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Platinum strikes & African's emancipation from poverty

27 March 2014, 10:02
South Africa's (SA's) platinum strikes are a big deal: they affect the production of about 40% of the world's output and are in their ninth straight week making them the longest strikes in SA since the end of apartheid. At the core of the dispute is the Association of Mineworkers and Construction Union's (AMCU) demand for a basic entry wage of R12 500 - more than double the existing wage, and the platinum industry's contention that they can only afford a 9% increase. At a more philosophical level, the question is to what extent should governments intervene when tensions between capital and labour threaten to disrupt the broader economy and in this particular case, which protagonist has the moral high ground. The platinum companies are certainly not being disingenuous when they insist that they can only afford a 9% increase. An analysis of their cash flows, which are in the public domain, indicates that there isn't much left over for wage increases once the mines make the most rudimentary investments to maintain current production levels. Were they to capitulate to the AMCU's demands, they would soon find themselves facing bankruptcy. It is important to point out that the mining sector in SA was built on the exploitation of labour for over a century. According to the World Bank's Poverty and Inequality Indicators, the top 10% of South African earners took home 51.7% of all the income in 2009. The lowest 20% earned only 2.7% and 39.5% of the population lives on less than $2.5 a day. The Black Economic Empowerment (BEE) initiative has created US dollar multimillionaire (and one billionaire) mining moguls but unfortunately has done little to improve the wages and working conditions of the unskilled and semi-skilled workers on the mines. The question then becomes; are the mine workers earning a fair wage? Is it reasonable for them to demand R12 500 a month? From a supply and demand perspective, there clearly isn't a supply of employers able and willing to pay R12 500 a month entry wage. This then takes us to the murky waters of equitable distribution of wealth. But wealth isn't distributed by wages, it's distributed by shares and dividends. Is the AMCU looking for emancipation of its workers from the wrong lines of the mines' financial statements? In any case the mines have all complied with the country's BEE laws so should the AMCU be looking for restitution from the shareholders of the companies or from the state? After all, in the developed world, the state intervenes to ensure the welfare of its poorest citizens through cash payments, free health care, foods stamps and other programs. In my view, problems created over more than a century will not be resolved by any single wage increase, however large and sustainable this may be. An unsustainable wage increase, on the other hand, will do far more harm than good in the long-term as the mines go bust and the workers find themselves unemployed and therefore without a stipend - everyone loses including the shareholders, the fiscus and the broader economy. However, urgently the workers' grievances may be felt, they cannot be resolved overnight and like most hard problems, there are no easy answers. In what has become a legendary experiment on the psychology of self-control, Walter Mischel and his colleagues would bring four-year old children one at a time into a room. They would then be offered the following options involving a treat, a marshmallow: they were given a marshmallow and told they could eat this whenever they liked or they could resist the temptation and receive a second marshmallow when the experimenter returned. Decades later, the childrens' capacity to delay gratification was a predictor of their success at school, popularity amongst peers, earning higher salaries, a lower body-mass index as well as being less likely to report problems with drug abuse. Genuine success involves having the discipline to delay gratification. With platinum prices 37% off their all-time highs reached six years ago, now is not the time for any stakeholder to be getting a treat. Capital and labour are much better off discussing how they will share profits more equitably going forward and, in particular, should platinum prices recover significantly. More important perhaps, is a discussion on how they could best work together to make the mines more productive and profitable in the long-term, thus making the pie bigger. After all, marriages where money isn't an everyday flashpoint tend to be happier. The most successful anti-poverty campaign in modern history was achieved by China with three decades of double-digit economic growth. In spite of their communist heritage, they did not take from the haves to give to the have-nots to lift more than half a billion people out of abject poverty. They implemented painful economic reforms, slogged it out and made the pie bigger. In my view, that's the only viable solution to the problems currently plaguing the South African platinum sector and the emancipation of hundreds of millions of Africans from poverty across the continent.

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