The basic answer is that although it might seem like a simple question, to answer it is actually quite complicated.
Compared to major developing world countries, South African workers, and platinum mine workers in particular, are earning not too badly, R5000 pm (just over $600 pm) vs a median** SA wage of R3000 pm. They beat Chinese mine workers ($174 pm) and Indian ($102 pm) ones even more so.
South African factory workers are earning less than platinum miners, but still more than their counter parts in China. Anecdotal evidence suggets that India and Bangladeshi factory workers earn even less. (Clothing and textile jobs, particularly in the Cape has been decimated as a result).
Why do our platinum mineworkers earn more than SA factory workers? South Africa has more than 80% of the world’s proven platinum reserves. Our platinum miners don’t face the same kind of international competition that workers in other sectors experience might be one answer.
But how does South Africa stack up against developed countries’ miners? So off I went to research Australian miners’ wages. What I found was surprising. Incredibly Australian miners earn almost 10 times what our platinum miners earn (round $6000 pm). How can Australian mining companies afford this?
Currently SA Platinum miners are not doing too badly
It’s all about productivity
‘Productivity isn’t everything, but in the long run it is almost everything’. Paul Krugman
As Krugman noted, a country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker (or productivity).
This report on Australian productivity points to some answers as to why their miners are so well paid. Bear in mind that the US is seen as the standard of productivity, one of the most productive economies in the world. It is in the US where new technologies and management techniques – the stuff that improve productivity – are usually first felt. In fact, the Australian report describes it as “the world’s productivity frontier”.
Australia as a whole is on average about 20% less productive than the USA. Mining was until recently the only sector of the Australian economy that was more productive than that of the USA. Australian mine workers were at one point producing 70% more than US ones for the same amount of work. Australia has done this through introducing new methods and technologies of mining that’s made it easier and cheaper to produce goods:
“An increase in the use of open-cut mining has been a key development, along with a general increase in the scale and automation of mining equipment.” Productivity in the (Australian) mining sector.
South African mining is in dire straits
Even in the midst of a global mining boom South African mining has declined in output. This is also true of platinum mines. Direct empolyment in mining has shrunk by a third since from 1970 to 2004 (660,000 to 440,000). Tim Cohen outlines in today’s Business Day the extent of the problem:
During the commodity boom from 2001 to 2008, the mining industry shrank by 1% a year, compared to growth of 5% a year among the world’s 20 mining exporting countries. This is despite the gold price, for example, going from about $400 an ounce in 1994 to $1,800 /oz.
South Africa’s state research body the CSIR wrote a report in 2011 called State Intervention in the Mining Industry that claimed the problems besetting South Africa’s mines were due to a number of factors that included poor skills and safety, which translates into poor productivity.
I will just pull out a few quotes from the report:
State mediated funding for health and safety research, through the Mine Health and Safety Council, measured in 2011 Rand, has fallen from R80-million in 1996 to under R20-million in 2010.
South Africa’s mining accident and fatality record is unacceptably high. Responsible multi-nationals are reluctant to establish or continue operating here as they cannot accept the consequences in human life. As one example, BHP Billiton will not mine platinum in South Africa, as it does not believe it can do so safely.
As mining has gone from shallow to deep, productivity has become poorer and costs have risen.
In platinum, there are extensive, relatively shallow resources available, but South African production has fallen since 2006 despite the global commodities boom in 2007 and 2008. Analysts list a number of contributing factors, including the role of technical challenges: “it is clear that mining is becoming more complicated than it used to be”.
There is a worldwide shortage of technical skills particularly in mining. High-level technical skills are particularly useful in the conceptualization, design and implementation stages of a new mining project. It is at these stages that most value is created, and that require the most innovative, high level and experienced skills that can be brought to bear on the project. If high-level skills are not available, the value that will be created from a mineral resource will be reduced.
Many technical areas where the country had an international reputation, for ex-ample rock engineering, have been weakened by a lack of investment in new capacity and by the aging of the researcher population. Researchers participating in mining research have fallen in number from over 600 in 1988 to less than 80 currently.
The industry is constrained by a lack of skills in many areas, particularly in artisan skills, but also by a widespread lack of literacy, and lack of a common language on many mines.
To get back to the question I originally asked. Do SA miners get a fair wage? Unfortunately I don’t think I have enough information to answer that yet. The numbers above do not factor in South Africa’s cost of living (which is higher than India’s for example).
But I do think my search shows us – once gain – who the main culprit has been. There are many actors involved in the current South African mining crisis, and there are many guilty parties. But none more so than the SA government. On its watch the country is deskilling. And on its watch a small elite is enriching itself. On its watch South Africa’s Gini coefficient – the measure of inequality, has shot up even further since apartheid (10% of the population is raking in 60% of the countries income).
South Africa is thick with the perils of moral hazard. It’s pretty clear that getting ahead is not about merit or hard work but rather who you know and how much of a fuss you can create.
How do we apportion blame to only miners in this dystopian environment?
* PS: When I get a moment I will have a look at the pay of wealthy South africans, comparatively.
** The median wage in South Africa is much lower than one would expect, considering the size of the countries’ GDP. That’s because income is so unevenly distributed, with the bottom 50% of the population taking home less than 8% of the countries income, and the top 10% taking 60%.
Surprisingly coal is the biggest earner for South Africa in terms of mining. Source: SAPA