IN SOUTH Africa we don’t only have summer, autumn, winter and spring — there is a fifth season. You guessed it, welcome to strike season!
Strike season is that special time of year when you can plan on some extra "duvet days" when you can stay in bed a little later, until you’re required to put on this season’s T-shirt and go to join your co-workers on a walkabout.
It has become part of our annual economic calendar, part of the culture of our society.
I think it’s a noisy, messy, outdated and ineffective waste of time, which contributes little towards achieving the economic dispensation it purports to seek.
The boundaries of the debate are the same every year.
Workers want about double what companies are offering and the science or wisdom of either side’s argument is seldom revealed.
Inevitably we settle somewhere in the middle, with both parties leaving the table satisfied with one another’s dissatisfaction.
We shake hands and leave the room with a smile and a "See you next year, same time, same place", having achieved not much.
What’s more, this process has some serious and damaging side effects. Strikes are news, visual news — I guess that’s their purpose. Foreign investors often don’t have enough informed context (or don’t care anyway) to see beyond the worst TV highlights, and the damage to investor perceptions can be quite severe and long lasting.
At some point this affects our risk-return categorisation, which affects our cost of capital, our exchange rate, our ability to deliver orders on time, and other critical factors which determine whether it is worth doing business with us.
Strike days are lost days, you don’t make them back.
If we aren’t making hay while the sun shines (why don’t people rather strike in the summer — much better T-shirt weather?) then those who do will steal our market share, sometimes permanently. Buyers like predictable suppliers. I’m not sure where either side gets its negotiating boundaries from (other than "What do you think we can get away with?") because it sure doesn’t seem like the normal law of basic economics applies — price is discovered where supply and demand meet.
We are all taught this in Economics 101, but it is common sense anyway. Sharing the economics of the firm is a zero sum game, and it should come as no surprise that the industries that are facing the toughest trading conditions are also having the toughest wage negotiations.
There is only so much cost a gold miner or manufacturer can absorb before its products become uncompetitively priced and unsalable — push this too far and there simply won’t be enough revenue to pay the increased wages. Have a nice day.
These things are known to all of the players, and I wonder whether we wouldn’t save a lot of time and trouble if instead we just fed all the variables into a linear goal-seeking multivariable computer program and waited for it to spit out the affordable wage negotiating range, all things considered.
Input dollar gold price, exchange rate, mining cost per ton at current wages, shareholder capital providers’ required return (so that we actually get their money and they don’t go and invest it in a mine in Australia), debt funder requirements, tax payable, capital expenditure required both to maintain and grow production.
You know, all the stuff, and there you have it — out comes the sustainable wage range.
Why is this not possible?
Well, for one thing, information is not shared between the two parties negotiating the deal. How on earth (or underground) do you expect two rational people to reach a sensible deal, let alone a resilient longer-term understanding and contract, if they’re not working off the same data and understanding?
Both sides seem to miss this requirement — the mine bosses don’t appear to know and understand the actual and causal needs of the workers’ finances, and the unions too often refer to irrelevant benchmarks to support their demands.
It’s not just about the numbers, and even to the extent that it is, it is much more about the absolute sums than it is about the percentages. When people ask for a 60% increase it’s not because that’s been calculated off the current base with reference to some economic index or measure of their increased productivity, rather it’s because that’s what they need, right now, to balance the household budget. Simple.
It is about needs.
It is about the widening gap between unfulfilled expectations and unaffordable indebtedness.
We are facing the compounding effect of overindebtedness and underemployment. I suspect that if you divided today’s final take-home pay by the number of mouths that it is required to feed you will find that result to be the lowest it has ever been for working South Africans.
How did we get into this mess?
It had nothing to do with the economics of the firm.
It had to do with easy, but expensive, credit made available to buy substitutes to fill failed aspiration gaps. Retail therapy for the masses! Unfunded retail therapy — money used to buy the deadly painkillers that give short-term satisfaction — because the economic dream of a better life for us all remains ever more elusive.
I think union-based strike action, as a valid process for solving wages, has passed its sell-by date.
Mass protest is far removed from the truths that need to be discovered between employer and employee. Direct communication, two-way education and understanding of each other’s circumstances is now required to rebuild the trust in the employer-employee contract.
If you bring the elephants into the room (and there seem to be a whole herd of them) then you may have a chance of addressing them — the enemy is outside.
Only once you know your workforce’s individual circumstances in detail can the rehabilitation process begin. There is no average state of despair amongst the workers. There is no average industry economics.
Get close to your workers, set boundaries of protection around their personal financial conditions. In the same way that we seek to secure our employees’ retirement, we need now to secure their everyday economic survival. Interfere in the garnishee order process, get involved in the rescheduling of credit — there is expertise out there to deal with this stuff.
I’m pretty convinced that angst and productivity are inversely correlated. If you’re worried, you can’t work well, if at all, and a lot of us are worried. We’re at risk.