers.

Statistics indicated the number of HIV/AIDS-related deaths as a proportion of total deaths in South Africa has virtually doubled from 4.6 to 8.7 between 1997 and 2001.South Africa has one of the fastest growing HIV epidemics in the world with an estimated 1,700 new infections diagnosed daily. Additionally the mining industry in South Africa has the highest prevalence of HIV/AIDS infections compared to 19.9 percent of the remainder of South Africa working population. By the end of 2005, there were 5.5. Million people living with HIV in South Africa and almost 1000 AIDS deaths occurring every day according to UNAIDS estimates. A survey published in 2004 found that South Africans spent more time at funerals than they did having their cut, shopping or having barbeque. It also found that more than twice as many people had been to a funeral in the past month than had been to a wedding.

The change of policy holds potentially devastating financial implications for families of mine workers many of whom live hundreds of miles from Africa Gold Inc.'s, mining operations. Historically and even today, the mining industry in South Africa relies heavily upon migrant labor coming from neighboring countries like Lesotho, Malawi, Botswana, Zimbabwe, Swaziland and Mozambique. Because of its reliance on inexpensive migrant labor, many of the workers live in housing at the mine site and spend months away from their families. Some health experts believe that this may contribute to the higher incidence of HIV/AIDS among mine workers. Furthermore, most families cannot afford to pay for the funerals since the average mine worker earns about 2000 rands per month (about $250).

In addition to the negative media coverage, Goldstone was also faced with challenges from the national union of mine workers. In a memorandum sent to Goldstone, the union accused the company of hiding behind excuses to avoid dealing with the problem of HIV/AIDS in the work place. They argued that the company's decision was unethical and that African Gold, Inc. could well afford to continue the funeral benefits of its workforce. The union also pointed out the additional funds that had come into the company because of the investment of Newtown Mining Inc. In the memorandum, the union threatened further action if African Gold, Inc. did not reinstate the benefits.

Questions

1. Did African Gold, Inc make the right decision? Should an organization be expected to go beyond legally mandated benefits to help with a devastating illness like HIV/AIDS?

2. What responsibility, if any, does African Gold, Inc. have to its workers?

3. What human resource challenges do U.S firms face when they globalize?

4. If you were Goldstone; what would you do?