Henry Goldstone, head of Human Resources for African Gold, Inc. in South Africa, examined the stack of newspaper and business magazine clippings on his desk. In the last few weeks, there had been numerous stories about the company's decision not to continue paying transport, coffin, and funeral costs form employees dying from non-mining causes. The decision was linked to the depletion of the funding source normally used to cover these costs. In the last two years, the fund had decreased rapidly because of the increasing number of HIV/AIDS deaths among the miners working for African Gold. The company planned to continue its education programs on HIV\AIDS for employees.
Although African Gold did not have exact figures of the prevalence of HIV/AIDS among its present labour force, recent company data indicated that, country-wide, there was an average of 20 funerals a month for workers who had succumbed to the disease. The average cost of a funeral is 10,000 rand (about $1250). Additionally, the costs of the company's medical aid and disability programs were also skyrocketing because of HIV/AIDS-related diseases (e.g. tuberculosis, pneumonia). Goldstone also realized that these amounts would be even higher if the costs 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 failing because of the growing strength of the South African currency (i.e. the rand). The price of gold in real terms fell 6 percent over the last few quarters. Decreasing profits hit smaller mining companies like African Gold greater than the largest companies.
The number of HIV/AIDS-related deaths as a proportion of total deaths in South Africa had virtually doubled from 4.6 percent to 8.7 percent between 1997 and 2001. South Africa has one of he fastest growing HIV epidemics in the world with an estimated 1700 new infections diagnosed daily. Additionally, the mining industry in South Africa has the highest prevalence of HIV/AIDS infections compared with other industries. It is estimated that 24 percent of underground miners have HIV, compared with 19.9 percent of the remainder of the South African working population.
The change in policy holds potentially devastating financial implications for families of mine workers, many of whom live hundreds of miles away from African Gold's mining operations. Historically, and even today, the mining industry in South Africa relies heavily upon migrant labour coming from neighbouring countries, such as Lesotho, Botswana, Malawi, Zimbabwe, Swaziland, and Mozambique, Because of its reliance on inexpensive migrant labour, 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. Most families cannot afford to pay for the funerals, since the average mine worker earns about 2000 rand 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 HIVAIDS in the workplace. They argued that the company's decision was unethical and that African Gold could well afford to continue the funeral benefits for its workforce. In the memorandum, the union threatened further action if the company did not reinstate the benefits.
1. What aspects of the external environment is African Gold, Inc. confronted with? Give specific details for each one from the case.
2. Which parts of the internal environment of the company are most affected by the external environment? Give details from the case to back up your choices.
3. Did African Gold make the right decision? Should an organization be expected to go beyond legally mandated benefits to help workers with a devastating illness like HIV/AIDS? Defend your answer.
4. What responsibility, if any, does African Gold have to its employees? Why or why not?
5. What human resource challenges might a Canadian company face when operating globally?