Wednesday, 26 September 2012

Strikes - a living wage and Europe's glass house

Let's cut the bull for five minutes and call a South African spade a shovel.

  1. The government has failed. Service delivery; job-creation and an improvement in living standards has fallen short of the political promissory note. Paradoxically, the ensuing leadership vacuum has given intellectually questionable and morally obtuse opportunists the platform to fuel discontent.
  2. Government excess and nepotism is no different or more morally corrupt than the culturally entrenched nepotistic employment practices and excesses common in the private sector. 
  3. The unions have lost relevance. NUM, in particular, has forfeited control; lacking the strategic vision, leadership qualities and structural continuity to motivate effective collective bargaining. When dialogue fails, militant violence must follow.  
  4. The strikes in the mining and transport industry are tangible manifestations of the current misalignment between the expectations of the general population and the ability of the country to service those claims. The private sector, specifically those companies structurally confined within the geographic region, lacks the margin to pass on a higher wage bill to consumers. The cycle intensifies when consumers themselves face further cost-push realignment; usually a down-scaling.
  5. Education is neither pragmatic nor sufficiently preparatory for effective participation in the global environment. The negative economic consequences of the largely defunct educational system will emerge in the next decade, effectively negating an entire generations' creative potential.
  6. Structural inadequacies and largely porous borders strain the rule of law, promoting violence, ethnic mistrust and racial bias.
  7. Publicly reported remuneration excesses in the formal private sector fuels the corporate culture of personal gain and systematic asset stripping at the expense of longevity and so on and so on...
Notwithstanding all of the above, the South African situation is not much different from the structural failures in both Europe and the US. European corruption, nepotism, ineffectual leadership and the emerging militancy of its populace is neither imagined nor surprising. Political ineptitude, tax evasion and corporate excess at the highest levels is systemic. 

Critically, although most condemn the associated violence, you could argue that the strikers demanding a living wage are correct in their claims that hitherto local and now internationally domiciled mines have been stripping this country's assets for far too long. Is there a case to pursue a national policy of resource-ownership? Why not rather pay contracted mines for their extraction skills, infrastructural spend and intellectual capital and pay them generously? Market the refined, rather than the raw product, through a state-owned central hub managed by the private sector, also contracted and paid generously. Strategically viable? Yes. Socially acceptable? Perhaps. Timeous and innovative? Definitely. 

At its core South Africa's mineral wealth, currently residing in the corporate / capital structures of Europe, has not made her people prosperous and you don't have to look too far to see why. 

Friday, 21 September 2012

The 'upside' for SA mines

Some time has passed since that fateful Thursday afternoon at Lonmin's Marikana mine. Without abrogating from the human-tragedy, you have to ask whether Father Time has finally caught up with SA mining companies? I think it has. Here's why.

Productivity in the mining industry is a measurement of sale-able tonnes per man year (tpmy). ie: the number of tonnes mined / sold averaged across the labour-force.

For illustration - a coal-mining comparison between South Africa, USA and Australia. Sale-able tpmy for the three countries aggregated across underground and surface-mining for each country is as follows:

USA - 9000 tpmy*
Australia - 7000 tpmy*
South Africa - 3000 tpmy*

*Although the data is fairly dated, the ratio holds true. South Africa's productivity figure is less than 50% of Australia's figure and or 33% of the USA figure.. Some small anomalies aside, the discrepancies in productivity, particularly in South Africa's case, is directly related to technology and work-practice. The SA mining industry's objective of job creation and or maintaining employment at the highest levels (whilst remaining profitable), although commendable and encouraged at State-level, is under the current circumstances, unsustainable.

The associated physical and psychological trauma from mine violence and intimidation respectively must, sooner rather than later, reverse the current labour-intensive work-practices in favour of technology. The ensuing elimination of jobs by SA's largest employer will be, undoubtedly, the single worst economic tragedy this country will face, this century, thus far.

Wednesday, 22 August 2012

President Zuma; Bloomberg TV & Miss 'Shut Up'

I think we've seen enough political farce emanating out of Europe recently to understand the financial implosion when confidence fails. Is South Africa, as a consequence, steadily walking the ratings plank?

One or two issues have become evident in the aftermath of the Lonmin debacle.

Firstly, there's very little evidence, if any, that the Lonmin board acquitted itself. Corporate South Africa should, as a consequence, initiate an introspective interrogation of individual competence at board level. There is in mitigation, however, a vast chasm between insensitivity and incompetence. Time will confirm Lonmin's transgressions either way and very soon.

The gist of the Lonmin demonstration and ensuing violence arose, seemingly, from a long-standing inter-union dispute between NUM and AMCU. At a stretch, perhaps, you might argue that Mr Ramaphosa, hitherto NUM's first General Secretary, now a non-executive director of Lonmin and a pivotal player in the current ANC-led government, predisposes an element of bias or perhaps even a conflict of interest at Board-level in favour of NUM. Then again, Mr Ramaphosa is both a formidable negotiator and a respected businessmen.

Secondly, whoever fired the first round doesn't excuse the ensuing violence. In addition, the response in the international media by the highest ranking members of the South African Police Services lent very little to restoring confidence in South Africa's executive. Yesterday's public display by the National Executive is also concerning. At a special parliamentary debate on the Marikana massacre the Honourable Minister Shabangu (Mining) rather naively, given the circumstances, preferred to attack her political opponents on unrelated events rather than address the issue at hand. Whilst a Nation mourns is it too much to expect a modicum of humanity from the Executive?

President Zuma, deflecting from the events that led to the deaths of 44 people and lamenting the insensitivity of the Lonmin board post the massacre, might well have said enough on Bloomberg to quell the fears but there's no denying that behind this leadership veneer there exists a great deal of confusion. This has been brutally exposed and the consequences for us as a nation might well be devastating.

Wednesday, 15 August 2012

Lonmin - Don't give the scum a platform!

Let's get this clear. If Lonmin's rock drill operators don't get a 150% increase in salary immediately more people are likely to be killed? It's mob-mining at its worst and deeply insulting to the rest of South Africa's law-abiding people.

Stuck between a rock and a hard place Lonmin's management must avoid an emotional knee-jerk reaction. Legitimising this brutality by providing these employees any platform of negotiation must be avoided but at what cost? More lives?

Anybody standing on that hill clutching the skirts of the loudhailer is complicit.

The South African mining industry is undoubtedly in decline and this doesn't help.

Tuesday, 10 July 2012

Policy, civic pride & perception

Let's give Europe a breather and, for today at least, consider our financial exposure in the South African dynamic.That has me thinking about civic pride; the South African government, it's policies and investor perception as a whole.

At the macro level, civic pride plays a key role in predictable economic expansion. Short-sighted strategic planning with 'nation-building' as justification in preference to civic pride misinterprets the sustainability of the project. To clarify: - 'nation-building' as a concept, is a State imposition ie: big brother knows best whilst civic pride is more reliably 'we-the-people-get-what-we-need'. The push / pull forces are very different. Civic pride is commensurate with a mature society. Imposition at its core is not sustainable. Giving people what they need rather than what you think they need addresses civic pride and is, by definition, more sustainable. A nationally-recognised vested interest in an asset and or a project promotes longevity. It's arguable that South Africa's young democracy has not matured sufficiently to nurture civic pride and therein lies the problem. Assets in the hands of the private sector, particularly the mining sector, are perceived, generally, by many South Africans, to be an injustice. There is therefore very little civic pride in the current mining infrastructure. As a consequence this sector faces a possible / probable legislative, judicial and or administrative threat to its longevity, certainly in its current form. Political preservation disguised as policy discussion on nationalisation and or the recently proposed 2nd-transition is evidence enough of this phenomenon. 

What's worse for the mining sector as a whole, in the South African context, is the tangible dislike local communities display, often violently, against these mines. Employment, as opposed to inclusion, is not seen as justification for the nurturing of civic pride. Until that changes, mining productivity, asset security and staffing will remain an issue. It is, in fact, the key risk variable most analysts build into mining-sector risk-models. 

International investors, as a whole, either directly or indirectly, justify risk by examining longevity. In the South African context sustainability is perceived, by both foreign and local investors alike, to be questionable and it's for that reason only that companies, either locally domicile or wholly invested here, particularly in the mining sector, will continue to underperform their peers.

Thursday, 9 February 2012

The Nation's in a state.

Dear Mr President

Satirists have sketched you in the shower. The 1st-Lady is just one of five. You've jiggled & jived with the maidens of the Reed. Your views on personal hygiene have amused, then shamed us. Much has been said about your lack of formal education. None of these things are important. What you do as a human being and as a man is your business and a right entrenched within our laws. We know the press lives for drama and sensationalism sells the news.

The term Your Excellency and the respect South Africans have for the highest office of the land is not a confirmation of your coronation. You are not our king and you are not a god but you are, in fact and like it or not, the duly elected highest official of this land. The burden of that office lies with you. Why have you forsaken your responsibilities?