Job creation: Don't write off mining

Terence Corrigan says the sector's contribution to employment should not be underestimated

South Africa’s employment malaise: has mining been forgotten?

‘Too few people work.’

This was the first of South Africa’s challenges identified in the National Development Plan. It was also the most important and most widely recognised. Indeed, unemployment – or, more accurately, employment – has been at the centre of each of the strategies that have come and gone since 1994. With unemployment riding at close to 27%, representing a staggering 5.6 million people, it is, as Finance Minister Pravin Gordhan said last month, a ‘national emergency’.

So, putting people to work should be at the core of our national agenda. And we should be making every effort to leverage our national advantages to deal with it.

With a mineral endowment estimated at some $2.5 trillion, mining has always been our great strategic advantage. But it is often seen as the economy of the past, dispensable on political and environmental grounds. Thus, Bishop Geoff Davis of the Southern African Faith Communities Environmental Institute acknowledges that ‘we are in desperate need of employment’, but dismisses the prospects of this coming from mining. Mining, he contends, will create only a ‘handful of menial jobs for the local community’. Rather, focus on ecotourism and ‘agriculture, using people and not machines’.

While there is a legitimate case for deliberation about the advisability of any mining project (and to consider alternatives), to belittle the contribution of the mining industry as a generator of employment is as counterproductive as it is untrue.

According to Stats SA, mining provides South Africa with around 447 000 jobs. This represents around 3% of all employment in the country, and a little over 4% of formal, non-agricultural employment – the ‘hard core’ of work in the economy. This is by no means insignificant. Somewhere between one in every 25 and one in every 33 jobs in South Africa is provided directly by the mining industry.

Since nearly every miner supports dependents – the National Union of Mineworkers estimates that each of its members has on average eight – the number of people supported by the mining industry can confidently be numbered in the millions.

Beyond this, the mining industry is a major purchaser of goods and services – everything from engineering to entertainment. Without this business, a sizeable number of jobs in the wider economy would evaporate.

It is not only the scale of employment that makes the mining industry’s contribution important. It is also the nature and location of the opportunities it provides.

Mining offers an opening into the economy for South Africa’s unskilled. The well-documented shortcomings of our education system make mining a valuable avenue for socio-economic mobility. As the country’s economy shifts its focus towards industries demanding skills – even passing matric no longer offers much advantage and is still rare.

And while the wages paid in the mining industry have been the subject of virulent criticism, they are in fact better than most of the alternatives on offer. Among gold miners, for example, the entry-level package for an underground worker is around R150 000 per annum.  As an analysis earlier this year by the Institute of Race Relations noted: ‘Current data shows that, in the gold sector, minimum entry-level wages (before benefits) are approximately twice as high as in the petroleum sector, three to four times higher than in the hospitality sector, and five times higher than in the security industry.’

No less important, mining is disproportionately an industry of South Africa’s rural parts. In the North West, mining employs 140 000 people, representing some 15% of the provincial workforce. The industry accounts for 6% of employment in Limpopo, and 5% in Mpumalanga. The opportunities that mining provides and the wages earned from these operations – however imperfect they may be – are the lifeblood of many rural communities. Without the mines, these communities would wither away.

Mining plays a large, important role in keeping people in work.

But there are grounds for concern. Employment in the industry has fallen over the years. According to official statistics, in 1990, mining employed some 693 000 people in South Africa (as this figure excludes the erstwhile ‘independent’ homelands, the actual number was probably somewhat higher). This reflects an overall drop in mining employment over 26 years of around a third.

Sadly, South Africa is failing to capitalise properly on its natural bounty. Partly, this reflects tough market conditions, new productivity-enhancing technologies and competition from other mining jurisdictions. But part of it reflects the choices that have been made (and have not been made) in South Africa. Confusing and changeable policy, infrastructural bottlenecks, and a barely-concealed hostility on the part of many in government and civil society have soured the environment considerably.

Indeed, in the past few days, no less a body than the Labour Court took issue with work stoppages in terms of Section 54 of the Mine Health and Safety Act. An important provision for mine workers’ safety, to be sure, but one that needs to be exercised within ‘the bounds of rationality’. In the case at hand, a shut-down at AngloGold Ashanti’s Kopanang mine incurred a daily cost of R9.5 million a day, resulting from issues affecting a part of its operations which employed only 2% of the 4 000 person workforce.

We need to do much better, to make mining an attractive field for investment and for operations, for its potential for putting many of the country’s unemployed to work. It must be encouraged to do this.

Otherwise, we may well read in a future development strategy:

‘Even fewer people work.’

Terence Corrigan is an independent governance, research and communications consultant with an interest in business and corporate governance. He is a Policy Fellow at the SA Institute of Race Relations.