Playing to the gallery

Unions strike at the core of the economy


There is a disparity between a  salary and the cost to company. In other words, just because someone earns say R10 000 per month, it does not mean it costs the company the same amount to employ this person. 

In actual fact, once you have taken the company’s medical fund, provident fund, UIF, SDL, and housing allowance contributions into account, the amount of money the company has to make just to employ one individual is almost double the gross salary. If you multiply that by thousands of people, the company needs to make a lot more than just R10 000 per individual. 

This amount excludes the running costs of the company, leave pay and bonuses. Now, if the cost of employing someone is too high, the company has little chance in selling their products at a profit (i.e. for the company to be sustainable), as the middle man and consumer cannot afford to buy the product, or in this case, the cost of producing minerals costs a lot more than the resale value.

This is something none of the unions seem to realise. But why should they? They earn a salary like the rest of the people they represent and never worry about where the money comes from or how much it actually costs for them to be a union representative. Now, as they are clueless about this, explaining what damage they are doing to South Africa will fall on deaf ears. Is it because they cannot comprehend the concept of business, they do not care about their members; or simply do not understand the consequences of their actions? And what about the fact that the longer they enforce a strike, the longer it takes for the employee to recoup lost earnings? 

So, thousands of people are paying money on the premise that they are being protected by a union, but the reality is that this is far from the truth. Take the Marikana travesty (the first of many unforgettable strikes) – the dispute was not based on the employee’s requests, but rather a result of the power struggle between the unions. In fact, the employees wanted to settle within the first two weeks of their strike, but the unions would not entertain their request. Why would they? They were in the limelight, showing the world their dictatorial ways and in the process ensuring the country lost R100-million per day in the mining sector alone. What they can take credit for is the loss of earnings for the workers, tragic deaths, senseless violence, assassinations, additional crime, a deterioration in confidence, the depreciation in the rand – the lowest since 2008, business failures, a downgrade from the International Monetary Fund, international shame and on-going corruption – and of course, a guaranteed salary at the end of the day. 

How does South Africa take bold steps to strengthen its economic performance to find balance, fair and socially responsible solutions to its labour problems when the unions make unrealistic demands? How do we project a positive outlook on our domestic economy when South Africa has been negatively projected through global risks and the decline of international investors? How do we explain how business works to people so hungry for power that they don’t see the bigger picture? And, how do we explain that the longer there is no production, the longer it will take for the mine to make money and cover its overheads? 

While government had several blueprints for improving the economy – from the Industrial Policy Action Plan to the National Development Plan – nothing sustainable will be achieved as the conversion of these plans into actions and implementation is sorely lacking. The ANC secretary-general Gwede Mantashe pleaded with unions to play by the rules, referring to the National Union of Mineworkers (NUM) and the Association of Mining and Construction Union’s violent rivalry. Unfortunately, he didn’t specify what rules – the ones governed by the country, or the man-made rules by the unions?

To compound the already unpredictable dilemma, Rupert Murdoch’s News Corporation, which was bidding for South Africa’s biggest English language newspaper group, Independent News & Media Group, pulled out of the bid after the outbreak of the Marikana incident, fearing the safety of its investment in the country.

And then NUM had the audacity to demand unrealistic increases of up to 60% for entry level wages, a 344% increase in housing allowances and an 81% increase in living-out allowances in the gold and coal mining sectors. These demands equate to approximately 10 times the current inflation rate and that is despite the heavy losses incurred by mining companies following last year’s strikes. Notwithstanding the world watching gold shares plummet and investors finding alternate countries to invest in, the unions involved in this laughable negotiation process continue to jeopardise our already volatile relationships with the rest of the world.

It is evident that NUM’s demands run far deeper than just the salary numbers and to reach deep into gold companies’ coffers. As a union, they want to flex their muscles in the face of an unprecedented onslaught on its membership numbers. While it’s predictable that NUM should make such ‘pie in the sky’ demands as it attempts to regain members lost in great numbers to rival union, AMCU, the reality is that the majority of companies in the South African mining sector could do with wage cuts, instead of wage increases, simply to keep the mines operating.

Sadly, a weaker rand will make it harder to pay for future imports, and decreased mining production will mean a further drop in exports, so the crisis will have a long-term effect on South Africa’s current account and currency, and the sustainability of its overall finances. Thus, the bottom line is that unless government and corporations react swiftly and effectively, the effects of the mining crisis could be felt for many years.

Thanks to the unions’ interference, not only have a number of mines closed, but thousands upon thousands of people have lost their jobs (excluding the fact that one in four people do not have reasonable work as it is). Taking this into consideration, a conservative ratio of 10:1 has been equated for the number of people that do not have any income and look forward to an extremely bleak future.  

The irony of all of this is that when the late Margaret Thatcher, fondly known as the Iron Lady, was in power as Prime Minister, she refused to allow Britain to place sanctions on apartheid South Africa, as she did not want to play a role in creating unemployment in our country. This, from someone who only had an affiliation with our country – the country we live in; the country we still believe in; the place we all call “home”. 

How is it that she’s more empathetic about our own people than we are? It makes absolutely no sense!  

Debbie Lieberthal (MD: Umkhonto Labour Holdings)

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Issue 83


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