Speech by Dave Steward, Executive Director of the FW de Klerk Foundation, to the Toastmasters Club, Cape Town, September 28 2012:

MARIKANA, O MARIKANA!

When future historians write the story of South Africa they might well identify the Marikana incident as the turning point in the evolution of the New South Africa.

The story is too banal to be a tragedy and too desperately serious to be a farce.

The dramatis personnae inlcude Lonmin; the striking miners and their break-away union AMCU; the NUM; the media; Julius Malema; the police and the government.

This has not been a happy time for Lonmin which is the world's third largest producer of platinum. Only four years ago Lonmin turned down an offer from Xstrata to buy the company for R80 billion. Now its value has slumped to just over R16 billion.

Lonmin is also under serious pressure from depressed platinum prices and rising costs. Labour costs which account for 36% of expenses have been increasing by 10% per annum since 1994. Electricity costs - which make up 10% of expenses - have risen by more than 50% in the past three years.

At the same time, Lonmin has had to comply with South Africa's tortuous black economic empowerment, social and environmental requirements. Black empowerment company Incwala owns an 18% share in Lonmin. 50% of Incwala, in turn, is owned by Cyril Ramaphosa's company Shanduka. The stake was acquired in 2004 for R2.8 billion, R2.5 billion of which was loaned to Shanduka by Lonmin. The IDC and Lonmin own the remaining shares in Incwala.

Lonmin is also making significant contributions on the social front. This year it will be spending R87 million on its programme to upgrade 2 790 housing units for its employees. It will also pay more than R260 million for human resource development and R70 million for community programmes. It has, so far, paid royalties to the local Bopa Ba Mogale community of R370 million and has provided extensive funding and support for schools in the area.

Almost as an afterthought, Lonmin assures its shareholders that, among all these social and empowerment causes, it is also interested in making a profit. During the first six months of 2012 profits were down to R112 million from R1.152 billion during the same period of 2011.

Still, Lonmin is pretty big by any measure: income in 2011 amounted to R17.8 billion. Of this, R6.4 billion (36%) went to the company's 37 360 employees - of whom 9 564 are contract workers. R56 million went to company directors; R240 million to shareholders and R320 million in tax.

To put things into perspective, Lonmin's income in 2011 was only 10% less than the GDP of Lesotho.

In his interim report for the first six months of 2012 Lonmin's CEO, Ian Farmer presciently observed that, "Successfully managing labour relations represents the biggest challenge to the effective operation of our mines and indeed the industry as a whole."

Farmer pointed out that labour dynamics were going through a sea change. This arose from the emergence of an alternative trade union in the Platinum Group Minerals mining industry, in the form of the Association of Mineworkers and Construction Union (AMCU), to rival the dominance of NUM.

According to Farmer "the rivalry for membership between the unions could be a feature for the foreseeable future with a corresponding increase in the risk of escalation of costs and disruptions to production".

He could hardly have guessed how right he would turn out to be.

Lonmin thought that it had resolved its labour problems with the agreement that it had reached with the NUM on 2 December last year. Employees would receive pay package increases of up to 10%. A further 9% - 10% increase was scheduled for October 2012. Workers would also receive a monthly housing allowance of R1850, rising to R1950 in October 2012. According to Lonmin: "This is a good deal for the Company and the unions, and is in line with the expectations of the market and industry settlements."

As it turns out, Lonmin was wrong. The agreement was not in line with the radical expectations of the trade union upstart, AMCU - which is the second member of the cast of Marikana play.

AMCU was conceived in bitterness and born in dissension. Its founder, Joseph Mathunjwa, had been the popular chairman of the NUM branch at the Douglas Colliery in Mpumalanga. His dismissal in 1999 led to a two-week wildcat strike that was resolved only after he was reappointed.

Mathunjwa was subsequently disciplined by NUM for his involvement in the unauthorised strike. Although two NUM leaders thought that he had done nothing wrong, Mathunjwa clashed with a remorseless Gwede Mantashe. His NUM membership was terminated - but he was allowed to retain his job at the Douglas Colliery. He also retained his popularity with his 3000 fellow-workers who decided to resign from NUM in solidarity.

In 2001 he and his breakaway unionists founded AMCU.

In the subsequent years - and in the face of concerted opposition from both NUM and management - AMCU established itself in several mines throughout Mpumalanga and KawZulu-Natal - particularly in the coal-mining sector. In recent years it has moved aggressively into the platinum mines of Northwest Province.

AMCU was, from the start, far less sophisticated than NUM - and perhaps for that reason closer to ordinary miners. It does not even have a website. Most of the miners who do the hardest work - the rock drill operators - come from Lesotho or Pondoland in the Eastern Cape. They pride themselves on being the toughest of the tough.

Many AMCU members are traditionalists with little education and with families back in Pondoland and Lesotho. They believe in witch doctors. In fact, earlier this year NUM complained that AMCU was using witch doctors to recruit its members. NUM claimed that AMCU had a "very powerful sangoma."

In a recent survey, NUM found that more than half its members supported violence as a part of the strike process. It is thus not surprising that violence has been a central factor in recent unrest on the platinum mines.

Three people were killed in January and February this year when a wildcat strike stopped work at the world's largest platinum mine, Implats for several weeks. 17 200 workers were dismissed - many of whom were subsequently re-employed.

AMCU's first encounter with Lonmin was at the company's Karee mine in May 2011. The problem arose when the NUM regional branch in Rustenburg clashed with its branch at Karee. The internal disagreement resulted in a wildcat strike which stopped production at the mine for almost a month. Lonmin acted quickly and fired all 9 000 workers at the mine. Significantly, it did so with the approval of NUM.

Subsequently, all but 800 of the workers were re-employed. However, most of them immediately resigned from NUM and joined AMCU. Because it was now the largest union at the Karee mine Lonmin entered into an organisation rights agreement with AMCU in December 2011. However, Lonmin insisted that the agreement "specifically restricts AMCU's limited organisational rights to Karee Mine and affords AMCU no rights whatsoever on any other parts of Lonmin's Marikana operations."

AMCU evidently disagreed and decided to challenge NUM's dominant position at Marikana. Its decision led directly to the confrontations of August, 2012.

The miners' widely publicised demand for R12 500 was probably a secondary goal. The primary motive was almost certainly AMCU's determination to displace NUM as the majority union at Marikana.

The war songs that striking miners sang before and after the massacre of 16 August were not directed against Lonmin: they were aimed at NUM. The message was "We hate NUM! How are we going to eliminate it?"

The trouble began on Friday 10 August.

On that morning 3 000 rock drill operators refused to work and set off on a protest march. Workers who wanted to report for duty were attacked. Six workers were hospitalised on Friday and Saturday - four of them with gunshot wounds. The next day two Lonmin security guards were burned to death when their car was set on fire.

By Monday night nine people had been killed - including two policemen. Their service revolvers were stolen and one of them was hacked to death with a panga.

NUM was quick to condemn the violence and demanded immediate action from the police. NUM General Secretary Frans Baleni called for "the deployment of a special task force or the SANDF to deal decisively with the criminal elements in Rustenburg and its surrounding mine."

The violence set the stage for the fatal confrontation of 16 August.

This brings to the scene the third actor in the drama, the South African Police Service.

The SAPS tactical unit was drawn up in the proverbial "thin Blue line" between scattered Nyala vehicles. Several thousand protesters had gathered nearby on a great sandstone boulder in a wilderness of scraggly bush and red dust. They were dressed in tribal blankets and armed with knobkerries, assegais, steel rods - and some with firearms. They included not only the rock drill operators - but also members of the local community and miners who had been fired after the Karee and Implats strikes.

The protesters were evidently ready for trouble. Many had consulted witchdoctors who had given them muti to make them invulnerable to police bullets.

The scenes that ensued have been played and replayed on national and international television. According to the police, they had been using barbed wire and teargas to break the demonstrators into smaller groups with a view to disarming and dispersing them. Suddenly, about 50 miners emerged from a narrow defile between the bush and one of the Nyalas. They are running in the direction of the police - who are lined up between Nyalas - about 100 metres from them. The police fired a 30-second staccato volley into their protesters' ranks. An order was given to cease fire, which was echoed down the police lines. When the dust cleared about a dozen bodies were lying on the ground.

There is no doubt that the protesters were running toward the police. Whether they intended to attack the police - or whether they were herded in the direction of the police by tear gas - remains to be established. Whatever the circumstances, the outcome is clear: by the end of the encounter 34 protesters had been killed.

Subsequently, investigative reporters have alleged that most of those who died were not killed in the initial engagement, but were shot a few hundred metres away when they tried to find shelter further up the kopjie. The Farlam Commission will, no doubt, establish the truth. However, the uncontested facts already raise the most serious questions:

• Why was the police's Tactical Unit and not its Crowd Control Unit deployed to deal with the crisis?
• Why did the police use live ammunition?
• Why did they not exercise greater constraint?
• What did North-West Province's provincial police commissioner Zukisa Mbombo mean when she made the following statement to journalists before the meeting regarding the action that the police would take: "We shall ask them to leave. But then I don't want to explain to you if they don't, what then? What I told you is today we are ending this matter."

The next player - the international media - was already on the scene.

What they saw made no sense to Western notions of industrial action: strikers were not supposed to toyi-toy with assegais; they were not expected to be under the influence of witch doctors - or to hack their opponents to death. So the journalists quickly cast the story into a paradigm their viewers would understand - of impoverished workers, living in squalid shanty-towns, protesting against a super-greedy and insensitive mining company.

Few if any of the journalists bothered to check the claim that the miners were earning only R4 000. The statistic that stuck in everyone's minds was the Lonmin chairman's package of R20 million a year. Viewers were not informed that the miners who chose to live in squalid informal settlements, rather than mine accommodation, were receiving a R1 850 monthly housing allowance.

Neither was there any attempt to place the miners' wages and demands in context: in fact, an income of R12 500 would place them in the top 15% of income earners in the country. It is more than the monthly income of 50% of white South Africans. It is the PPP equivalent of US $2 000 per month - which is higher than the average wage in Israel, Poland and the Czech Republic - and twice as high as the average wage in competitor countries like Chile and Malaysia.

Almost inevitably, our next player, Julius Malema, was quick to arrive on the scene. There were dark suspicions that he and other shadowy figures had master-minded the violence. However, it is much more likely that he was simply trying to capitalise on the enormous populist potential of the situation. Be that as it may, the Government, the NPA and the police quickly ensured that his performance was limited to a walk-on role.

Finally, the last player, the Government, entered the scene. The Minister of Labour should perhaps have been there at the beginning of the piece - when it was already clear that the looming confrontation between NUM and AMCU might end in a catastrophe. The incident was immediately labelled by the Government as ‘a tragedy' rather than as a massacre. To his credit, President Zuma quickly announced the appointment of a Commission of Inquiry, under the chairmanship of a highly respected former Appeal Court Judge, Ian Farlam. Judge Farlam will present his report next January - which is probably the minimum time he will require - but which will be too late to have any impact on the ANC's National Conference in Mangaung.

Where does all this leave our players - and us - the audience?

Lonmin decided to settle as quickly as it could - probably with a view to resuming production and cash-flow as soon as possible. It has a US $945 million loan whose terms it may well have breached because of the problems it has experienced this year. Its compliance with the terms of the loan are due to be reviewed at the end of this month.

Accordingly, it granted the rock drill operators a 22% increase - which includes the 9% that they would in any event have received in October. The increase brings their package to R9 883. Together with the average monthly bonus of R1 500, their income will be close to the R12 500 that they had demanded.

Lonmin also decided to close its K3 shaft to cut costs - resulting in the redundancy of 2000 contract workers employed by Murray and Roberts.

Our second player, AMCU, no doubt, believes that it has achieved a victory. It has outflanked NUM on the left and has recruited 21.4% of Lonmin's unionised workers - as opposed to the 53.3% who are still members of NUM.

NUM, our third player, and its ally Cosatu, are seriously worried. They fear that AMCU's example might lead to further breakaway unions and to the weakening of their previously dominant position. They have been vociferous in their criticism of AMCU and in their efforts to reclaim the banner of radicalism.

The police are, no doubt, concerned about what the Farlam Commission might reveal. There will be serious charges that they were out of control. More seriously, there may be allegations that that they were under control and were acting on instruction to teach AMCU a lesson - or perhaps to wreak revenge for their fallen comrades.

Julius Malema is now preparing for his next performance in court confident, no doubt, that an extended trial will present a bully pulpit for his populist message.

As for the Government, it will continue to focus nearly all its attention on the forthcoming ANC National Conference where the future policies and leadership of the country will be decided.

And South Africa - the stage on which this sorry performance has been presented - what does Marikana hold for it?

Unfortunately, nothing good.

The first problem will be further unemployment.

AMCU's success has already unleashed a flood of wage demands and unauthorised strikes across the country. The demands - some as high as R18 000 a month - bear no relationship to productivity or economic reality. If companies accede to them they will either see their profit margins crumble - or they will employ fewer workers. Alternatively, if they hold out against wildcat strikes, they will lose production and income

The losers will be the tens of thousands of workers who will lose their jobs and who will swell the ranks of the 40% of South Africans who are unemployed.

As FW de Klerk cogently remarked a few weeks ago,

"The relevant wage divide is not, as the media would have it, the gap between Lonmin workers and their Chairman in London - however unacceptable this might be: it is the fact that Lonmin workers have incomes that are 20 times higher than their unemployed neighbours in Marikana."

The second problem is Marikana's implications for future foreign investment. South Africa is dependent on foreign investment, not only for growth, but also to cover our large current account deficit. Unfortunately, Marikana will further compound growing concern regarding the cost, productivity and reliability of labour in the South African economy. Together with increasingly radical policy proposals emanating from the ANC's Policy Conference in June and Cosatu's conference earlier this month, it will raise questions regarding the policy environment within which foreign companies will have to operate in the future. As a result, investors in South Africa and overseas who were reluctant to invest in the economy before, will now think of putting up the shutters.

According to Moody's, the 22% Lonmin wage increase could spur similar wage hikes at other mines. This "would be credit-negative for rated miners with exposure to South Africa, that are facing other event risks, including potential increased taxes as an alternative political response to nationalisation." On 27 September Moody's downgraded South Africa's sovereign credit rating from A3 to Baa1. Moody's referred to policy uncertainty ahead of the ANC National Conference in December and noted that "The revision reflects Moody's view of the South African authorities' reduced capacity to handle the current political and economic situation and to implement effective strategies that could place the economy on a path to faster and more inclusive growth."

There are indications that Standard & Poor and Fitch are waiting to see the outcome of the National Conference in December before reassessing their rating of South Africa's creditworthiness.

The third problem is that developments at Marikana will feed into growing populist demands. Both the ANC and Cosatu might draw the conclusion that, to ward off the threat of further Marikanas, they themselves will have to adopt much more radical policies. This tendency was already evident at the ANC's policy conference in June and at Cosatu's conference earlier this month. It may make it easier for the radicals to win the day at the ANC's all-important National Conference in Mangaung in December - and much more difficult for others to defend the sensible approach set out in the National Development Plan.

It will be some time before the curtain finally falls on the Marikana drama.

Indeed, Marikana might continue to reverberate through our future in much the same manner as Sharpeville has reverberated through our past.

Issued by the FW de Klerk Foundation, September 282012

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