SA is committing economic suicide with platinum strike – by Mike Schüssler (Mineweb.com – May 15, 2014)

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A shocking 1.4 million people stand to be affected in some way by the ongoing platinum strike in Rustenburg, now in its 16th week.

JOHANNESBURG – A shocking 1.4 million people stand to be affected in some way by the ongoing platinum strike in Rustenburg, now in its 16th week.

According to the Department of Mineral Resources the mineral economy makes up 9% of the gross domestic product (GDP). The sector also employs 525 000 people and a further 841 000 are employed in sub sectors supplying goods and services to the industry.

Platinum group metals (PGMs) make up nearly a quarter of mining production and is the largest sub-sector in mining. The latest statistics suggest that this subsector employs 196 000 people and highlights that PGMs is probably the most important in the mining sector, as it relies more on labour intensive methods than mechanisation.

However the 70 000 workers on strike have affected many more people. Firstly the mines involved employ 125 000 workers in the sector (including contractors) which is nearly 64% of all those working in the platinum industry.

My initial estimate of 150 000 to 200 000 people directly affected was very conservative. I learnt that the number could be closer to 325 000, as 1.6 workers are employed by suppliers for every one worker in the mining sector.

This excludes those working in many other unrelated industries in Rustenburg and Madibeng, such as the retail industry, which are also severely affected.

In these areas even welfare organisations complain of drying up payments and retailers report having to retrench people, making it clear that the platinum strike length is having an ever-greater economic effect.

So indirectly, the actual number could be closer to 350 000. The families consist of four people and one can safely say that 1.4 million people are feeling some negative effect of the strike.

No exit strategy

I honestly believe that Association of Mineworkers and Construction Union (AMCU) had no exit strategy in place for when its demands were not met. It is quite clearly a big loser here as its members will now never recover from this strike – they have lost nearly 30% of their annual income. They have become even more indebted and their inability to repay their debts is putting pressure on the financial system.

The economy too is a major loser and if the strike continues for another month or more, the economy may face a risk of dipping into a recession.

GDP effects

The R17.5 billion lost in PGM sales would also affect the current account and by the second quarter the deficit could again be over 7% to GDP. This will again alert the financial markets that South Africa is vulnerable to currency outflows.

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