11 August 2017


The state of the economy and its effect on the people on the street is effectively explained by the high level of inequality in South Africa. Inequality is measured by an index called the Gini Coefficient. South Africa has one of the highest levels of inequality standing at a shocking rate 0,69 with a rate of 1 being worst.

The economy is shaped by a number of factors, such as the exchange rate, Gross Domestic Product (GDP) growth in the respective sectors, the labour market dynamics, as well as consumers and prices. It includes factors related to money like the supply of money through the South African Reserve Bank (SARB), trade and trade agreements with other countries.

Obviously, the economy is also shaped by its major players, being government who makes the rules, gets taxes and decides how to spend taxes. Business itself is a big player in the economy, with related factors of investor confidence, corruption, and sales market fluctuations.

It shouldn’t come as a surprise that we find ourselves where we are. The current state of our economy was inherited as it is. Since the discovery of minerals, the intention was never to give wealth to our citizens. Rather the intention was to enrich a few.

The principles that ruled were cheap labour, migrant labour, land dispossession, proliferation of taxes and profit at all cost. This led to structural problems particularly in mining, manufacturing and agricultural sectors of South Africa since the earliest times.

These structural challenges were further compounded by racial discrimination which further ran along class lines. Once minerals were discovered, everybody wanted a piece, and England became very interested in South Africa.

This interest led to territorial struggles, which in turn caused the Anglo-Boer Wars and eventually in 1961 South Africa became a republic. However, the apartheid years saw inequality and racial discrimination grow even more. Capitalists were able to exploit cheap labour and use their political privilege to accumulate more and more money.

After the liberation struggle, South Africa saw its first democratic election and the current ruling party was victorious. However even though the incoming government had the chance to really transform the economy they chose to embrace the structural economic system used by the previous regime, for the sake of increased income. This meant that the focus became the benefit of a few, over the misery of masses.

Public service delivery has deteriorated due to lacking maintenance and general corruption. This causes only the poor and the destitute to use public services like the police, hospitals and public transport. Middle class citizens supplement basic services with private arrangements, like security, medical aid and motor vehicles.

This class division in the utilisation of service invariably compounds the differences in quality of such services, which creates a vicious cycle that promotes inequality even further.

The harsh effects of capitalism in South Africa are compounded by structural constraints that have ushered in spiraling unemployment, with shrinking labour demand and poor labour absorption.

The unemployment rate remains very high for a middle-economy and continues to grow with the recent job blood bath in the mining sector.

The insensitivity of Anglo Gold Ashanti and Sibanye and the inhumane act of slaughtering jobs further exacerbated the inequality in our country. This again confirms the Gini Coefficient index rating for South Africa.

There have been recent media pronouncements that the retrenchments are a corporate response to the gazetted Mining Charter.

Although the timing is coincidental and may arouse attributable correlations, as AMCU we believe that this is a calculated move by capital to disinvest in South Africa and ship opportunities to other investment destinations, particularly the United State of America for the two companies in question.

The South African economy unfortunately failed to transcend the primary economy and build a strong manufacturing base in the secondary economy. This would stimulate aggregate demand and build a local industry with reduced imports.

This failure has negatively affected our growth trajectory and limited our consumption levels, leading to increases in internal constraints, growing poverty levels and more people dependent on social grant system.

For an economy that is currently in recession, the scenario for South Africa is bleak and requires a shift in the development trajectory to find alternative growth paths that will stimulate growth and development.

The economic structure of the mining sector has been supported by a cheap labour regime, sponsored by an oppressive migrant labour system under the Chamber of Mines and most recently TEBA.

Section 189 of the Labour Relations Act allows employers to terminate employment of their employees for operational requirements whose principal requirement may be to make profits.

As a trade union, we are worried with the job blood bath in the gold sector considering that the gold price has been up for a long time. There is no rationale logic to explain the process of disinvestment in South Africa economy considering that the same companies have bought Platinum refining plants and mines in the USA. This while Anglo Gold Ashanti is looting up to 39% gold production in South Africa and 33% in the rest of Africa. This is high compared to 19% taken from South America and 9% from Australia.

There is a clear process of off-shore investments influenced by numerous factors some which include better industrial capacity else other that South Africa. These same companies have sought to create jobs in other countries other than South Africa using wealth they accumulated in this country.

This explains the lack of loyalty in private capital and the need for the state to rethink its role in the economy. If this wealth was in the hands of the state, the country would not have been a victim of similar capital flights as these proceeds would have gone to the state for re-investment in the country.

The issue of mining retrenchments is a broader social ill which is affecting the South African economy. It is a tip of the iceberg of malfunctioning economy ecosystem that requires urgent re-engineering. This is not an industrial relations issue between an employer and employees, but a broader socio-economic phenomenon which requires higher level policy making to curb future job blood baths.


The Effect on The Man on The Street.

As consumers, ordinary people are actively engaged in the economy – in one way or another because mining plays such an important role in the economy, it therefore follows that this sector will also have a direct impact on the lives of many people.

One of the obvious aspects of the economy which has a direct bearing on the ordinary people, is the employment opportunities available in the labour market.

There will therefore be increased unemployment and poverty due to the mass retrenchments currently faced.

People forget that mines do not only employ many people directly, but also indirectly it creates many jobs for people in downstream businesses. A good example is catering companies who provides food for mineworkers, or factories manufacturing protective clothing for mine workers.

Retrenchment is probably the worst thing that can happen to workers. It strips them of their income, their status in the community and ultimately of their dignity. In a country like South Africa with its massive unemployment rate, it can actually also be an employment death sentence in that the chances of reemployment are slim in real terms.

The issue of demand and supply compounds this problems as mass-retrenchments in localised areas such as the current Anglo Gold Ashanti and Sibanye job cuts, basically create a big black hole in rural communities like Fochville, Carletonville and Westonaria.

Obviously larger centres like Klerksdorp (including Stilfontein and Orkney) and Potchefstroom will also feel the downstream social and economic effects.

In South Africa, we want to see wage-led growth, meaning that people must have decent wages and be able to spend their money to stimulate the economy.

There are different sectors in the economy, and many people are forced to be entrepreneurs in SMME sector. Unfortunately, this sector is highly under-regulated, which means that often it is not accessible to ordinary people on the street. AMCU will campaign for higher levels of regulation in the SSME sector.

Economic growth is highly dependent on a proper education system. The education system should be responsive to the needs of the labour market, and it should ensure that our children are equipped with the right skills and knowledge to play their role in our economy