When pigs die, expect changes . . .

Wednesday, 8 February 2012

Most events do not occur in isolation. One might not think, for example that a plague of flies in Egypt might be linked to an outbreak of swine flu in other parts of the world, but the connections become obvious when one steps back to look at the bigger picture.

On Friday, 3 February 2012, Impala Platinum took the extraordinary step of firing 17 200 workers at its Rustenberg mine (which happens to be the largest platinum mine in the world).

On Saturday, 4 February 2012, Cyril Ramaphosa (who happens to be a founder member of the National Union of Mineworkers) delivered a 40 minute address on behalf of an African National Congress disciplinary appeal committee which effectively wiped Julius Malema off our country’s political map for the foreseeable future.

And on Monday, 6 February 2012, Planning Minister Trevor Manuel broke his prolonged period of silence on economic matters and called for mining to be positioned as a catalyst to drive other changes in our economy.

What’s the pattern, you might ask? I believe it is this: that the Zuma administration has gotten a major wake-up call.

Mining contributed R103-billion to our economy in 1993. By 2009, that amount had shrunk to R93-billion – this in spite of a global commodity boom which saw both gold and platinum prices rise from under $400 per ounce in 1993 to more than $1 700 per ounce recently.

Our mines have simply not been working as they should have.

Why?

Think transport for one. Transnet, which through its freight services is responsible for shipping output of mines, has been a basket case for a number of years. Railway lines have not been fixed, locomotives have not been replaced, shipping schedules were non-existent. (Before you bang off a letter to the editor, realise that I’m talking about shipping ore and coal and the like – not refined gold or platinum.)

Think Eskom for another. I do not have to waste time recounting the calamitous state of affairs at our state-owned electricity producer. Suffice to say that running a mine requires electricity – lots of electricity, lots of reliable electricity, lots of reliable cheap electricity.

Think labour costs. Mines are labour intensive. If you have a workforce of 46 653 (which is what Impala had at Rustenberg in 2011), a pay increase of R1 per day per worker means a R12 million increase per year in costs. Thanks to a rampant Cosatu, labour costs have skyrocketed in proportion to inflation. While this, in itself, is not necessarily a bad thing, what is a problem is wildcat illegal strikes, such as the one at Rustenberg, which costs more than R35-million per day in lost production.

But most importantly, think Julius Malema. Ever since the erstwhile leader of the ANC Youth League began spouting his mouth off about nationalisation, every significant global mining operation with interests in this country began to formulate plans to cut their losses in the event of that happening. The fact is that no one in their right mind builds a new home in a crime-ridden neighbourhood.

And so we have our overview joining the dots: ill-disciplined workers have been fired, the champion of nationalisation has been smacked down, and the man with a plan outlines a comprehensive path to addressing all of the concerns I have raised here, specifically the requisite water, rail and electricity infrastructure needed for much higher mining output.

All of this is good news if we expect to push our economic growth to 7 percent or better and beat poverty.

And since you asked about the flies in Egypt: in 2009, the Mubarak regime took advantage of the global swine flu outbreak as an excuse to kill the thousands of pigs owned by minority Coptic Christians. The problem was that those pigs used to eat most of the garbage generated by Cairo’s 7 million inhabitants.

You connect the dots.