The South African economy is facing a rocky period. But don’t blame the platinum strike or the union or workers involved. That labour dispute was a symptom, not the cause, of problems that had developed outside of the control of the workers.
Since labour is a major cost factor, it is the wages and conditions of workers that come under pressure whenever there is an economic crisis. And the only protection workers have is to organise since, without labour, there can be no production and no profit. Trade unions, therefore, are products of an essentially exploitative system; they exist to provide a more humane balance to that system.
But now that the strike is over, with declarations across the board that lessons have been learned, there is no room for complacency: the ending of the dispute does not signal the turning of any corner economically. In fact, if all the powers that be do not develop some innovative ideas, followed by radical action, we may be heading via further crises to a potential social catastrophe.
Clear heads are needed at this stage. And clear, honest analysis. This should be a time to review what happened, how it happened and, with the insight gained, work holistically to avert the potential tragedies that lie ahead.
Unlike natural catastrophes such as earthquakes or tsunamis, about which we have no control and little or no warning, social catastrophes are usually the culmination of a series of avoidable crises that develop over time. The situation on the platinum belt from the massacre at Marikana to the five-month strike this year provides a classic example.
Of course, in the immediate wake of the strike this week, there were celebrations on many fronts and even the rand rallied as currency dealers took a slightly more optimistic view of South Africa. But all the underlying problems that created the crisis in mining remain in place; ongoing global economic instability also makes matters potentially much worse.
Migrant labour remains a reality as do problems of housing and health. But it is deteriorating market conditions that hang, like a sword of Damocles, over the sector. And reactions to this could determine whether or not a serious social catastrophe can be avoided.
It is certainly not the miners, whether striking or not, who were to blame for the fact that the government handed out perhaps too many mining rights, resulting in a potential glut of platinum being produced. Nor can they be held responsible for the fact that the commodities boom between 2001 and 2008 saw a disproportionate share of profits going — mainly abroad — to shareholders and directors.
It is also government and the companies that should have been fully aware that recycled platinum would, sooner or later, start to undermine demand and prices. Because the main use of platinum is as a catalyst in the auto industry, which means that it can be constantly reused. As this column has already noted: more than 2 million ounces a year is already coming to market.
This is happening at a time of ongoing global economic crisis, with a declining demand for motor vehicles and, therefore, auto catalysts. At the same time, there is a substitute for platinum in the auto catalyst sector: palladium. And Russia provides more of this metal to the market than does South Africa.
This situation, in the absence of any innovative programmes and radical action could mean a decline in the platinum price and the profitability of various shafts which, in turn, may result in large-scale retrenchments. The gold sector, so far not directly involved, is also in the line of fire.
Because gold — perhaps even more so than platinum — can be subject to extreme price volatility; just look to the gold price fluctuations since 1971. So neither gold nor platinum, within the present arrangements, provide safe havens or any security for the domestic economy.
But if 30 000 or 50 000 miners end up being retrenched because of circumstances beyond their control, this will trigger what can only be described as a social catatstrophe. Because, by most estimates, every miner supports between eight and ten dependents, mainly in the rural areas, primarily in the Eastern Cape.
In such circumstances it will again be the poor who will suffer most. Without income from migrants, millions more hungry and desperate men, women and children will inevitably drift, in hope, to towns and cities, to urban areas where infrastructure is already inadequate and jobs for the unskilled are virtually non-existent. This is the future scenario to be avoided.
Cape Town, South Africa-based journalist commentator and author specialising in political and economic analysis and labour matters. 
Terry Bell Writes 
judithnkwe
June 29, 2014
When government is so heavily invested into the mines – where do the workers go for support? This government was assumed to be worker friendly – what a lie
Terry Bell
June 29, 2014
The government is not invested,in financial terms, in the mines (although individuals closely connected to government certainly are). But government manages the system in which we all have to live. And governments, within such a system can never be worker friendly.
Dave Martin
July 1, 2014
Let me first state the reason for my interest in this debate. I live and work in a remote part of the Transkei where the striking miners live. My main goal in life is to assist our community here to fight the scourge of poverty. (www.bulunglaincubator.org )
I also have a degree in Economics and Finance so have taken a keen interest in this strike as it has had devastating consequences in our region.
Terry, this article raises a number of questions. First, it seems to ignore the fact that the cost of extracting the platinum will determine how much platinum will never be mined, ever.
As I understand it, in simplistic terms, there is high grade ore which has lots of platinum per ton and there is low grade ore that has much less platinum per ton. The cost of mining low grade ore is much higher as you have to extract a lot more ore to get the same amount of platinum. Let’s put arbitrary cost figures to the extraction from these two ore bodies e.g. US$1500/ounce (low grade ore) and US$1200/ounce (high grade ore).
Responsible mining companies will mine a mix of low grade and high grade ores all the time and would thus calculate an average cost per ounce (e.g. US$1400/ounce). This means that should the (sale) price of platinum be US$1600/ounce they will be making a profit on both grades of ore. If however the price drops to US$1450, they will be making a loss on the low grade ore (US$1450 – US$1500 = -US$50/ounce) and making a profit on the high grade ore (US$1450 – US$1200 = +US$250/ounce) only. If the mining company was irresponsible at this point, they would just mine the high grade (profitable) ore and forget about the low grade (unprofitable) ore. The problem with this approach is that when the high grade ore runs out, and if the platinum price is still below the cost of extracting the low grade ore (US$1500), then the irresponsible company will just pack up and abandon the mine. The problem with this is that should the price of platinum rise again to above US$1500 and thus the low grade ore become profitable again – the cost of re-opening the abandoned mine shaft and replacing all the equipment is so high, that it makes it prohibitively expensive to get back down to the low grade ore. In this case the platinum in the low grade ore will never be extracted. It will never be profitable to get it out unless the price of platinum increases by many hundreds of percent.
A responsible mine thus continues to mine both grades of ore even when the low grade ore is loss making so that the mine continues to operate and thus if/when the platinum price rises again, making the low grade ore profitable, there is no new capital expenditure required to access the low grade ore as it has been mined all along.
So why is the above essay relevant to your article?
Your article ignores the fact that an increase in wages renders the cost of extracting both the low and high grade ores more expensive. If the wages increase too much, then the temptation to abandon the low grade ore increases – i.e. just mine the easy, profitable platinum. This is the real risk now on the platinum mines: the new buyers of Amplats’ deep shafts (perhaps Sibanye) could just mine the easy, profitable platinum for a few years and then abandon the low grade ore and the entire mine. Thus a mine that could have had perhaps a 20 year life might close down after 10 years and that platinum and associated jobs will be lost forever. Of course the Zama Zamas will then go in and clean out the low grade ores – but at incredible risk and much lower pay than what was paid on the mines.
Add to the above analysis that the strike and the increase in wages also increases the attractiveness of mechanisation. Mechanised mines need skilled labour. But South Africa has a shortage of skilled labour and a massive surplus of unskilled labour. So, again, this wage increase has the potential to do devastating damage to the men from our communities, 80% of whom are illiterate and who thus have little hope of getting the skilled jobs (which require applicants with a Matric).
If we truly want to reduce unemployment in this country, we need to create millions of jobs for unskilled, unemployed people. If wages are so high that they encourage mechanisation or the abandonment of minerals in the ground forever, then the opposite will occur. I think this strike and the agreed wage settlement will contribute to both these problems and thus cause massive suffering here in the Transkei. It would be madness for us as a country to mechanise and to abandon valuable minerals in the ground – and this strike has contributed to the likelihood of this outcome.
I really hope I’m wrong!
Terry Bell
July 1, 2014
I wish I could say you were wrong. But you are right. And much the same has happened with gold. What might — ah, the advantage of hindsight — have been done was to build up a fund from profits in the boom times (perhaps by restricting company profits to a reasonable 15%) to tide mines and miners over the price slumps. Under the present system price volatility for commodities such as pgms, gold, iron ore etc will always be a reality.
We in SA have to go back to square one and come up with realistic, radical proposals than can be carried through to action if we are to have much hope of a better future on the medium term. But thank you for your comment. I hope many others read it and, above all, think about the spectre you raise.