Union bosses need a lesson in economics

PRIVATE companies are in business to make profit.

Profit is the difference between income earned and expenditure incurred.

Companies are owned by shareholders, who expect to receive a return on the money that they have invested in the company.

As soon as the financial results and/or forecast show that there is a risk of profits no longer being realised it makes sense for the shareholders to disinvest from a company.

This is probably why General Motors (GM) has made the decision to withdraw from South Africa.

Why else would a company pack up and leave after so many years in Port Elizabeth, and contributing to so many peoples’ lives in wages and other benefits?

The reality of it all is that GM is leaving the country due to economic reasons.

Economics is affected by politics and the politics in this country are very uncertain.

This is evident in the recent credit ratings downgrade to junk status.

The National Union of Metalworkers of South Africa (Numsa) has accused GM of jumping ship.

It is also concerning that the union bosses do not seem to have at least a vague understanding of economics.

It is obvious that the company does not forecast profits for the future so, unlike government that is able to borrow to make up a deficit, private companies have a mandate to maximise profits.

Instead of pointing a finger at GM, the union should look at the turmoil and crisis in the ANC, and the resulting adverse effects. Numsa should also try to build a better relationship with employers.

I hope I’m proven wrong, but this could be only the beginning.

The longer Jacob Zuma is in power the longer it will take our beautiful country to recover from “junk status”.

And more companies could be leaving our shores before it’s too late.

It is unfortunate though that families will be affected as their breadwinners will now be out of work.