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21 October 2016 13:09 (South Africa)
Opinionista Dick Forslund & Jeff Rudin

Mining strike: Whose reality is ‘the real world’?

  • Dick Forslund & Jeff Rudin
    Dick Forslund & Jeff Rudin

    Dick Forslund is senior economist and Jeff Rudin is a research associate at Alternative Information and Development Centre.

Everyone, other than lunatics, troublemakers and the economically illiterate, is supposed to know that the demand by the striking platinum workers for a starting basic wage of R12,500 is plainly unaffordable. Indeed, anything even near R12,500 is supposedly so outrageous as to guarantee the bankruptcy of the mining companies and the closure of the mines. The fact that the mining companies are now only nudging towards this claim, after more than 12 weeks of all out strike, and despite the major concession by AMCU, the trade union involved, of a four-year phasing in of the claim, ought to be sufficient proof of the magnitude of the workers’ unreality. A closer look at the actual numbers, however, suggests something very different.

The absurdity does not go away; instead we are forced to ask: Whose reality determines ‘the real world’?

An “unskilled” worker at Angloplats, for instance, has a basic monthly wage of R5,400. To reach R12,500 in the fourth year means an annual increase of R1,775 for each of the four years. This would appear to be a whopping 32.9% increase for the first year, falling gradually to a still large 16.6% in the fourth year. However, excluding other allowances and pension costs that, as a further concession, AMCU agreed to peg at the rate of inflation and assuming official inflation of 6% for four successive years, means that the total nominal wage increase falls to 21.6%, in the first year, and 12.1% in the fourth year.

For skilled and professional workers, the situation is far easier, for their basic salary is already close to R12,500. Indeed, the highest grades have it already. We don’t know the precise number of employees in each pay grade because the employers seek to hide this information. However, we can confidently say that the total wage bill for all AMCU’s members would be far less than a 20% increase in the first year and close to or below 10% in year four. Keeping inflation below 6% would reduce these numbers even further.

But the cost of meeting these increases – whatever they might be – is not small. This is not something to conceal but rather to affirm: We are indeed speaking of a wage revolution but with a difference: the cost would come from profits, rather than at the expense of the production of wealth.

At the beginning of the strike, the platinum giants offered a 9% wage increase. Nine weeks later they are still offering 9%. They say they are not unsympathetic to a wage increase but that they cannot afford anything higher than 9%. This claim needs to be seen against what, in their real world, would be considered to be ‘reasonable, sustainable and economically sound’ profit increases. Mr Cutifani, the new CEO at Anglo American (AA), made it clear, on 26 July last year, that the required profit rate was well “north of 15%”. The business press and Anglo’s own annual report for 2013 makes clear that the industry goal is an eventual return to the golden age of the platinum boom of six years ago – a heady 30% rate of profit.

What does the ‘modest’ starting point of 15% mean amidst the swirl of business-speak numbers? Let’s use Anglo American as an example, given that it owns 78% of the major platinum company, Angloplats, with its 51,000 permanent employees. In 2013, a 15% profit increase for this worldwide corporation would have meant an increase of no less than $1.481 billion or R15.699 billion at an R/US$ exchange rate of 10.60.

If we divide this demanded profit increase of R15,699,000,000 by 158,900, which is the number of permanent and contracted staff in Anglo American’s worldwide empire, we get an average wage increase of R98,800 per year or R8,200 per month. R8,200 would not only cover the first of AMCU’s R1,775 yearly increases but would have sufficient left over to contribute 57.7% towards the second year as well.

“Capital”, however, demands the whole of this increase entirely for itself: the big shareholders demand this as a work free income from capital.

Lest it be forgotten, a profit freeze does not mean NO profit. Using last year as an example, a zero profit increase would still mean a cool $4,369 billion or R46.311 billion in profit. The point is that R46 billion is not enough for capitalism. Capitalism means compounded profit maximisation each and every year, with each year’s profit being reset to 0 when measuring the next year’s profit. In this world, profit maximisation is never enough and has no ending.

The question of who pays the mine workers is therefore a class question. ‘Affordability’ has nothing to do with this. The money is there; it’s the class struggle that determines who gets it.

Morality, alas, has no place in any of this. This is why the stark and grinding poverty of the hovels in which the mine workers live no less than the poverty of their families in the poorest parts of rural South Africa is not denied. The acknowledgement, however, comes with an apologetic shrug of supposed helplessness by both the mine owners and the government that protects them. We are left with the invitation to accept the inescapable and amoral realities of their ‘real world’.

But even worse is to come. Again invoking their version of sound economics, global capital demands nothing less than a 33.9% profit increase – which Mr Cutifani, using the authority of Anglo American’s Annual General Report 2013, promises to deliver in two years! Yes, two years.

The audacity of it is well placed; it comes from a confidence secure in the power of the mining industry. And this confidence is borne of having the government in their pocket, even though the fit is sometimes an uncomfortable one. Black Economic Empowerment is the ultimate guarantor against the government challenging the mining companies and the global investors behind them, in any substantial way.

The Freedom Charter ought to make them sufficiently nervous about the threat of nationalisation that continues to hover in the background. Nationalisation, in turn, ought to unsettle their version of a fixed ‘real world’ to a point where reduced levels of profit become a realistic alternative to a total profit freeze. Outright nationalisation could, of course, release more than enough profit to make R12,500 per month seem entirely reasonable.

But this new ‘real world’ is still to be won. DM

The article is based on one that is to be published in the next issue of Amandla.

  • Dick Forslund & Jeff Rudin
    Dick Forslund & Jeff Rudin

    Dick Forslund is senior economist and Jeff Rudin is a research associate at Alternative Information and Development Centre.

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