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Cape Town - The government is only too happy to show off the progress it is making in long-run
sustainability issues in mining which include safety, housing and the migrant labour
system.
But long-run restructuring in sectors such as platinum has yet to take on a more prominent role. So said Nomura International's emerging markets economist Peter Attard Montalto, who was reporting back on a lunchtme discussion attended by Deputy President Kgalema Motlanthe, Mining Minister Susan Shabangu and Finance Minister Pravin Gordhan.
Motlanthe outlined the outlook and difficulties of South Africa's mining sector, touching on the gap between workers’ needs and expectations and the wage round outcomes the unions achieved. "This was a fundamental source of unrest and tension that developed in the year before Marikana," said Montalto.
Debt is a major issue, with mineworkers' exposure to unsecured credit and loans at high interest rates - caused by the so-called living out budget which leaves the workers to their own devices - a factor which comes into play.
"This, in turn, has clearly increased debt levels significantly among workers and has added noticeably to the recent social unrest," said Montalto.
The government aims to tackle the financial education of those who need it most, and is directing efforts towards negotiation with banks, with agreements in place on first- and second-tier credit levels. But it will be much more difficult to keep track of microlenders, who lie at the heart of the problem.
On the centralised bargaining process, Montalto said the government can perceive the pros and cons, and provides "equal opportunity across unions of various sizes and notably does not discount the smaller ones".
The development of skills in the whole economic spectrum is a key focus, said Montalto.
The migrant labour system is ripe for reform, and "the government seems to be pushing hard for the living out allowance to be directed towards travel allowances to allow workers to return to their homes in other provinces or neighbouring countries".
Said Montalto: "The need to further push beneficiation against a sceptical mining industry was also made while the new Mineral and Petroleum Resource Development Act amendments were dismissed as a continuation and tidying up of the existing framework."
Industrialisation
On the "hot topic" of industrialisation, the "suggestion was that, although healthy in many respects, industrialisation usually serves to employ less labour at a higher cost.... The target remains very much to increase skills of workers in labour-intensive sectors but to also open up new sectors," said Montalto.
He said Motlanthe and the ministers showed "honest recognition of the problems, and active engagement to solve those issues" but there remains a "very stark" dichotomy between stability and competitiveness.
Montalto said "stability means investment in other areas such as housing that lowers competitiveness arguably in the short run, stability means keeping a collective bargaining system vs disaggregation of workers and employers that could drive competitiveness.
"All this still points to the need for further productivity gains in the sector and in particular gold and platinum," said Montalto.
"Mineral prices remain the key to deciding how that balance plays out in the medium run, but it still seems to us that some restructuring must happen after the elections in platinum in particular."
Montalto feels the government is "doing all it can within its current view of the mining sector, but that investors and ourselves have a somewhat different view of the balance between cyclical and structural factors as well as between stability and competitiveness".
- Fin24
But long-run restructuring in sectors such as platinum has yet to take on a more prominent role. So said Nomura International's emerging markets economist Peter Attard Montalto, who was reporting back on a lunchtme discussion attended by Deputy President Kgalema Motlanthe, Mining Minister Susan Shabangu and Finance Minister Pravin Gordhan.
Motlanthe outlined the outlook and difficulties of South Africa's mining sector, touching on the gap between workers’ needs and expectations and the wage round outcomes the unions achieved. "This was a fundamental source of unrest and tension that developed in the year before Marikana," said Montalto.
Debt is a major issue, with mineworkers' exposure to unsecured credit and loans at high interest rates - caused by the so-called living out budget which leaves the workers to their own devices - a factor which comes into play.
"This, in turn, has clearly increased debt levels significantly among workers and has added noticeably to the recent social unrest," said Montalto.
The government aims to tackle the financial education of those who need it most, and is directing efforts towards negotiation with banks, with agreements in place on first- and second-tier credit levels. But it will be much more difficult to keep track of microlenders, who lie at the heart of the problem.
On the centralised bargaining process, Montalto said the government can perceive the pros and cons, and provides "equal opportunity across unions of various sizes and notably does not discount the smaller ones".
The development of skills in the whole economic spectrum is a key focus, said Montalto.
The migrant labour system is ripe for reform, and "the government seems to be pushing hard for the living out allowance to be directed towards travel allowances to allow workers to return to their homes in other provinces or neighbouring countries".
Said Montalto: "The need to further push beneficiation against a sceptical mining industry was also made while the new Mineral and Petroleum Resource Development Act amendments were dismissed as a continuation and tidying up of the existing framework."
Industrialisation
On the "hot topic" of industrialisation, the "suggestion was that, although healthy in many respects, industrialisation usually serves to employ less labour at a higher cost.... The target remains very much to increase skills of workers in labour-intensive sectors but to also open up new sectors," said Montalto.
He said Motlanthe and the ministers showed "honest recognition of the problems, and active engagement to solve those issues" but there remains a "very stark" dichotomy between stability and competitiveness.
Montalto said "stability means investment in other areas such as housing that lowers competitiveness arguably in the short run, stability means keeping a collective bargaining system vs disaggregation of workers and employers that could drive competitiveness.
"All this still points to the need for further productivity gains in the sector and in particular gold and platinum," said Montalto.
"Mineral prices remain the key to deciding how that balance plays out in the medium run, but it still seems to us that some restructuring must happen after the elections in platinum in particular."
Montalto feels the government is "doing all it can within its current view of the mining sector, but that investors and ourselves have a somewhat different view of the balance between cyclical and structural factors as well as between stability and competitiveness".
- Fin24
