South African Jobocalypse will lead to increased policy radicalisation

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Doom and gloom may be all we can expect in the South African economy as commodity prices plummet. This is largely due to the continued slowdown of China, whose resource hunger has fuelled growth in the global mining sector. The mining industry and the wider economy are suffering from rising costs as a result of labour unrest, union wage claims, and power problems. Furthermore investors are dealing with an increasingly uncertain policy environment. The current climate is not promising to shift to a better position any time soon, with South Africa’s growth rate only likely to achieve at best a meagre 1% in 2015.  Minister of Finance, Nhlanhla Nene drove home the reality of South Africa’s predicament at a recent ANC party meeting, letting his comrades know that slow economic growth was not just temporary but the new normal for the country in the foreseeable future.

The jobs catastrophe

In the mining sector South Africa is about to witness a severe number of job cuts. Anglo-American announced that over 50000 jobs are at risk across its international operations; whilst in South Africa it will cut about 6000 jobs. Lonmin will cut an additional 6000 from its Rustenburg operations. Lonmin has not recovered from the instability that has plagued the platinum sector since 2012. Rising costs, mostly as a result of protracted labour strikes, and the drop in the platinum price has made it difficult to operate. Other mining companies in South Africa experiencing similar difficulties are likely to follow the similar route. 25000 jobs have already been lost in the sector since the beginning of the year.

Outside of mining, the telecoms sector faces troubled times as well, with Telkom announcing that it would retrench up to 4000 workers. This move has been halted by legal processes, however it appears inevitable that the company will eventually cut a large percentage of its workforce. Mobile operator MTN has had its own share of problems, with a damaging labour strike in South Africa that saw the resignation of the CEO, Ahmad Farroukh. Facing challenges in its two major markets, South Africa and Nigeria, new MTN CEO, Mteto Nyati has suggested that job cuts will be considered as the company seeks to solve its problems.

Manufacturing, viewed as a key to the creation of skilled jobs in the country, is one particular industry that has suffered greatly from the effects of load-shedding. Advanced manufacturing processes simply cannot operate without power, meaning plenty of downtime and work stoppages effecting bottom lines. This ultimately threatens job growth in the sector and even more detrimental, job security. The steel sector is one case in point of such a negative effect. Arcellor Mittal, the country’s largest steel manufacturer, along with other players in the sector, are suffering from the issues of power as well as competition from China, which the sector has accused of dumping. Should Arcellor Mittal close its Vereeniging plant, 1000 workers would be out of work.

Tourism will see its share of job cuts as a result of new visa regulations that will reduce the number of visits in South Africa. Minister of Tourism, Derek Hanekom, recently spoke about the negative consequence of the new visa regulations that have made it a lot more difficult for visitors to come into the country. The regulations will not only impact tourism but also business which depends on a lot of foreign skills for various business activities. Anglo American CEO, Mark Cutifani, lamented the impact the new visa regulations have had on business with diamond buyers from China finding it harder to get entry into the country. This has resulted in some of them foregoing a trip to South Africa because of the strenuous process of applying for a visa.

An immeasurable impact

Looking at Anglo-American and Lonmin’s combined 12,000 proposed job cuts, it is hard to imagine the ramifications of adding this number of workers into South Africa’s already large pool of unemployed, currently standing at around 25%; or close to 35% when counting those who have given up searching for work. The situation is even more dire when we consider that the average South African worker is said to support up to 4 other people. Many of South Africa’s workers in the mines are internal migrants, earning an income which supports basic necessities, such as food, housing and education for their families back home.  With South Africa’s relatively meagre social safety net already under strain, many people have nowhere further to fall. It is estimated that close to 12 million South Africans live below the poverty line. Many of these people rely on the jobs, directly or indirectly, that are set to be cut across sectors.  Job losses will also have ripple effects across the economy, particularly the informal sector which services many of South Africa’s workers. With reduced incomes, families in the country will have to reduce their spending which will negatively affect small businesses that service them, placing a further number of people in peril.

Added on these threats to employment South Africans will have to deal with the additional burden of rising power tariffs that the state owned power utility, Eskom, is looking to impose. The combination of these will have major political implications for the country.

Radicalisation likely to be the main reaction to current realities

South Africa’s dire economic situation is putting all sorts of pressure on the ruling party, the African National Congress (ANC). The party is facing numerous issues, including community protests, labour strikes and party (inter and intra) rivalry; all of which have become increasingly violent. These have been a response to a grim economic environment, service delivery failures and disappointment over the transformation agenda of post-democratic South Africa. The recent xenophobic attacks were a symptom of these underlying issues.

Whilst the party has been dominating elections since 1994, there have been a few changes that have occurred in recent years that threaten this. Firstly the party itself has had immense damage to its credibility during the tenure of President Jacob Zuma. The ongoing saga around the President’s homestead Nkandla is viewed by many as the microcosm of much what is wrong with the party and its failure to deal with corruption, and the creation of a government which does not respect the basic tenets of the constitution.  Secondly the party is facing more credible threats in the form of left wing entities such as the Economic Freedom Fighters of Julius Malema and trade union NUMSA which intends forming a worker’s party; and the Democratic Alliance which has become more appealing to a diverse voter base. 

The ANC almost lost Gauteng, the economic hub of South Africa, in the 2014 elections. In the 2016 municipality and local government elections, major metropolitan areas like Johannesburg and Port Elizabeth are the targets of political rivals. Seeing the vulnerability of the ANC in the urban areas, opposition parties have made it a point of targeting these areas in the upcoming local government elections.   The EFF is a big draw for South Africa’s youth with its radical policy suggestions. Youth make up about 60% of the unemployed, and many of them are persuaded by arguments pertaining to nationalisation and increased state intervention in the economy. The EFF seems to be offering a more concrete vision, to fight for the economic future and freedom of poor South Africans, many of whom have moved to urban areas in search of employment.  The EFF, formed by ex-ANC Youth, has been consistent in rhetoric relating to changing the ownership of South Africa’s economic system. In their mind the process of gradual transformation has been too slow and they feel that nationalisation of the key sectors of the economy is the correct path to follow for radical transformation. South Africa remains a highly unequal society with the racial economic structures of apartheid still in place.

The EFF criticises the ANC for failing to fulfil the promise of providing a better life and transforming society. In Gauteng, the EFF has led groups to occupy unutilised land as a response to government’s failure to provide housing to the increasing urban population of the region. The EFF leader Julius Malema was also one of the prominent politicians who has made a presence to those who lost family members in Marikana. Speaking to widows, as well as children of slain workers, Malema’s assurance of changing the ownership of the “exploitative mining industry” played well amongst the ears of the bereaved. NUMSA, like many of South Africa union’s is also supportive of radical changes to South Africa’s liberal economic policy, particularly ownership in the mines. This narrative suggests that the ANC no longer has the monopoly on the transformation agenda. It can no longer play at transformation merely through rhetoric with no follow up, something the EFF and NUMSA has accused it of. It must either put up or shut up, as the rising tide of the left is gaining ground as a credible option for the voters.

The DA has also had mild but impressive growth amongst the black middle class, and with its election of its first black leader, Musi Maimane, it may be able to gain an even larger share of votes.  While the black middle class is not as attracted to radical rhetoric, it has sympathies to the narrative of the ANC’s failure to transform society. The DA under Maimane offers another path towards transformation centred on the DA’s image of being a party of competent government. The DA run Western Cape has been viewed on many governance metrics as the best run province. The black middle class which is simply yearning for better service delivery and accountability may find the offer from the DA very enticing. The black middle class has also been disappointed by the ANC’s failure in creating jobs, especially amongst the youth. The DA has made it one of its strongest policy arguments that it has a better ideas for creating jobs than the ANC. Some of these ideas have been in fact been ANC policies which have not been implemented as a result of resistance from its labour partners. An example of this was the government’s delay on youth job subsidies which was staunchly opposed by ANC labour ally Cosatu.

With a strong nationalist challenge coming from the left, the ANC will respond with its own version of populism to try and avoid NUMSA and EFF stealing its thunder in the coming elections. The ANC led government will take what it views as necessary radical steps in dealing with the upcoming challenges from the left. Beyond populist rhetoric, they may take some radical steps such as suspending mining licenses, as the Minister of Mines has done recently with Glencore Optimal Coal. The state will also have the nationalisation card to play. It has stalled its state owned mining company however this may be required to take over some assets in the sector. The major challenge will be funds for compensating owners should the state decide to intervene in that manner.

Syriza: South African style

Tough economic situations can sometimes bring out the worst in governments. Whilst a crisis can bring together disparate voices around a common agenda, often it is the opposite where the loudest and most radical of voices win out. Across Europe we see this with the rise in the influence of parties on the left and right extremes. Greece may be seen as a prime example of where the extremists rise to power, with the emergence of Syriza, a coalition of the radical left. In South Africa, the EFF and NUMSA may advance a formidable movement that would oust the ANC which has been a centre left party. Its failure to deliver in the short term on critical needs of the people will lead to this. Investors and business are sometimes willingly oblivious to these forces that influence government on the political front; only wanting the state to have a narrow focus on their specific needs whilst ignoring those of the wider populace. An electoral loss is often too great a cost for political parties to risk if they are required to concede to the demands of investors. Ruling parties may accede to populist policies, which paints investors as the enemy. Even if these may be disastrous, it can sometimes solidify the support their support in the short term, which would be attractive to politicians looking to win elections.