Unemployment only worsens as mining fades

THIRTY-four breadwinners lost their lives in the closing weeks of winter when the police fired on illegally striking workers at Lonmin’s Marikana mine.

That’s the real tragedy that I sometimes lose sight of as my fears grow over the future of mining, still an important sector of this country more than 100 years since it began. The dependency ratio for each job in mining varies depending on who you speak to but the general figure is about eight to 10 people.

There are more depressing ratios. The Royal Bafokeng recently published a figure of 26 dependencies for the entire value chain.

When the labour ructions in the platinum sector finally come to an end (surely they will) a report by SBG Securities analysts Justin Froneman and Walter de Wet says there could be as many as 8,000 breadwinners out of a job.

Employment in the platinum sector may drop to 176,650 next year from 184,890 last year, according to their research. Platinum group metals and gold mining make up about 70% of the labour force in the mining industry. The fallout from the Marikana tragedy has been concentrated in this sector of mining.

While production problems in the platinum space have boosted the price of the metal — which gained more than 17% in the past quarter — the cost inflation from labour settlements will place further pressure on already “unsustainable” industry margins, the report says.

The illegal strikes across the platinum belt call for industry restructuring, and ultimately that means job losses. If we assume 8,000 job losses, as many as 80,000 people are affected in one way or other.

Sectors of the economy such as construction -— which could have provided alternative employment for mostly unskilled labour — are operating in a recessionary environment. No help there.

It is ironic that the state’s ability to spend money on infrastructure — which would absorb unemployment — is constrained by expenditure on social services. The need for those social services is itself a function of unemployment.

Of the government’s budget of just over R1-trillion, social services account for 57%, up from 49% a decade ago, according to Investec.

The burden of caring for dismissed workers and their dependents will fall onto the state. That means even less space in the budget to spend on infrastructure such as roads, bridges and highways. It doesn’t help matters that there is a standoff over e-tolls, the user-pays principle being perhaps the only way the Zuma administration can deliver on its promises.

Moody’s concurs. The agency, which still has the country’s rating on negative outlook, raised concern over the government’s ability to stimulate the economy because of “socioeconomic stresses”.

The unfolding disaster in the mining industry means these “stresses” will intensify, thereby making another downgrade more likely — something we simply cannot afford.

“If Moody’s downgrades SA again, as its negative outlook suggests, this may prompt Fitch and Standard & Poor’s to follow, imperilling SA’s investment grade status,” Investec said.

There’s no victory in pointing fingers about who or what started this crisis. Of utmost importance is that we find a solution now and not wait for a leadership contest to decide the future of mining and SA’s longer-term prospects.

MARKETS have been waiting for Spanish Prime Minister Mariano Rajoy to give in to the inevitable and ask for the fourth bail-out since the European sovereign debt crisis began three years ago.

That step is seen as the last before this emergency can finally come to an end. Once the common monetary union’s fourth-biggest economy concedes it needs help, the European Central Bank starts buying its bonds.

Mr Rajoy, whose country has been engulfed in protests over the austerity measures his government has already undertaken, disappointed markets last night.

He said a request for rescue funds was not imminent, defying speculation that the nation was preparing to ask for a bail-out.

US equities turned lower after he made the announcement that he had no plans to request aid in the near term. The remarks were made after South African and European stock markets were closed.

So it seems we are no nearer to putting a full stop on a crisis that has derailed the recovery of the global economy since this “Great Recession”.

Here’s to uncertainty, an old friend by now. E-Mail: derbyr@bdfm.co.za Twitter: @ronderby