Sept. 5 (Bloomberg) -- With the largest reserves of more than a dozen minerals, South Africa is not about to run out of riches. Yet the unrest rumbling through its mining industry reflects the deepening failure of Africa’s largest economy, almost two decades after the end of apartheid, to tap its natural wealth for the lasting benefit of all its citizens.
On Monday, police used tear gas to disperse strikers at a gold mine near Johannesburg. This came not long after the worst violence of the post-apartheid era: On Aug. 16, police at a platinum mine owned by Lonmin Plc used live ammunition to turn back strikers armed with spears and machetes, killing 34 of them. The workers were demanding a near-doubling of their monthly pay to 12,500 rand ($1,500); they were also fighting with one another, in a clash triggered by a breakaway union.
South Africa’s mining industry, which generates nearly one-tenth of its gross domestic product and half its foreign exchange and provides about 500,000 jobs, has been hard hit by slowing demand from China and Europe. (The price of platinum, for example, which is used in catalytic converters for cars, slumped with sluggish auto sales in Europe.) But the country’s economic problems go well beyond that. Unemployment, now at 25 percent, has not dipped below 22 percent since 2000; the level of inequality, as measured by South Africa’s Gini coefficient, is worse now than at the end of apartheid.
According to one World Bank study, only the top 20 percent of South Africa’s population saw any growth in real wages between 1997 and 2008; in the bottom 10 percent, average wages were almost cut in half -- if you were one of the 30 percent in that bottom group lucky enough to have a job, that is. Comparing the lot of job seekers in 18 middle-income countries, the World Bank noted that individuals in South Africa had the lowest chance of actually finding work.
To the credit of South Africa’s leaders, millions more South Africans now have clean water and electricity and are living above the poverty line. Still, giving out welfare grants (which go to more than 15 million people, or nearly one-third of the population) and government jobs (more than 20 percent of the workforce, far outstripping the country’s emerging market peers) is an expensive anti-poverty strategy with diminishing returns. Between 2007 and 2011, government debt jumped by more than 10 percentage points of gross domestic product, far more than in other BRICS.
Instead of creating more private sector jobs and promoting small enterprises, the governing African National Congress party has catered to entrenched elites, whether in business or in labor. The clashes at the Lonmin mines were partly the result, as the combative Association of Mineworkers and Construction Union sought recruits among workers disenchanted by the pro-ANC and mainstream National Union of Mineworkers. President Jacob Zuma’s failure to rush back to South Africa after the killings, his dispirited subsequent visit with the miners and prosecutors’ initial decision to use apartheid-era laws to charge the strikers have fed the impression that the government is out of touch.
December’s election for head of the ANC -- and thus in all likelihood the country’s next president -- bodes ill for a change in approach. Zuma and his potential rivals will probably do all they can to curry mainstream union support, including backing legislative “reforms” that will actually hurt job creation by extending the country’s onerous labor regulations to cover temporary jobs. According to the World Economic Forum, South Africa ranks 139th out of 142 countries in the ease of hiring and firing; the World Bank reports that South Africa’s minimum monthly wage of $543 dwarfs that of $300 in Brazil, $183 in China and $30 in India.
A better approach would be to give more South Africans a chance to work for a living wage. A subsidy for young workers in new jobs would be a good place to start, though the idea is stalled by opposition from labor unions who fear the displacement of their workers. Another strategy would be to channel state procurement purchases away from the big, established companies that dominate the economy and toward newer small and medium enterprises. A third would be to tackle one of apartheid’s most stubborn legacies -- the segregation of Africans in remote townships -- by providing a transportation subsidy to enable people to commute to where the jobs are. As things stand, unskilled workers must commit significantly more time and resources just to get to and from work, let alone to find a job.
Stubborn inequality is a problem that South Africa shares with much of the rest of the world. One of the best ways to reduce it would be to invest more in the country’s educational system, where the problem is not enrollment but achievement: One survey ranks South Africa’s primary school system 127th out of 142 countries, below that of Mali. That is tough, long-term pick-and-shovel work, much less dangerous than working South Africa’s deep mines, to be sure, but even more essential to tapping the country’s single greatest resource.
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