NO NEED FOR RETRENCHEMENTS
Delegates wrapped up the 19th annual African Mining Indaba in early February 2013 full of back-thumping promises to improve the public image of the sector. Little wonder that the mining captains feel the industry needs a facelift: since the Marikana massacre South Africans wonder whether democracy did anything to lift our ‘resource curse’.
But it appears the surgery is to be purely cosmetic – any substantive discussion about redistribution was barred from the conference, as were labour and community representatives.
Anglo American, whose subsidiary, Amplats, was the latest to raise public ire with its plans to restructure and cut 14,000 jobs, is particularly symbolic of defaulted transformation. The company, a model of parasitic extractivism, which is reputed to have controlled 40% of South African GDP at one point, relisted in London a number of years ago in order to take profits abroad, along with minerals.
Amplats wants to reduce production and ‘raise profitability’ by closing three shafts and selling another. Two of those shafts, Khomanani and Khuseleka, made a profit in the first half of last year of R62 and R94 million, respectively. The cost of their closure and of writing down equipment is expected to be R4.1 billion. To put that in perspective: it equals roughly two year’s worth of living wages (R12,500 per month) for each of the 14,000 mineworkers affected.
Why would a company close an operation that’s making healthy profits, especially when it costs so much to do so? One of the first things you learn in economics is that true profit isn’t simply about making money on an investment – it’s about making more than you could reasonably have gotten elsewhere.
That axiom often goes along with another – namely, that businesses exist purely to maximise profits. While this is certainly true at one level – Marx called capital ‘self-valorising value’ – it obscures a lot of detail about how firms and other economic actors make decisions, and the political and institutional circumstances in which they do so.
Around the late 1970s, a deep crisis in global capitalism engendered a major shift in the centre of economic gravity away from industry and towards finance. A key feature of this process was a change is the way businesses are managed, to something known as ‘shareholder value maximization’ (SVM).
Prior to this, in what some called the era of ‘managerial capitalism,’ bosses tended to give greater weight to long-term value creation, company growth, and market share. The general approach to corporate governance then was one of ‘retain and reinvest’ – firms held on to profits and grew the business. While still of the weave of capitalism – capitalists must exploit to be capitalists – it was at least a system that encouraged real investment and in which the yield of productivity could be more fairly distributed.
With SVM the sole object of managers becomes increasing the share price of the company, which is determined by ‘profitability’ – the return per rand of investment. If cutting half the labour force, closing down factories and outsourcing activities increases profit per rand (even if it lowers the total long-term amount of profit) then that will be the path taken by vampire CEOs.
When profitability goes up, the share price increases; shareholders make a capital gain and the money saved from downsizing can be channelled elsewhere – often to gambling in financial markets where winners make a quick short-term profit. Making a company’s shares more appealing also entails dishing out excessive dividends. In 2007 and 2008, Amplats paid over R29 billion to shareholders – more than the wage bill of the entire sector.
These changes weren’t just dreamed up in a boardroom – they were undergirded by structural shifts in capitalism. The excessive power vested in a bloated, unregulated financial sector means that firms whose share price falls too low are susceptible to hostile takeovers – which usually entail being stripped of assets and laden with debt. To make sure that CEOs obey the new dogma, they are increasingly paid in share options. In 2012 Amplats chief Chris Griffiths got over R3,3 million, around half his total earnings, in share awards.
This is a demented system, one which utterly undermines the ‘positive externalities’ of capitalism (growth and technological progress) that so enchant its apologists.
Of course, a temporary crisis of oversupply in the platinum market is the immediate impetus to Amplats’ schemes. But their anticipated response, which preserves the short-term interests of shareholders and imposes the maximum penalty on workers and their more than 100,000 dependents, is in the last instance a political choice.
The purpose of this discussion is not to suggest that things can be made right by nostalgia for the good years of capitalism or tinkering with corporate governance, but to show that there are alternatives –which must start within the system, but reach beyond it.
As noted above, the targeted shafts are bringing in profits of millionsbut Amplats thinks it can make more money by strangling supply and redirecting the capital invested there – most likely abroad. Those plans will look a lot less economically appealing if workers respond with a properly orchestrated withdrawal of labour. This is a battle that can be won on the shop-floor if workers are organised and determined.
But the bigger war entails overriding the market to protect workers and communities in a declining mining sector and ensure minerals are preserved for socially and ecologically beneficial ends. This will require a broader accumulation of social forces.
Don’t believe support will be forthcoming from the current regime – the verbiage from Susan Shabangu and others is more about saving face in the wake of Marikana than anything else. Remember that Amplats shed 15,000 jobs in 2008 and not a murmur was heard from government (or NUM, for that matter). In fact, the whole history of ANC mineral policy has been one of capitulation and retreat – successively watering down any redistributive policies to allow Anglo American, the very embodiment of extractive colonialism, to pursue a monopolistic strategy. Shabangu has been among the most militant in trying to close down the debate on nationalisation for fear of upsetting ‘the markets’.
The South African financial sector appropriates more than 20% of GDP (‘appropriates’, not ‘comprises,’ since it creates no new value). Yet the sector barely contributes to financing real investment, which comes largely from retained earnings. Currently corporations are sitting on a cash pile of over R600 billion. The record profits of South African banks are drawn from consumers who are forced to assume crushing debt in the face of stagnating and declining real wages. No reason pander so wholeheartedly to foreign investors when surpluses generated domestically are sitting idle.
Here a lesson can be learned from the administration of Ecuador’s Rafael Correa, who recently won a landslide re-election. And it’s not hard to see why – unemployment in his country has halved, minimum wages have doubled and poverty has shrunk dramatically, all through the most gruelling years of the crisis. This was achieved by doing everything financiers most revile – doubling social spending, regulating the finance sector and revoking the independence of the central bank.
‘We can’t be beggars sitting on a sack of gold,’ Correa says, referring to Ecuador’s substantial mineral endowments.
