Mining, job losses & the system

Posted on August 15, 2015

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Large scale redundancies in the South African mining sector, running to tens of thousands of jobs, are probably inevitable. But only because of the system in which we have to operate.

Even in the gold sector, there will be mines and shafts that remain profitable without job losses, but each shaft and each mine will be considered separately.  And, as further mechanisation is introduced, there will be less need for workers.

This is the stark reality that was the basis of the crisis talks convened last week by minerals minister Ngoako Ramathlodi.  But it is a case of better late than never, because such talks, involving all parties, should have been held at least two or three years ago when it became obvious that a crisis was looming.

In the aftermath of Marikana in August 2012, renewed militancy among miners who demanded — and deserve — a decent living wage and better conditions, meant that the cost to companies increased. However, it is the fiduciary duty of company directors to maximise profits for shareholders and that means, where possible, costs must be cut.

Since South Africa’s historically massively profitable mining industry was built on cheap labour, wages constitute the greatest cost.  But when it becomes possible to operate by cheaper means, the system demands that jobs must go.

In reaction there have been calls, by among others, President Jacob Zuma, for the mining companies to exercise “social responsibility”; to, in effect, put the welfare of people before profits.  But the system does not allow for this and it would probably be illegal, and certainly actionable, for companies to deprive their shareholders of dividends in order to retain workers who are unnecessary.

This is not a moral judgment, merely a statement of fact.  The free market, capitalist, system demands that profit be the only priority.  As the late Milton Friedman, father of what is now labelled neo-liberalism, once noted:  Any company director who prioritises social responsibility should be sacked on the spot.

In business, therefore, it is the bottom line that matters.  This makes for an exploitative and potentially brutal system in human terms.

North American legal expert professor Joel Bakan made this clear in his book, The Corporation, when he wrote that if people behaved in the way that corporations have to, they would be locked away as dangerous psychopaths.  And he added the ironic fact that, in law, companies are legal persons.

It was this reality that gave rise to trade unions as reactions to a system in which workers could become mere disposable ciphers. As a result, we have what has often been described as “constructive tension” between opposing interests in the workplace.

As a result, in a parliamentary democracy, governments are faced with having to perform a balancing act, needing both the tax and other revenues from companies and the voting support of workers.  In South Africa, with local government elections looming, workers have a little more leverage with a government that still remains committed to maintaining the system of competition and the accumulation of profit.

This is the background to the crisis talks that tended to concentrate on the gold mining sector. Ramathlodi will be desperate to have companies and unions strike a compromise that would avoid both a labour and capital strike.

Mining unions have put the moral argument that during the boom times their members were not rewarded, while company executives and shareholders profited enormously.  Now, at a time of an economic slump, companies wish to retrench their members.  Within the system, it is an argument that has no power.

However, for any honest compromise to be struck, the gold producers will have to be candid and open about their bookkeeping.  Transparency is called for because, over the past decade, gold prices, while fluctuating, have soared.  At the same time, the exchange rate value of the US dollar to the rand has more than doubled.

What this means is that the gold price in 2005 reached a peak of $510 and averaged less than $500 when $1 bought R6. Last week, when the crisis tslks were held, the gold price was stil above $1,000 while $1 was worth R12.70. In rand terms, what this means is that ten years ago, gold earned roughly R3,000 and ounce; today more than R12,000.  And the overwhelming bulk of mining costs are in rands, the income in dollars.

However, appropriate rates of pay and decent conditions for miners have, in many instances, become more expensive than machines. So the march of mechanisation will continue. And that means jobs will be lost, never to return, even if commodity prices rise.  Once again it will be workers who will suffer in  a world where the wage and welfare gap continues to grow.