How much is a living wage for miners?

Johannesburg - "A living wage" is the battle cry of the Association of Mineworkers and Construction Union (Amcu) as it and rival unions plunge into pay talks this month with mining houses.

But what is a living wage for a South African miner?

Finding a definition, no easy task, has become the goal of an increasingly militant labour force demanding pay increases ranging from 15% to 150%, which mining companies can ill afford as precious metals prices tumble and costs surge.

Wage negotiations in the gold sector kick off on Thursday.

The issue is complicated by many variables and by the difficulty of defining fair pay for work that may often require only low levels of skill but is very tough and dangerous.

"It's difficult to put a number on a living wage," said Boitumelo Sethlatswe, a researcher at the South African Institute of Race Relations.

"It depends how many people are in your household, and are there people in your household with access to social grants such as for old age pensions and child support," she said.

Amcu, which has emerged as the dominant union on the platinum belt and made inroads into gold after poaching tens of thousands of members from the once unrivalled National Union of Mineworkers (NUM), certainly has a number in mind.

It has submitted demands to South African gold producers, which include AngloGold Ashanti [JSE:ANG] and Harmony Gold [JSE:HAR], calling for a more than doubling of the monthly basic wage for entry-level miners to R12 500 from R5 000.

It wants a similar increase from Anglo Platinum [JSE:AMS], the world's top producer of that metal. NUM's demands to gold producers are for raises of between 15% and 60%.

That sounds steep but probably does not seem unreasonable if you go underground - in hot, difficult and potentially lethal conditions - to toil for just a few thousand rands a month.

But the basic wage is not the whole picture.

According to the Chamber of Mines, basic wages in the gold sector are supplemented by other benefits, cash and non-cash, which can translate into R8 800 a month in costs to a company.

These take the form of meals, housing, and other allowances. Bonuses and overtime can take the total up to R11 000 rand a month.

Mining houses have not waded into the debate about what a living wage is, but looking from the perspective of the cost to companies, they have said they simply cannot afford big rises.

Eight mouths, two families

One way to look at the issue is through a rough profile of a South African mine worker. NUM, which claims to be the biggest union in the shafts at 300 000 strong, says its typical member is male, aged in his 30s, and has eight dependants.

The Studies in Poverty and Inequality Institute (SPII), a Johannesburg think tank, has compiled a list of average monthly purchases in South Africa for a household of 3.4 members.

Included in this list is almost 5kg of brown bread, 10kg of maize meal, plus meat, sugar, vegetables, cooking oil and other necessities.

Reuters has checked the prices and amounts on the list at a supermarket chain in Johannesburg which targets mostly lower-income earners, and has multiplied by almost three to assume a household of nine - a miner plus eight dependants.

This provides a very rough estimation of what a household of such size would typically spend to meet basic nutritional and other needs.

A household of 3.4 members would pay around R1 830 a month for the items and quantities calculated by SPII.

Multiplied by around 2.65 to assume a typical miner plus the eight people who rely on him brings the figure to R4 850, or roughly the basic wage at the bottom of the scale.

This would hardly suggest a living wage as it does not include school fees, transport or other costs associated with the daily grind, not to mention amenities and savings.

Of course, meals are provided to miners, but dependants would still consume the bulk of the required monthly items.

Then there is the question of those who rely on the pay cheque and their potential sources of income. South Africa is a rarity on the continent in having a basic social welfare net.

This includes an old age pension of R1 540 a month and child grant support grants of R260 per child.

So if a miner's whole package was, say, around R9 000 a month and he or she had two children and at least one parent on pension, the total family income would be around R11 000  a month. This would meet basic needs but not much beyond that.

Inflation is currently running at under 6% but food inflation is almost 6.5% and accelerating, which will further strain the budgets of low-income households.

Complicating matters is the fact that the mine labour force remains largely a migrant one, drawn from remote and impoverished rural areas and neighbouring states such as Lesotho. Many miners have two families, one in the village and one where they work.

Many are subsistence farmers who supplement their cash income by growing crops or raising cattle and other livestock.

The minimum wage for farm workers is R105 a day or only around R2 100 a month, a reflection of the view that rural dwellers can survive on less cash than their urban counterparts.

This all excludes a family's desire to own a television, cellphones and other amenities. Such consumption often requires lower-income households to borrow from microlenders at exorbitant interest rates - one factor behind high wage demands.

So it is easy to see why the target of a "living wage" would be built around the goal of R12 500 a month.

The problem is that gold's decade-long bull run has come crashing down and the spot price has lost around 25% so far in 2013. Platinum prices also remain depressed while mining costs have been soaring, crushing profit margins.

According to the Chamber of Mines, the sharp fall in the bullion price pushed about 60% of the country's gold mines into loss-making territory in the first half of 2013, spelling doom for the industry.

Major South African gold producers have among the weakest pretax profit margins in the industry.

Harmony Gold, which gets more than 90% of its output from South Africa, keeps less than 10% of its sales as pretax profit, according to Thomson Reuters StarMine.

The government, which has key labour allies including the NUM, has talked less about a living wage and more about the need to preserve jobs in an industry that has shed hundreds of thousands over the past two decades.

Defining a living wage, and understanding where the figure comes from, are probably easier goals than paying one.

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