Why Amplats is doing the unavoidable

By Aidan Prinsloo

The upcoming retrenchments are neither malicious nor a justified retribution. Instead, they are signs of transition that South African business must make.

The Association of Mineworkers and Construction Union (Amcu) and Cosatu have expressed outrage at Amplats’ proposed cut of 14 000 jobs. Other mining companies are proposing similar cuts. Some think these mining giants are fully justified in what they’re doing — getting rid of the troublesome workers who were responsible for the wildcat strikes that marred the end of 2012. Many think they aren’t justified: the mining sector is the biggest in South Africa and these cuts represent a massive shock to our already struggling workforce. Amcu has even proposed that the government take over the mines in order to prevent the job cuts.

But these responses all display the wrong way to think about the issue entirely. Don’t get me wrong — we should really be worried about the soon-to-be-jobless families. This country is going to have trouble recovering from this addition to the pool of unemployed and people are going to suffer. But this is unavoidable. Let me explain.

Basic logic dictates that whatever happens, the mines have to continue to offer competitive prices on the global market. If they don’t, they don’t make a profit, cannot sustain operations and they will eventually have to shut down — an even worse shock to our workforce! So, the mines’ ability to keep the economy floating relies directly on their ability to sell their produce on the global market at low prices. (Keep in mind that South Africans do not generally buy our mines’ produce — we trade it on the global market to economies that are richer than ours.)

Now, with or without government involvement, all mining companies have to make a decision between two models. Mamphela Ramphele points out that most South African mines run on the same model they did in the 19th century — that is, they hire a large amount of unskilled labour and pay them very little. This model does not make use of high-tech machinery; instead, it relies on the same principles that made slave labour viable. Let’s call this the “many people, low-tech” (MPLT) model. This model made sense in a world where most mining technology was expensive. As a mine owner, you paid less overall to get the same amount of produce.

But, let’s make one thing clear, the MPLT model generally requires that you don’t pay people a fair wage. Also, because humans are doing most of the work in this model, workers are put in very risky situations where injury and long-term health effects are constantly a part of their lives.

The other model Ramphele mentions is one that many of the world’s leading mines have already switched over to. It is by now far more viable than the MPLT model because the cost of technology has decreased significantly since the 19th century. This model requires fewer people who are more skilled. Furthermore, the mine uses a higher level of technology. Let’s call it the “high-tech, few people’’ (HTFP) model. Workers get paid more (because they are skilled) and risk their lives less (because machinery takes over the more dangerous bits).

Overall, as Ramphele points out, we’ve needed to shift from the 19th century MPLT model to the worker-friendly HTFP model for a long time now. The older model is now less, and we are failing to be as competitive in the global market. Marikana was the wake-up call that shook them into action. Such protests are inevitable for the MPLT model where people are poorly paid and work in dangerous conditions.

The downside of this transition is that many people have to lose their jobs. This is why Ramphele calls for mines to consider placing ex-mineworkers in other sectors. Contrary to what most people think, the mines cannot go on employing the same number of people — they simply won’t be able to compete internationally.

Now, what about Amcu’s suggestion that the government nationalise the mines? I imagine that Amcu thinks the government will then employ the same number of mineworkers, doing the same work and pay them the new increased wage. I’ve already said that this model is not going to make much money on the international market. So if the government actually chooses to do this, it has to make up the difference from elsewhere in its budget. This means that it will have to pull many from other sectors and spend it on maintaining a business that is no longer making money. You don’t need an economics degree to see that this is not sustainable. This option will not only negatively impact the mining industry but the country as a whole when the government runs out of money coming from smaller sectors.

Ultimately if the government were to nationalise the mines and run them effectively and sustainably, they would have to do exactly what Amplats is doing right now. Calls to nationalise mines solve nothing.

Aidan Prinsloo is a master’s student in philosophy at Rhodes University. He is actively interested in the country in which he lives. He believes the only way we can overcome our current predicaments is through careful planning and rigorous, informed debate.