THE criticisms of their "militant and revolutionary" rivals by trades unions Solidarity and the United Association of SA at the weekend reflected the extent of the crisis that unions are facing as the rout in commodity prices starts to savage employment in mining and manufacturing, the unions said.
The unions were responding to platinum producer Lonmin’s announcement that it would stop five production shafts and increase the number of job cuts to 6,000 as it tried to shore up its balance sheet. They blame the Association of Mineworkers and Construction Union for extracting from Lonmin wage increases the company could not afford.
And those wage increases are part of the problem not just for Lonmin — they affect other producers too.
But they are by no means the entire problem.
Commodity prices crashed to new lows last week on news of a further slowdown in China’s factories, with Bloomberg’s Commodity Index losing 4.4% to touch its lowest level since 2002.
It has become clearer that the commodities cycle is not about to bounce again any time soon. China’s growth has slowed and its economy has shifted away from commodity-intensive infrastructure investment towards consumption and demand remains weak in markets such as the eurozone.
There are still too many producers to fulfil too little demand and until a fair amount of output is taken out of the market, prices will keep falling. Some of that output is going to have to come out of the South African market, given that costs here have gone up much faster than those of global rivals, with labour and electricity among the main culprits.
That has put producers such as Lonmin and ArcelorMittal under huge pressure and their closure and job loss announcements are likely to be followed by more from other companies. It is no comfort that this is a global phenomenon, as is clear from Anglo American’s announcement that it will cut a third of its workforce.
Anglo didn’t say anything about the South African environment — rather, it emphasised that it would look to sell poor-performing assets wherever they were, and to cut head office "overhead" jobs in London and Johannesburg.
Anglo doesn’t expect any upturn in the commodities cycle for at least the next six months.
The latest World Bank Commodity Markets Outlook forecasts nonenergy prices this year 12% down on last year. Some argue it will be at least three to four years before there’s an upturn. The consequences are likely to be dire, not only for workers and their trades unions but also for the companies that employ them and supplier industries that rely on them.
This clearly is the moment for some serious conversation and perhaps even a compact between workers and employers on measures that could minimise the damage in the gold, platinum, iron ore and metals industries.
The government, too, needs to be part of the conversation.
But it goes beyond the industries. The commodities rout has serious implications for SA’s economy, given that commodities including platinum, iron ore and coal make up 53% of our merchandise exports.
The rand has already been hit; the balance of payments will be affected, and the commodities rout could make the fiscal balancing act more difficult and potentially hit tax revenues. This makes it particularly urgent that policy makers focus on what SA can do to weather the downturn.
The power crisis and policy uncertainty in areas such as black empowerment are adding to SA’s commodity woes, so those issues must be tackled with speed.
Post a comment