Columns 19.5.2014 09:00 am

SA caught in Amcu vortex

FILE PICTURE: Members of AMCU march to Implats head office in Illovo, 27 March 2014 to deliver their demands which include an salary increase to R12 500. The  five month long strike has since ended. Picture: Neil McCartney

FILE PICTURE: Members of AMCU march to Implats head office in Illovo, 27 March 2014 to deliver their demands which include an salary increase to R12 500. The five month long strike has since ended. Picture: Neil McCartney

A shocking 1.4 million people stand to be affected in some way by the ongoing platinum strike in Rustenburg, now in its 16th week.

Platinum group metals (PGMs) make up nearly a quarter of mining production and are the largest sub-sector in mining, employing 196 000 people. The sector is probably the most important inmining.

However the 70 000 workers on strike have affected many more people. Firstly the mines involved employ 125 000 workers in the sector (including contractors). This is nearly 64% of all emloyees in the platinum industry.

My initial estimate of 150 000 to 200 000 people directly affected was very conservative; it could be closer to 325 000, as 1.6 workers are employed by suppliers for every one worker in the mining sector.

This excludes those working in many other unrelated industries in Rustenburg and Madibeng, such as the retail industry, which are also severely affected.

In these areas, even welfare organisations complain of payments drying up. Retailers report having to retrench people.

So indirectly, the actual number could be closer to 350 000. Assuming that families consist of four people, about 1.4 million people are feeling some negative effects of the strike.

No exit strategy

I believe that the Association of Mineworkers and Construction Union (Amcu) is a big loser here. Its members have lost nearly 30% of their annual income.

They have become even more indebted. Their inability to repay their debts is putting pressure on the financial system.

The economy too is a major loser. If the strike continues for another month or more, the economy may risk dipping into recession.

GDP effects

The R17.5 billion lost in PGM sales would also affect the current account. By the second quarter the deficit could again be over 7% to GDP.

Even if the mines start up today, it will still take weeks or even a month for the first platinum to reach the markets.

GDP growth is now more than likely to dip below 2%. My estimate is that the strike will shave 0.8% of a percentage point off GDP growth.

The impact of the strike is already evident in the manufacturing industry. Manufacturing output has shown an anualised decline of 6% in the first quarter, partly due to the strike.

Mining output is showing an annualised decline of about 24% in the first quarter.

The huge decline in output levels in the mining and manufacturing sectors will contribute to a decrease of just over 2% in GDP growth in the first quarter.

There is also significant pressure on electricity output and vehicle sales. I estimate that the likelihood of a contraction in the first quarter is now at over 50%.

Economic suicide

The strike will have a negative impact for years to come, as investors will ask why government has allowed this strike to continue for so long.

Most countries would have seen ministers or even presidents getting involved long before 16 weeks.

The right to strike is part and parcel of our Constitution. Many other countries do not acknowledge this right. Most countries limit the right to strike of its workforce in one form or another.In South Africa, the only requirement is the proper following of procedure.

It’s astounding that this tragedy is allowed – democracy is being undermined by inaction.

Somehow the country must be able to call an end to the strike and enforce arbitration. At least, neutral people ought to be involved to help get everyone out of this mess.

The inaction is madness. South Africa is committing economic suicide.

Mike Schüssler is the founder of economists.co.za

 

The Citizen Trail Run 2018

today in print