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Reality
 
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Platinum wages - is it affordable?

10 June 2014, 10:52
The background

Much has been written about  the Platinum strikes. There are a lot of people saying that the mines should just pay the R 12 500 and a lot saying that it is unaffordable. So what is it really?

On the one hand miners need to earn a decent wage to live and on the other hand investors need a decent return otherwise they wont invest.

In this article I am going to try and give some answers to these. Information in what the miners are earning differ widely from R 5000 a month (claimed by the miners) to R 9000 a month (claimed by the mines). From my understanding it looks like R 5000 is the amount (after deductions and with no bonuses) a miner will get out. The R 9000 is probably what it costs the company to keep these workers employed.

Furthermore it looks like the miners want the R 5000 to go up to R12500. The big question is..is it affordable? The mines say it is not and the miners say it is very affordable because the mine manangers and the CEO get paid "millions".

If the miners want R 12500 then the cost to company is probably around R 18000. Remember the miners want the amount after deductions and because they would now be earning 250% of their current earnings

(12500/5000) * 100 = 250%

they would have to start paying tax and that has to be absorbed by the mines.

To determine if R 12500 is affordable to the mines we do not need most of the stuff above as we could do it by using a very simple ratio calculation..let me explain..

Source

The mines have created a website
http://www.platinumwagenegotiations.co.za/

On it they display the revenue lost by the miners as well as the wages lost by the miners. I am going to use these figures for the calculations as I think they are reasonably accurate. Currently the revenue lost stands at R 22 billion (rounded upwards) and the wages lost stand at R 10 billion (rounded upwards). The rounding does not have much of an influence, it only helps to keep it simple. So let us see if it is affordable.

Revenue includes wages which means from the R22 billion the companies lost, they would have to pay out R10 billion in wages which would leave them R12 billion to pay everything else.

BEFORE INCREASE
Revenue R 22 billion
Wages    R 10 billion

AFTER INCREASE
Revenue R 22 billion
Wages  (12500/5000) * 10 = R 25 billion

Explanation
The R12500 is the demand
The R5000 is what they currently earn
The R10 represents the R10 billion they have lost so far.

So, by using a simple ratio calculation we can see that with a Revenue of R 22 billion, the wage bill will be R 25 billion. As the strike is nearing 6 months, we can therefor assume the mines will make a loss (before anything else is paid) of (R 22 billion - R 25 biilion) =  R 3 billion every 6 months.

I challenge everybody (including AMCU) to prove that my calculations are wrong. It is impossible to give into such demands as the wage bill is higher than the total revenue.

The ONLY reason why the miners have not accepted the offer made by the mines is a political reason because they want the mines to close down and be taken over by government.
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