Alarming quarterly labour market stats show rising unemployment.

A deadly combination of so-called ‘equity-promoting’ regulatory intervention in the mining industry, cynical, short-sighted warring unions and tempting credit traps proffered by retail houses have combined to hike our latest overall joblessness rate to 27%. The figures and sound logic in the analysis of the quarterly labour market stats below make for frightening reading, especially in the current populist climate where they provide ready fuel for the Malema’s (and Zuma’s) of the world. Piled on top of the rampant cronyism and corruption which are now a feature of so many government deals and financial allocations, plus the soon-to-be-bloody internecine party battles, this news serves to emphasise that things may get a whole lot worse before they reach saturation point and we can perhaps do something about turning the corner. Ironies abound, especially when you take the confluence of negative factors and their effect. It sets one wondering whether, like so much clumsy law making, the law of unintended (ideology-driven) consequences is at play. Or whether the various stakeholders are so stubbornly set on their own agendas that they fail to see the bigger picture. Win at all costs seems to be the only collective credo. – Chris Bateman

By Gideon du Plessis*

The quarterly labour market statistics, recently released by Statistics South Africa (Stats SA), show that South Africa’s unemployment rate has risen to above 27%.

labour relations
Gideon du Plessis

Those figures have Cosatu hot under the collar as this rate comes as a blow to the tripartite alliance’s addressing of the so-called triple challenge of poverty, inequality and unemployment.

The mining industry as case study

To examine the phenomenon of unemployment, the mining industry will be used as case study. Over the past 12 months the ailing industry has lost nearly 50 000 direct jobs.

The impact populist trade unions have on job losses

Of the direct jobs lost, around 30 000 came in the wake of Amcu members’ five month long platinum strike in 2014 – a strike which wiped out companies’ cash reserves and resulted in major losses.

Since Marikana, Amcu has promised a minimum wage of R12 500 to a predominantly unskilled workforce, and so Amcu’s membership has increased from 30 000 to 190 000. However, despite the five month long strike in 2014 and even after 2016’s wage negotiations the promised wage has still not materialised. For example, the 22% increase implemented after the 2014 strike was undone by the no work no pay principle that applies during strikes. Due to a loss of income workers had to incur debts to survive. In 2015 Anglo American did a survey among its entry level workers and found that 83% of the workers in this category experience serious debt problems.

In particular, banks (such as Capitec) and retailers (such as Lewis) “exploited” workers by nonchalantly granting them loans or giving them credit. The debt trap forced some workers to resign as a way to access their provident fund money.

Typically, workers’ high debt levels constitute a major factor in the high wage demands that are put forward during wage negotiations, and in the process, exploitation and trade union greed (union membership equals 1% of a members’ basic salary) also play a role. This is what happened during 2016’s platinum negotiations too. To avoid a strike and to send a positive message to credit rating agencies the platinum mining houses this year granted an above-average increase. The HR Head of one of the mining companies in question, however, mentioned to me that he had been instructed to cut the company’s workforce by 2 000. This is how certain trade unions, through their strike action and the way in which they approach negotiations, manage to cost members their jobs. The situation is exacerbated by violent trade union competition. Such labour instability has a negative impact on production and a company’s sustainability. Ultimately, it leads to mining giants, such as BHP Billiton, AngloGold Ashanti and Anglo American, throwing in the towel, and they simply disinvest.

Mineworkers gather at Wonderkop stadium outside the Lonmin mine in Rustenburg, northwest of Johannesburg January 27, 2014. Government-brokered talks between South Africa's Association of Mineworkers and Construction Union (AMCU) and the world's top three platinum producers began on Monday in a bid to end a strike that has hit half of global output of the precious metal. Hopes for an immediate resolution to the strike, which began on Thursday, remained dim given AMCU's uncompromising approach to negotiations and with the two sides poles apart over wages. REUTERS/Siphiwe Sibeko (SOUTH AFRICA - Tags: BUSINESS CONSTRUCTION ENERGY CIVIL UNREST POLITICS)
Mineworkers gather at Wonderkop stadium outside the Lonmin mine in Rustenburg, northwest of Johannesburg January 27, 2014. REUTERS/Siphiwe Sibeko

Impact of regulatory framework on job losses

Along with poor labour relations, an uncertain and unfriendly regulatory environment provides another reason for withdrawal and downsizing by companies and their eventual disinvestment.

The ruling party’s destructive mining regulations can be traced back to the statement in the ANC’s Freedom Charter that the minerals under the ground belong to the “people,” and this socialist rhetoric is supported by the distorted populist slogan that mining houses represent “white monopoly capital”. As a result, government is over-regulating the industry through the Mineral Resources and Petroleum Development Act and the Mining Charter (black economic empowerment framework) without understanding that the Act and the Mining Charter are destroying job opportunities.

These regulations and policies are creating major uncertainty among mining houses and investors because they have been in draft format for some time already. The “new taxes” contemplated in the regulations and policies and the threat such taxes pose to the ownership of mining companies and investors, further discourage mining companies and investors.

For example, the Mining Charter stipulates that employers and international service providers must pay 1% of their turnover (not of their profit) to either a community development fund or a mining transformation fund. This provision will cost the mining companies a combined additional sum of R4,1 billion. What this means is that capital projects, which would have created more job opportunities, would be cut. Had companies been obliged to rather establish their own training centres with this money and to empower workers by equipping them with scarce skills, it would have enhanced the workers’ chances of getting promotions and lower their chances of getting retrenched.

unemploymentApart from the current statutory employer contribution to the Skills Development Fund, the Charter also makes provision for an additional 5% of the payroll which employers have to pay to an external training initiative – yet another clause that is destroying jobs. If an employer could use such funds to help illiterate workers obtain their matric certificate the literacy thus obtained would empower workers to make better decisions both at work and as far as their finances are concerned.

If the mines could make their workers shareholders rather than have political “fat cats” as shareholders in compliance with the 26% black economic empowerment dictate it would boost the morale of the workforce, which in turn, would lead to higher production and employment.

There is a danger that non-compliance with certain provisions of the Mining Charter could lead to the suspension of a mining licence – this scares away investors and destroys jobs.

As far as the Mineral Resources and Petroleum Development Act is concerned, one of its provisions that destroy jobs lies in the powers vested in the minister to grant mining licences at his discretion. This means a mining licence can be granted to a company or a friend that did not lodge the original application for a licence – this scares off the major mining companies and destroys jobs. If there is certainty about their licence applications mining companies would not, as is presently the case, sell-off those mining assets that do not realise profits to dodgy smaller players arbitrarily.

Challenges towards reaching a solution

An ideological mind shift and strong leadership in the mining industry (and in business in general) could lead to the triple challenge of poverty, inequality and unemployment being curbed.

Mining shaft

Apart from serving their own interests, the warped thinking of ideologically impaired politicians and trade union populists that, as long as the “enemy’s” footprint and influence can be reduced, the price paid for it is justified. At the moment, millions of jobless persons and their dependents are paying that price but, ultimately, the country as a whole will pay the price and this while the solution is within reach, and those who are not looking at things through ideologically tinted lenses can see it.

The question is: “Who is actually the workers’ worst enemy?”

  • Gideon du Plessis is Solidarity’s General Secretary
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