POLITICS

Mining unrest will lead to job losses - AEI

Adcorp says managers will react to anarchy by accelerating capital intensive investment plans

To the student of history, nothing comes as a complete surprise. In this view, recent events at Marikana are not an occasional mayhem: they are just the most recent and suggestive symptom of an old and familiar rot.

Over the past year, wages including bonuses and overtime in the mining sector increased by 13.8%. By contrast labour productivity in the mining sector fell by 11.4%. The absolute gap between labour costs and labour's contribution is now 25.2%, the highest gap in recorded history.

South Africa's mines are responding rationally, by reducing their dependence on labour. Since the peak in 1986, employment in the mining sector has declined from 839 000 to 523 000, a decline of 37.7%. (Production levels were roughly flat.) Over the same period, mines' annual capital expenditures increased by 124.7% to R72 billion. The ratio of capital to labour - a measure of mines' capital intensity of production - has increased by 959% since the mid-1960s.

Lonmin management's 11%-22% wage settlement in Marikana will probably be met with a slew of similar demands and capitulations elsewhere in the sector. But whereas workers have learned the lesson that anarchy leads to higher pay, mine managers have learned the more notable lesson that they should accelerate their capital-intensive investment plans.

Trade unions are the most significant losers in this equation. Applying an average unionization rate in the mining sector of 80.3%, the loss of 316 000 jobs over the past 25 years represents lost union membership dues of R193.9 million in today's money. If the future is anything like the past, trade unions could lose 200 000 jobs in the mining sector over the coming decade.

Given these sorts of losses, competition between unions has become commonplace. Unions like the National Union of Mineworkers (NUM) have grown complacent under laws that heavily favour large trade unions and the miscellaneous distractions of the tripartite alliance.

Smaller trade unions have spontaneously emerged. Some of them, like the Association of Mining and Construction Union (AMCU), have radical "workerist" agendas. But most new unions are responding pragmatically by offering their members benefits such as life insurance, bursary schemes and funeral cover. The new trade unions more closely resemble stokvels and cooperative societies than the politicized trade unions with which they, for now, share the labour market. South Africa's fastest-growing trade unions - the Federation of Unions of South Africa (Fedusa) and the National Council of Trade Unions (Nactu) - have deliberately shunned party-political connections.

There are significant economies of scale in operating a trade union. For this reason South Africa's labour landscape will continue to be dominated by large unions. First-past-the-post laws grant recognition only to the largest trade union in each workplace. Agreements that compel workers to become members of a specific trade union as a condition for getting a job favour incumbent unions. And laws that force employers to deduct union dues on trade unions' behalf greatly simplify trade unions' administrative procedures.

Trade unions are subject to competitive forces just like other economic entities. Protection from competition - such as that offered by our labour relations system - will just as surely signal a growing crisis of relevance for unions who are currently beneficiaries of the system.

The Congress of South African Trade Unions (Cosatu) will be the primary loser. Growing workerism will cause Cosatu to take a sharp swing to the left. The African National Congress (ANC) will not follow suit, since its economic elites have become married to the great commercial advantages of capitalism, whatever the party's official line. The tripartite alliance, beset with internal contradictions, will not hold. These are interesting times, and the labour market seems, more than usual, up for grabs.

This is an extract from September's Adcorp Employment Index, October 10 2012

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