Depending on where one draws the statistics from and how one reads those statistics, there are between 5 and 20 million (5.6 million unemployed and 15.4 million not economically active)people of working age (15–64 years) who are unemployed in South Africa out of a total cohort of 36.5 million people between the ages of 15-64 years. Just over 40% (15 million) of people of working age are employed with only 11 Million in the formal sector, leaving the vast majority of South Africans dependent on self-employment, state subsidies, hussle and crime to survive. Only 8 million formally employed individuals are employed on a permanent basis, indicating that approximately 7 million people are employed on an unspecified or limited basis.
Not only is this a recipe for disaster but it gets worse. Since 1994, South Africa`s working-age population has increased by 11 million. In the next 50 years, it will grow by another 9 million, peaking in 2065 at about 43.8 million. The next 20 years alone will see an average net increase in the working-age population of about 280,000 people per year. As a share of the working-age population, United Nations (2013) projects that the peak of unemployment will occur in 2045, when it will reach 68.3%.
South Africa is reported to have the 8th highest unemployment rate in the world in 2015, according to a new report issued by the International Labour Organisation (ILO).
The World Employment and Social Outlook – Trends 2015 report provides a forecast of global unemployment levels and explains the factors behind this trend, including continuing inequality and falling wage shares.
The report confirms that “[t]he employment situation has not improved much in sub-Saharan Africa, despite better economic growth performance (than the developed world) until recently. In most of these countries (Sub-Saharan Africa), underemployment and informal employment are expected to remain stubbornly high over the next five years.”
Even more concerning is the concerns drawn by renowned Professor of Economics at Cambridge University, Anwar Shaikh, in his recent book, Capitalism – Competition, Conflict, Crisis, that even if capitalism recovers soon from its crises, can it grow fast enough to offset the steady match of mechanisation? Can it absorb the new labour coming from population growth?
Still others such a István Mészáros have argued that Capitalism has been in an structural unemployment crises and that “we are talking about a major trend of social development, and not about some mechanical determinism.”
This thinking, while not being absolutely confirmed by the unemployment trends articulated by the ILO, confirm that “[t]he world economy continues to expand at rates well below the trends that preceded the onset of the global crisis in 2008 and is unable to close the significant employment and social gaps that have emerged. The challenge of bringing unemployment and underemployment back to pre-crisis levels now appears as daunting a task as ever, with considerable societal and economic risks associated with this situation.”
It thus not a great surprise that the question of work, and gainful employment has become an ever deepening fault line running through our collective hopes for a prosperous future.
For two decades we have been told by government and the economic witchdoctors of the global markets that our hope rests in the ability of the economy to attract foreign investment in order to grow the economy and by extension to generate and grow jobs, but only within the formal legacy of our colonial past. Heaven forbid that we should become innovative and act in the interest of the people, rather than preferring trickle-down economics which ensures investments are driven towards maintaining the very corporate economic structures inherited from the heyday of Grand Apartheid.
Yet our economy has never really hit the great levels of growth we are told are needed to generate the extra jobs so desperately needed by our growing youthful society. One of the most grievous results of the “New South Africa” has been the way our country`s leaders have maintained the systems and structures of Colonial Apartheid, which keep black people from engaging in economic activity that would undercut the minerals and industrial complex that has been the backbone of the exploitative extraction of South Africa`s wealth .
Economic Responses
The stated aim of government`s economic policy has been to develop a developmental project that is capable of reducing the high levels of economic inequality, unemployment and poverty and in this way to arrest and resolve the social crises which continues to etch itself ever deeper into the social fissures inherited from Apartheid.
While the overall goal was admirable the manner in which we attempted to get to the solutions was not always expedient or successful. On the one hand the BEE project has produced some billionaires and quite a few millionaires, this has not cascaded down to the grassroots levels and the growing inequality, unemployment and poverty has maintained its trajectory towards the socially volatile outbursts experienced in Marikana and across the South African landscape.
This, together with the (unintended?)structural reshaping of the economy towards services and away from industrialisation, and the natural inclination of a capitalist economy towards monopolisation and oligarchies in various sectors, mining being one of them, has seen further efforts towards mechanisation and away from the creation of manual jobs.
Government`s ambitious job creation projects and plans in the decades between the 1990`s and 2000 up to 2010 saw jobs growth percentages that was considerably less than the rate at which the economy was growing pointing to jobless growth. Hein Marias notes that in the “first decade of the 2000`s while the economy grew heartily, only 1.7 million jobs were created, a large portion of these were casual temporary and low paid… (and that in any case) the recession later stripped almost 900 000 jobs out of the economy.”
BY this time it was clear that earlier forecasts of gloom around the economy which emanated from the Macro Economic Research Group in the early 1990`s was coming to fruition and by 2010 Seeraj Mohamed warned that : “[t]he integration into financial markets has increased the risk of financial crisis and vulnerability to contagion from financial problems elsewhere. The weak industrial structure and continued dependence on mining and minerals creates a balance of payments risk…and that unless there is a huge effort to address the industrial decline in South Africa and new economic policies implemented to support industrial growth and transformation, the majority of South Africans will face an increasingly bleak future.”
The biggest challenge thus facing South Africa was whether and how the structural bias (towards the Minerals energy complex) in economic thinking could be overcome
The answer to this question, which is evident today in the persistent inequality, unemployment and poverty, is that “[o]verall, The MEC has been consolidated and economic ownership is as concentrated as ever. Most sectors are dominated by a handful of vertically integrated corporations.”
What are our options?
Just as the Apartheid government initially tried to wish away and criminalise the minibus taxi industry, when it exploded onto the economic scene during the late 1980`s, today we see a similar effort to ignore and criminalise another informal industry, without regard to the imperative to decolonise the structures of the South African economy in order to benefit its citizens rather than to benefit foreign interests.
Instead there exists an unquestioning acceptance that our task as a country is to reinforce, protect and extend the colonial structures of economic colonialism at any cost, even if that means criminalising hardworking people living in poverty.
The blowback from the decades of failed promises and desperate poverty have been increasingly felt across the country as communities, students and workers vent their frustrations and anger at a system that seems to continually promise but which seldom delivers.
As the crises deepens, the reality sets in that local and foreign Capital will not invest the substantial cash hoard they have been holding, in order to invest and create jobs.
Non-financial private companies had R725bn ($45.4bn) on deposit in South African banks at the end of March, up from R670bn a year earlier, South African Reserve Bank data shows[10]. In the same report, Fin24 reports that “Gold Fields, then the world’s fourth-largest gold miner, decided to spin off all but one of its South African operations in 2013, while AngloGold Ashanti, the third-largest, tried to do the same the following year. Harmony Gold Mining, which gets 95% of its production from South Africa, is taking advantage of a recovery in the rand gold price this year to build a war chest to invest in a new project in Papua New Guinea.”
The need to move towards alternative approaches which allows us to free our economy from the tyranny of global markets, and towards stepping out of the narrow confines of the colonial economic legacy bequeathed to us, becomes not a luxury, but a necessity.
Classical Orthodox Prescriptions:
When dealing with the question of unemployment, current orthodox economic thinking has developed standard responses that could be attempted to try and tackle unemployment. These responses have worked to varying degrees and are highly dependent on the local economic conditions. Bearing in mind that a systemic structural unemployment crisis already exists, any efforts to rebalance unemployment is always limited and constrained by the broad framework of orthodox economic thought.
With the extent of the world economic and structural unemployment crisis becoming ever more difficult to deny, even the IMF, the main institutional driver of neoliberal economics over the last 4 decades, now admits that neoliberal economics has failed. In their recently released paper “Neoliberalism: Oversold?”, the IMF note that the economic growth that neoliberal policies are designed to foster is difficult to discern, but that the inequality caused by austerity and lassez-faire policies is palpable. And the authors argue that government officials should do something to offset that:
“The evidence of the economic damage from inequality suggests that policymakers should be more open to redistribution than they are.”
Let us look at some of orthodox suggestions to create jobs drawn from classical economic thinking as articulated by Frans Barker in his book The South African Labour Market:
- Economic Growth and Exports. The degree to which employment is created also depends on the patterns of growth and the labour intensity of that economic growth. As pointed out above, evidence suggests that South Africa`s economic growth shows muscular signs of tending towards capital intensive growth at the expensive of labour intensive growth. We further pointed out that this type of growth foreshadows a growing social crisis.
- Allowing higher inflation to create jobs. The link between higher inflation and job creation is known as the Phillips Curve. In South Africa’s case the Phillips curve does not hold true, as there is no inverse relationship between unemployment and inflation in South Africa. In fact the opposite is true; it seems that in South Africa’s case, our high levels of inflation are fuelling unemployment.
- Improve the labour absorption capacity of the economy. This has been a long standing goal of both the RDP and GEAR strategies. As indicated above the opposite has occurred despite the stated intentions of governments economic strategies. Most of this trend has been linked to the capital intensive nature of investment over the last 2 – 3 decades, together with the liberalisation of the economy and the preference for capital to invest in tertiary service sectors.
- The Cost of Labour. The Cost of Labour is always been held up as a limiting factor in an economy. The logic being that the higher the wages, the lower the profit. It has been claimed that since 1967, output per worker per unit of capital in South Africa has fallen from R7 297 to R4 924 a year – a decline of 32.5%. From its peak in 1993, this measure of labour productivity has fallen by 41.2%, bringing it down to the lowest level in 46 years. But this is often a question of how one arrives at statistics. COSATU for example point to rising rates of profit and point out that even the IMF has placed SA as the 3rd highest out of 19 developing countries for their company profitability. Quite clearly there is a mismatch between the rising rates of profit, the falling rates of wages and the rising unemployment. This declining share of wealth for the vast majority of South Africans have a real impact in terms of aggregate demand and the ability of South Africa to fund its own development.
- Labour Market Flexibility and productivity. While this has been held up as an important source of job creation there remains huge concerns about the exploitative nature of outsourcing and labour brokers. Unions in South Africa remain opposed to the casualization of work and recently the issue has gained renewed interest with the University Outsourcing Must Fall Campaigns. More than 60 percent of workers worldwide, predominantly women, are in temporary, part-time or short-term jobs in which wages are falling, a growing trend that is fuelling global income inequality and poverty, according to an International Labor Organization (ILO) report
- Active Labour Market Policies. While unemployment insurance benefits can help to alleviate the hardships of job losses, active labour market policies aim at preventing unemployment by returning displaced workers to productive jobs.
- These normally include Programmes intended to enhance the quantity or quality of the labour supply or to alter its distribution across occupations or locations. Eg training or mobility assistance.
- Policies that act primarily to influence the structure, composition or level of the demand for labour. Eg wage subsidies.
- Programmes that can include labour market processes and institutions such as placement services, skills and aptitude testing, vocational guidance, etc.
NB: The ILO review of 1996 warns that “there is limited capacity to implement an interventionist labour market strategy in South Africa, whether through labour market training, employment services, public works or subsidised job creation.
- A strong Skills base. The availability of a strong skills base is an essential element of any strategy to relieve the unemployment. An important point to note here is that according to the Human Sciences Research Council, the South African mining Industry had employed 828 773 people at its peak in 1987 but two decades later, the mining industry directly employed 455,667 workers. Current StasSA figures indicate the sector employs 447 000 people. A massive decline which has not been reversed to date and which threatens to intensify given the global oversupply of minerals and the ongoing retrenchments in the sector. Over the past year, some 88 companies issued Section 189 processes impacting 58 549 workers, as South Africa faced an almost perfect storm that was “destroying” jobs and Solidarity CEO Dirk Hermann claims that the current spate of retrenchments would have five times the impact expected. This means that South Africa not only has a half a million miners unemployed but also a sizeable and substantial skills base which lies fallow and unproductive.
- Formal and Informal Small enterprise sector. It is well know that small enterprises and the informal sector represent a significant part of total employment. But in South Africa, despite the small enterprise sector absorbing nearly 30% of total formal employment, it has not shown great employment creation potential. In order to bolster this sector government has proposed strategies which include:
- Improving access to land
- Improving access to finance
- Improving access to support services
- Create linkages between enterprises
- Create an appropriate legal and regulatory framework
- Improve access to managerial support and capital
In this sector some of the barriers to entry have been identified as:
- Poor Market Information
- A weak skills base
- Poor access to finance.
- Public Works and Special Employment Programmes. PWP`s have been used worldwide and have a long history of successfully assisting to alleviate pressing social and economic problems and first emerged on a significant scale as a remedy for cyclical unemployment. South Africa is no different. It was used with some success in the 1930`s to combat unemployment among white workers. More recently it has been used as part of the RDP in which government sort to create jobs in order to build the economy by redressing infrastructural disparities focusing on amenities such as water supply, sanitation, clinics, and child care facilities. PWPs can assist in the following ways:
- Unemployment can be reduced
- Workers on such programmes can gain or use marketable skills
- The programme can be linked to specific developmental initiatives
- Dependence and indigence is reduced
- Capacity of communities to manage their own affairs can be increased, local government strengthened and sustainable economic development generated.
The Value of work.
As a start it would be useful for us to resist terming the problem as unemployment. This term is loaded with subtexts which infer that people are passive recipients of jobs and it denies the bearers of the label the agency and dignity associated with employed individuals.
The term also carries with it a closing of space and a boxing of solutions into determinate directions and which often implies that the solution to “unemployment” lies only in finding capitalists with investment capital who are willing and able to invest in order to “create” the sort after employment.
The term unemployment reduces South Africans of working age to drones/ cattle/ unthinking commodities, who have no agency and who literally need to be employed by well-meaning capitalists to be of any value or consequence to society.
Instead we should be talking of a “work” crisis.
Work or labouring, is not the negative alienation from one agency and even hostile object that our historical colonial system of capitalist exploitation has turned it into.
Instead, labour and work should be seen as an act of dignity which allows for the expression of the human essence and is an important conduit through which the engagement with self, nature and community can be realised.
With so many people not engaged in productive acts of labouring, is it any wonder then that our young people are slowly losing their sense of self, nature and community.
Even more concerning is how long term unemployment and loss of the sense of self is compounded by an unequal society in which consumer culture is celebrated alongside devastating poverty.
Richard Elliott from the University of Oxford writes in his research paper… How do the unemployed maintain their identity in a culture of consumption?
“[t]he long-term unemployed become marginalised in society and alienated from it, and through their relative poverty their alienation may be deepened by their exclusion from the consumption culture which surrounds them… The growth of structural unemployment in developed economies is giving rise to a new ‘underclass’ who are denied a share in the material aspects of a consumer society, as their income falls further behind that of the majority of society. But as Beveridge (1944) suggested, “the greatest evil of unemployment is not physical but moral, not the want that it may bring but the hatred and fear which it breeds“. The unemployed become marginalised in society and alienated from it (Allen and Waton, 1986), and through their relative poverty their alienation may be deepened by their exclusion from the consumption culture which surrounds them and which it “is difficult, if not, impossible to avoid” (Bocock, 1993). The financial worries and difficulties which are associated with unemployment are strongly associated with the anxiety and depression experienced by the long-term unemployed (Payne and Hartley, 1987).”
So the imperative for a country that is fast losing its moral compass, and in which the alienation from the activity of labouring leads directly to the alienation from self and society, should be creating opportunities to work, not necessarily to be employed.
This process is not the same as entrepreneurship, which in the South African context often only means participating in some kind of trading activity. Instead we need to speak about a much more fundamental reconnection with the self-actualisation which comes with labouring and which in turn leads to a renewal and regeneration of society.
This means that we should be making land available for people to farm and labour wherever this is possible. We should be providing the structures and support, both logistically and financially for those who wish to labour to do so.
Yet, faced with this intractable problem, our government and our public discourse remains firmly entrenched in our colonial past, preferring instead to employ its limited resources towards actively preventing people from labouring on the land. It even goes so far as to criminalise those who wish to affirm their humanity through the act of labouring.
The Case for ASM Mining
With well over six thousand abandoned mines in South Africa, which were left fallow by large corporate miners, often only because they were unable to profitably extract a profit for their foreign shareholders, given that they carry huge overheads, and which have never been rehabilitated, we have seen a growing trend of young people accessing these mines which still hold mineral deposits.
Instead of celebrating the enterprise of young people who would rather labour in protection of their dignity than sit idly by waiting for handouts, government seems more preoccupied with criminalising decent hardworking folk in protection of large corporate miners who are nonetheless not going to be increasing their employment quotas anytime soon.
It is incomprehensible that a country which contains one of the richest mineral deposits in the world is not able to put people to work in pursuance of dignity for the individual and community, and increased wealth of the nation. To add insult to injury, our government`s plan for the sector does not include major work creation projects, but goes one step further to criminalise those who labour for their dignity.
Taking only the six thousand odd abandoned mines as a target, our government could, with some creative out of the box thinking come up with a plan to allow people to access work opportunities, in which they fund themselves, and clean up the environmental nightmare left behind by our supposed large scale mining benefactors. Regulation of the artisanal mining industry will not only ensure safe health, safety and security standards for the miners, but also ensure that environmental safety is brought under the regulation of the sector. The sector has a flourishing informal market and regulating its activities will add to the fiscus as much as it adds to the human dignity of its participants.
This will require however, that we abandon the colonial structural models handed down to us by big corporate miners and instead place our faith in the hard working honest people of South Africa. The decolonisation project should not be seen as one which only affects and exists on the campuses of our institutions of higher learning. Indeed, there is not a sector that needs a discussion on decolonisation more urgently than the one which provided the blue print for Grand Apartheid, and which silently continues to condemn thousands of people to poverty and criminality.
Key Profile areas of ASM
- ASM is labour intensive and provides more employment than large scale mining. Between 15 to 20% of the worlds non-fuel minerals, approximately 18% of Africa`s gold and almost all of Africa`s gem stones, except diamonds are produced by ASM according to the African Unions African Mining Vision Document.[24]
- ASM is often a precursor to large mines and allows exploitation of deposits that are not amenable to large scale mining.
- The African Union estimates that ASM currently provides 3.7 million jobs on the continent (13-20 million worldwide) with about 30 million people dependent on it.
- The AU predicts that this sector will triple as the economic and unemployment crises starts to bite.
- ASM is also an important factor for income generation. Revenue derived from ASM activities can increase aggregate demand which in turn stimulates SME development and fosters local economic multipliers.
- In Tanzania where ASM`s are said to earn ten times more than farmers income is invested in shops, taxis, bars guesthouses and farming.
- ASM`s can contribute to foreign exchange earnings
- ASM`s also help to reduce rural to urban migration.
ASM sustainability
Despite the positive profile of the sector the sector is greatly neglected on both a local and international level in terms of infrastructural and institutional support. This trend is fast reversing as more and more international institutions, from the ILO and the United Nations to the African Union and the International Council on Mining and Metals as well as our very own Chamber of Mines have all started to recognise the reality and potential of ASM. The Chamber of Mines admits in its 2016 Illegal and Artisanl Mining fact sheet, that; “Artisanal mining presents a challenge for law makers. It is unlikely that these miners can be absorbed into the work force, instead they could create small scale businesses, which could create employment and benefit communities and even the fiscus legalised and regulated for, among other things, safety, environmental standards and incorporation into the formal economy.”
The lack of legal and regulatory frameworks and the failure of government to recognise and formalise the sector have partly been responsible for the negative perceptions of ASM as well as the subsequent growth of criminal syndicates in what has largely been an underworld activity.
This neglect and underappreciation of the sector as well as the continued preference by governments of large scale mining has meant that:
- ASM`s operate off a low capital and asset base.
- Most ASM activities are of a rudimentary nature
- Where there is mechanisation equipment and techniques are hazardous to the environment and to the miners
- Productivity, yields and ore recovery is low
- Income remains at subsistence levels
- This hinders recapitalisation and upgrading of mining operations
- Keeps ASM`s in viscous cycle of poverty.
- ASM miners have no security of tenure
- ASM miners do not have access to high quality mineral deposits.
- AS a result they are not able to use their mineral rights as security for funding.
- They are precluded from entering into joint ventures with other more capable partners.
- They are thus precluded from accessing finance.
- Environmental standards are often neglected
- Forced or exploitative labour practises are common.
- Without access to legitimate markets for their labours, ASM miners are often under paid for the value of the work.
- Criminal syndicates often benefit from their use of force and without ASM recourse to law enforcement agencies.
- Law enforcement agencies are often implicated in extortion practises when dealing with ASM`s
- Ultimately the minerals and gems mined enter into the official markets where corporate business entities ultimately benefit.
Linking ASM`s to Orthodox Economics:
At the outset of this paper we indicated that the neoliberal trajectory of the South African economy has defied all hopes of producing and inclusive jobs intensive economy. Instead the IMF, the main proponent of such neoliberal economic doctrine has itself admitted that its economic model has instead produces greater inequality. Joseph Stiglitz a leading global economist has argues that the IMF has betrayed its original mission to “bring a country in crisis back as close to full employment of it’s workforce as possible”. Instead of “foster(ing) (an) expansionary economic policy—for instance, encouraging or enabling increased expenditures, lower taxes, lower interest rates—in order to stimulate the economy…(so that )a country’s populace would have more money available and so increase their purchasing, thereby stimulating the economy,”, the IMF has instead driven countries like South Africa to champion “the untenable ideology that markets should be left to operate on their own, and that no (or very little) direction or intervention is needed.”
South Africa has by and large allowed and facilitated the continued control of the sector by large scale mining and has steadfastly failed to allow broader humanitarian and economic considerations to be brought to bear on the sector.
The virtual lockout of ordinary skilled South Africans from accessing the backbone of the South African economy has meant that the sector continues to face an ever declining employment ratio with dire social consequences.
How does an ASM strategy help to create jobs within the orthodox economic framework:
- Economic Growth and Exports.
Most economists agree and recently BHP Billiton CEO predicted that the global commodity glut will last at least another decade. This means that investments in the sector will subside with an increased Mergers and Acquisitions activity which ultimately means that the sector will contract and that the jobs blood bath will continue. Thus in terms of growth and exports, the mining sector in South Africa will continue to come under significant strain both economically but also socially. From a Macroeconomic perspective, the combination of lowered major commodity demand, oversupply, and no willingness to bring production/demand and inventory reduction into balance, could lead to a forthcoming price/income breakdown and a subsequent recession. Whether South Africa likes it or not, the productivity levels of the large scale miners, which have been some of its greatest strength in the last century, could in this century, turn out to be its greatest weakness.
ASM mining on the other hand with its low productivity, but high job creation potential offers an alternative to the over production and low job absorption strategy of large scale mining.
The Platinum sector is a case in point. Despite South Africa`s virtual monopoly on the supply of Platinum Group Metals, and its theoretical ability to control the supply and price of PGM`s the current Large Scale Miners who effectively control the sector, are dead set on a policy in which low credit costs are able to sustain unprofitable production. But even this is not sustainable and cheap credit will itself lead to other structural consequences.
- Improve the labour absorption capacity of the economy
South Africa, despite its growth trajectory to date, which has been stubbornly fixated on capital investment in the primary, secondary and tertiary sectors of the economy, does not have any other option but to find meaningful ways to redirect investment towards labour intensive sectors of the economy.
ASM provides a significant opportunity to not only bring the markets and prices for commodities such as Platinum, back into equilibrium but provides millions of jobs at the same time.
Through the thoughtful use of public works programs in rehabilitating closed mines and government investment in the ASM sector, South Africa is potentially able to tackle a number of problems at the same time.
Here we refer the Board to the Prieska Protocol In Prieska in the Northern Cape, South Africa, raw, uncut tiger’s eye is bought for 1 dollar and sold for 5 000 dollars after cutting and polishing. In 2015 through a cooperative process a number of people got together to ensure that instead of all the wealth from the mining of gem stones, going to a foreign middle man, that the value is added in Prieska and that a significant portion of the wealth is able to circulate in the community.
With sufficient political will a new economic model is possible.
- The cost of Labour.
As indicated previously, the debate around the cost of labour in the classical economic sense revolves around the distribution of added value between labour and profit. This debate is linked to either the classical view of Says Law which says that production stimulates its own aggregate demand or the Keynesian proposition that Aggregate demand stimulates production. With increasing levels of unemployment, poverty and inequality, the question we face is quite starkly a question of distribution. The unequal distribution of wealth besides having serious social consequences also restricts the size of the South African market, thus restricting aggregate demand and by extension restricting and in many cases annihilating local manufacturing industries who are not able to profitably supply a reducing market. Thus the cost of labour is directly linked to macroeconomic question of redistribution. ASM offers the economy the opportunity to not only produce jobs but to distribute wealth at a local level through multiplier effects as local economies are boosted by the increased income derived from mining activities.
- A Strong Skills base.
The mining industry has shed well over 500 000 jobs over the last 2 decades or more leaving a mass of skilled, semi-skilled and general mine workers unemployed. The Chamber of Mines has acknowledged that some these unemployed miners end up working as artisanal miners in order to escape poverty and to maintain some dignity. This vast amount of ex miners represent a significant skills pool that remains untapped, underutilised and unproductive human resource base for the struggling South African economy.
If a strong skills base is an essential element for developing industries then our significant skills base in the mining sector must surely provide the basis from which South Africa is able to reconfigure the sector in order to generate work and wealth.
- Formal and Informal Small Enterprise Sector.
The South African ASM sector is said to vary anywhere from 14 000 people employed to well over 30 000 people, depending on who provides the statistics. The Chamber of Mines estimates that 14 000 ASM`s produce R6 Billion worth of mineral value each year. The Tanzanian government has estimated that small-scale mining generates at least three jobs for each individual directly involved in mining. In Prieska alone the Prieska Protocol estimates that there are in excess of 1000 artisnal miners mining gemstones in that area.
The fact of the matter is that no one has yet been able to quantify the sector due to its illegal status and its neglected position within the economy. R6 billion remains a significant contribution to the economy from a marginalised illegal activity that is required to develop wealth without any institutional or infrastructural support while facing tremendous challenges ranging from health and safety, to environmental degradation, criminal syndicates and violence, police extortion and threat of arrest.
By extending governments existing SMME interventions to include a regulated ASM sector the opportunity to create work, wealth and redistribution within the economy is thus extensive. Interventions must include:
- Improving access to land
- Improving access to finance
- Improving access to support services
- Create linkages between enterprises
- Create an appropriate legal and regulatory framework
- Improve access to managerial support and capital
- Public Works Programmes.
By linking Public Works programmes to the mammoth task of rehabilitating the 6000 abandoned mines across South Africa, the government will be able to tackle the following two key strategic initiatives.
- It would be able to close off and rehabilitate mines that have reached the end of the productive capacity and which may have become too dangerous to mine further and which if left unattended will simply allow for further ASM activity to take place and which will increase the risks of loss of live and severe injury. Unrestricted ASM mining also has the potential to pose a threat to surrounding communities should unscientific mining methods continue in certain mines.
- In conjunction with the Council for Geoscience who are currently auditing the 6000 mines, potential safe areas with recoverable reserves could be identified and ASM`s supported to establish cooperatives and SMME`s.
In this way the hazard of un-rehabilitated mines are addressed, jobs are created and a budding new industry is supported.
A Developmental/Decolonization Path.
South Africa, as a former colony that further endured the uneven and unequal development of a colonially structured Apartheid political economy remains firmly stuck between ascending to developed world status and descending to deeper poverty.
Some of the clear drawbacks remain the structure of the economy and its predilection for developed world solutions.
The manufacturing sector, which is globally recognised as the only way to escape the poverty of resource extraction has steadily declined over the last 2 decades with some industries virtually disappearing or being reduced to a shadow of their former selves.
South Africa`s exports are still unhealthily dominated by unprocessed minerals and value add elements are sorely lacking even though government has long championed a policy of beneficiation of raw materials.
Efforts to revive or rebuild the manufacturing sector have mainly been of the capital intensive variety and which has laid the basis for the current socio economic crises.
While the South African economy is broadly speaking driven by consumer demand, the aggregate demand is not been sufficient to drive growth and the structural deficiencies of the economy has not allowed distribution of income and wealth to spread sufficiently to drive consumer led growth.
Sitting alongside this impasse is the need to ensure that the Balance of Payments are supported by sufficient exports and foreign income. This is mainly achieved through resource commodity exports in which the bulk of the derived value is realised outside of the economy. For example one of the mian drivers of resource commodity exports is Platinum. Platinum is commonly used in the manufacture of auto-catalytic converters, where Johnson Matthey, BASF, and Umicore control 90% of the market in auto-catalytic converters in the light duty vehicles segment, and jewellery. Yet the platinum price is a very small component of the overall value of these products. None of the value is thus accrued to SA Inc.
In order to reverse such an obvious route to poverty in which South Africa remains stuck at the bottom of the value chain will require a reconsideration of the industry and our role of merely a supplier of resources.
The Asian Tigers and China are well known for developing their industries from scratch at a time when it seemed impossible for them to escape the poverty trap. Initially the Asian Tigers produced for their own consumption through import substituting industrialisation. As critical mass was reached they soon turned to Export oriented Industrialisation.
While the WTO rules have been significantly tightened to reduce the ability of developing nations to build and protect local industries there remains significant opportunities for South Africa to use its comparative advantage of abundant mineral resources and its abundant skilled(ex-miners) labour force to lay down the foundations of new and innovative industries.
The Prieska Protocol provides a glimpse of what a strategy which could craft a replicable model that allows us to capture an entire vertical value chain, looks like.
The balance between an over bearing state and an economy that is conducive to foreign direct investment (or an overbearing market) has not been achieved in South Africa. This balance is an imperative if we hope to arrest the declining social cohesion and economic prosperity.
While the IMF has recently admitted that it was wrong about insisting on a small, hands-off state, the evidence has mounted for increased state management of its strategic outcomes. The Asian economies used free trade rules to aggressively build their industries, while China had to reduce its command of the Chinese economy to allow for some free market activity.
Both found a balance between free trade and protecting, directing and building their industrial capacity.
South Africa will need to do the same, and it appears as if our abundant mineral resources, together with our pool of skilled artisans provide the perfect platform for such a developmental path.