South Africa: The platinum canary

The labour strike in the South African platinum belt finally came to end after a grueling five months which cost the workers, investors and the economy billions of Rands. Mining companies are suggested to have forfeited R23 billion in potential earnings while mineworkers lost about R10.3 billion in wage payments. Poverty and inequality are still at the heart of the malaise in the mining sector with workers pressurised to demand more from companies who are financially strapped. The strife between labour and business in South Africa is unlikely to end any time soon, and the platinum belt’s recent problems should be seen as the canary in the South African mine. The strike has created a number of challenges for South Africa, economically and politically. These will continue to be characteristic part of South Africa in the next five years.

 In economic terms the challenges created by the strike include the billions of Rands in potential revenue lost. These costs have not only been incurred by the platinum companies and workers but by a wider group companies connected to the platinum belt economy including suppliers and shops in Rustenburg. In the wider South African economy the strike caused a major slowdown in growth in the first quarter. The international ratings agencies reacted with a ratings downgrade, driven by a pessimistic outlook for the nation’s economy in the year ahead.

 The strike has done a great deal of damage to the nation’s reputation as an investment destination.  Mining investors, particularly in the platinum sector are more than likely looking at jurisdictions with less risk than South Africa. A major mining company in the platinum belt is reported to be looking at increasing its production in Zimbabwe to make up for the shortfall in South Africa: a sorry indictment of the state of the South African mining sector. If this view continues, Zimbabwe would benefit with South Africa losing out on a little more investment which could have come back into the country. Another threat to the sector would be manufacturers of catalytic converters looking at alternatives to platinum, 70% of which is produced in South Africa. While an alternative is currently nowhere in sight the exposure to South African labour volatility will further spur investment into research to find a replacement for platinum.

 The relationship between the private sector, society and labour continues to be strained as a result of the strike. On the sidelines different political interests continue to keep the flames burning as they position themselves as either champions of business (the DA), or the working poor (the ANC and EFF). What is not being done is work on tangible solutions to socioeconomic challenges that keep creating the conditions which lead to labour strikes.

 Beneath all the labour strife in South Africa is dissatisfaction with economic conditions. Worker’s demands may cause damage to the South African economy, however in their minds economic struggle has long been a part of their lives.  While demands of workers often appear unconsidered and short-sighted, critics often forget that workers start at a very low economic base which means they bear the brunt of economic problems the country faces in a globally connected world. Workers can’t afford the patience of waiting for better economic conditions in an unknown future. Measures such as relaxing labour laws, as often suggested by pro-business lobbyists, are an immediate threat to workers in the present, even if they may somehow result in a more efficient economy which could benefit all in the future. 

In the past two decades South Africa has been unable to lift large numbers of its population out of poverty. This is despite the great economic growth and investor friendly policies of the Mbeki years.  This situation has only increased the desperation of workers and their stubborn attitude towards the private sector is unlikely to abate anytime soon.

Calls for radical economic change from the left were mimicked by President Jacob Zuma at his inauguration speech and at the State of the Nation address. Unions such as AMCU and NUMSA, as well as political parties like the Economic Freedom Fighters will stoke the fires of radical policy transformation. The President will have to keep a clear head in his efforts to juggle the demands of a nation frustrated with the slow rate of change since the end of apartheid, and a business sector looking for a more certain environment for investment.

For a number of years there has been a persistent call for national dialogue on the South African economy by leaders in business and civil society. It may be high time that the South African government heeded to that call. The National Development Plan is a well-received document which is perfectly placed to be the guiding light for this national dialogue. 

Originally published on the africapractice blog here: http://www.africapractice.com/blogposts/page/22/?id=7146

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