EDITORIAL COMMENT: South Africa’s platinum strike

sundaymailAs the strike by South African platinum miners enters its eleventh week, analysts continue to warn the Association of Mineworkers and Construction Union (AMCU) that its demands are unreasonable and risk collapsing the platinum industry. AMCU is demanding that the lowest paid miner receive R12 500 (US$1 200). The mining companies have flatly refused, arguing that they actually need to cut costs to maintain profitability.

The unions are reminded that demand for platinum has been depressed and they should be reasonable in their expectations.
It is difficult to fault the mining companies; their PR machine is in overdrive and the numbers they offer seemingly add up. The miners do seem to be making unreasonable demands. Or are they?

The conversation becomes less straightforward when you take a look at mining salaries in South Africa. An entry-level platinum mine worker earns   R6 000 (US$600). Without context this might seem a reasonable sum.

Mining is a particularly curious example of wage disparities because the output is traded on global markets at universal rates; the only differentiator is the cost of extraction.

Are there any iron ore miners in Australia earning US$600?
No. It is quite the contrary.
The average salary in the Australian mining industry was about US$110 000, in 2010. In Canada a driller earns US$252 in a single 12-hour shift. In Peru the average annual salary is US$51 000. Chilean mine employees earn an average annual salary of US$97 537.

The conversation extends beyond South Africa. No African miner earns anywhere near those figures. Something is not right. It certainly cannot be that the gold, diamonds, or platinum mined by Africans are somehow less valuable.

Gold mined in South Africa fetches the same price as gold mined in Australia. It seems outrageous that a driller mining gold in Australia is paid enough to drive a sports car while his African equivalent lives in a shack. Worse still is the fact that the same multinational pleading poverty in South Africa is somehow managing to pay so well in Australia.

Mining companies will quickly point out that African miners are not productive and thus cannot attract similarly high salaries. No numbers have been provided to support this view. How much more productive can a tipper truck driver be, do they have to drive faster?

Some mining companies point out that mining costs are higher in Africa. Again, no persuasive numbers have been offered to support this view. It seems highly suspicious that all the mines in Africa happen to be associated with higher costs necessitating lower wages while all mines in Australia, Chile, Canada and Peru are conversely low-cost operations.

It seems the real issue is not so much what mining companies can actually pay but what they can get away with paying; in Africa, that’s very little.

Once these global contradictions are included in the conversation, the seemingly unreasonable South African miners suddenly look a little more sober.

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