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How to stop mine strife

Oct 29 2012 07:38 Malcom Sharara
Mining

(Shutterstock)

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WILDCAT strikes hitting South Africa's platinum and gold mines have cost South Africa just over R10bn so far this year, according to the national treasury.

In my opinion, this is just the tip of the iceberg as it will take time for the South African government to determine the full impact of the mining strife on growth. In fact, this might never be known as there will be massive collateral damage.

The treasury even confirmed this, saying declining mining output and the spread of strike activity have depressed activity in related industries including manufacturing, logistics and services, with negative consequences for gross domestic product.

This is a tragedy for SA as the poisonous atmosphere is the worst industrial unrest in South Africa since the end of apartheid. The tragedy is not limited to the miners, but has also extended to the economic status of SA as a country.

After the Marikana debacle, investors voted with their cash with the JSE losing ground on a daily basis. Rating agencies also showed their disapproval, downgrading the credit rating status of the country, major banks and some companies like Old Mutual.

The action taken by Moody's can easily dry up lines of credit so that SA and its companies might want to seek greener pastures offshore. Overall the downside of the wildcat strikes cannot be over-emphasised.

Most of the strikes have however been settled, either with pay raises well above inflation or with employers sacking - or threatening to sack - workers who walked out on wildcat strikes. Late last week NUM and the mines management said they had struck a deal. There is no doubt that this is good news for the country.

However, for the sake of SA’s future a lasting solution to these problems still needs to be found. Is this the last time mine workers will embark on wildcat strikes? For how long will the workers be satisfied with the new wages of just above R6 000 for rock drillers?

Will mines survive the increased wage bill and remain profitable? What exactly can be done to make sure this is the last time we see illegal strikes taking place?

In my opinion, a paradigm shift in terms of mine ownership is what is needed and there is no better way of doing this than to make mineworkers substantial owners of the mines.

Instead of finding partners through black economic empowerment which only empowers the elite and a few individuals, the workers can come in as key partners. Here I am not talking about smokescreen share option schemes, but ownership upwards of 20% for the workers.

The shareholding will then be used for profit sharing. Yes, there could be fears that companies might not declare dividends so that workers won’t benefit. Proper structures can however be put in place, for example the parties might agree that once a certain profit margin has been reached, a set percentage of the total profit must be distributed through profit sharing.

Even nearby communities might be thrown into the pot and be given substantial shareholding. And to make sure that no bigwigs are created, there must be limited terms of office as well as appraisals for the workers and community representatives on the board.

Why give workers or communities ownership, one might ask? Simple: workers won’t embark on illegal strikes because that will be akin to striking against themselves.

Workers won’t make unreasonable demands because they will be crippling their own companies. A damaging strike will only lead to reduced profits and in the process a diminished share of profit in their pockets.

But where does this worker/community empowerment leave the current owners of the mines who have invested so much money into them?

Easy: they will gain safety and sustainability - a mine owned by workers will not, for example, allow someone like Julius Malema to come and ruffle feathers. Mines owned by workers will not allow even government to put in place punitive policies or measures detrimental to the mines' going concern status.

The bottom line for me is that any business model anchored on big multinational companies only - without including meaningful involvement of workers or nearby communities - is politically, economically and socially unsustainable.

 - Fin24
 

mining unrest  |  mining
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