The profit motive

Jan 18 2013 07:35
Mzwandile Jacks

Striking workers have become a familiar sight in the mining sector. (Pic: Felix Dlangamandla)

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SOUTH Africa is used to job losses on JSE-listed companies, which come with just about every economic slump. But the government and the labour movement have not become accustomed to the actual driver of these job cuts.

What brings us to this point is the fact that JSE-listed Anglo Platinum [JSE:AMS] (Amplats) this week said it would lay off 14 000 workers, close four shafts and sell Union Mines.

Amplats says workers could lose their jobs because of the firm’s cash shortage. It says weakened business and investor confidence has translated into less capital in the system, lower business growth and fewer employment opportunities in the mining sector.

This sparked a vicious response from Mining Minister Susan Shabangu, who said there was no justification for Amplats’ planned move to restructure. She claimed that Amplats had agreed with the government on plans to make the company more profitable, adding Amplats should have discussed this with the government first.

I think the motive behind this whole thing is profit for investors or shareholders. There are people who stand to gain a lot financially after these lay-offs and she and the labour movement have got to do something about this.

It does not help to just fume after the board has made a decision to cut jobs. Board members rarely change their minds once they have made a decision to make a quick buck.

Investors want to make maximum profits, particularly when economic growth projections for the world economy are not that great for 2013.

The international market for the mining industry’s goods has shrunk markedly. High-income countries struggle to restructure their economies and regain fiscal sustainability, according to the World Bank.

Developing countries, where growth is 1 to 2 percentage points below what it was during the pre-2008 financial crisis period, have been affected by the weakness in high-income countries.

Major downside risks include the loss of access to capital markets by vulnerable eurozone countries and commodity price shocks. Some prospective buyers of precious metals have put their plans on hold.

Now these issues bring nervousness among investors, prompting them to call for more job cuts. No wonder analysts and economists are predicting wider job cuts across the SA mining industry this year.

Mining firms, it is believed, are all going to blame last year’s widespread strikes in the sector, saying these strikes weakened business and investor confidence in South Africa’s mining sector.

Investors always have a positive reaction to layoffs at big companies because they reckon lower costs mean higher profits.

Given South Africa’s more than 25% national unemployment rate, this is not a very nice emotion to hold. These layoffs are often a half-hearted process that can result in productive workers taking a buyout and quickly finding a job elsewhere, while deadwood workers hunker down and stick around.

This will simply make the company less profitable due to lack of adequate expertise. But investors do not care as long as they know that they have the power to call for another layoff whenever they want to.

At least I believe that the SA mining sector should continue to be among the major contributors to the country’s economy.

The South African economy depends more than ever before on income from the country’s mining companies, which have been contributing 65% to the country’s mineral export earnings and 21% of total exports of goods.

The mining industry is also South Africa’s biggest employer, employing about 500 000 workers and a similar number indirectly. It is recognised as the fifth-largest mining industry in the world – representing 5% of South Africa’s gross domestic product.

Mining in South Africa has also been recognised as the main driving force behind the history and development of Africa's most advanced and richest economy. Based on what miners have been telling the media this week, each mining job could support up to 10 family members.

I believe mass layoffs will increase unemployment figures in a country which has been grappling with more than 25% unemployment rate for a couple of years now. Layoffs may also possibly lead to the long-term goals of mines being to find automated solutions.

 - Fin24

* Mzwandile Jacks is a freelance journalist. Views expressed are his own.

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anglo platinum  |  mzwandile jacks  |  sa economy  |  mining



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