Henry Ford, the famous American industrialist, made the announcement that he would pay his workers the unheard-of wage of $5 a day in 1914. This announcement was made shortly after the launch of the Model T Ford. He stated that paying high wages was smart business. It also served social justice. He believed that when wages are high and steady, business is more secure. Workers earn enough to become good customers and to live a decent social life without neglect. He was one of the first business leaders to articulate what economists call “the virtuous circle of growth”: well-paid workers generating consumer demand that in turn promotes business expansion and hiring.[1]
This philosophy resonated in and across American industries and led to one of the longest economic booms in economic history and a juggernaut economy. The boom faltered and died when the maximisation of profit and shareholder wealth became the prime concern of American businesses.
The South African mining industry is not dependent on the South African consumer for it’s revenue growth. The industry earns its revenue and profits from exports. When foreign economies boom South African companies boom. China’s economic boom is an example. Low operating costs and low wages are a prerequisite for profit-maximisation. The virtuous circle of growth does not apply. Local workers (consumers) do not buy and consume gold and platinum ore. There are no local down-stream beneficiation industries. Beneficiation takes place in the importing countries. Local workers are paid wages that force them to live in shacks, squalor and poverty. The labour unrest at some local mines and the unfortunate deaths of workers and police at some mines is a direct result of workers being distressed and spiritually blunted by the life they have to live.
The question is how does one transform an industry as old as the mining industry in South Africa? How do we inspire “the virtuous circle of growth”? How do we create employers that pay workers wages and provide conditions that inspire both employee engagement and personal wealth?
There are at least three options. Either the shareholders and owners agree to share the wealth with the workers, or Government introduces an export levy that assures fair wages and decent working and living conditions or local beneficiation of raw materials is made a pre-condition for export licensing (within a set time-frame).
1. Hedrick Smith: When Capitalists Cared. New York Times, September 3, 2012
[1] Hedrick Smith: When Capitalists Cared. New York Times, September 3, 2012
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