Wednesday, 11 June 2014

Why is the gap between rich and poor incomes (Gini Coefficient) so big in South Africa?

Gill Marcus, Governor of the South African Reserve Bank blames employers for the strikes in various industries:

http://www.miningweekly.com/article/rand-weakens-after-marcus-comments-2014-06-10

My comments:

Marcus blaming employers? Perhaps they are at fault, but without them, there wouldn't be any employees!

Unless the government wants to employ everyone, as seems to be the case. And in Communism, the only way to finance this is by asset stripping (causing massive environmental destruction), essentially by dramatically increased mining exports (which are dwindling) and fracking, which won't happen if workers would rather have handouts and grants than actual self-fulfilling work.

In the meantime "new Mineral Resources Minister Advocate Ngoako Ramatlhodi exits the platinum sector wage talks",  http://www.miningweekly.com/article/mining-minister-bows-out-of-talks-platinum-producers-mull-options-2014-06-10 , saying that the task team established by government on May 28 and comprised representatives from the departments of Mineral Resources, Labour and National Treasury, and Lonmin, Anglo American Platinum (Amplats), Impala Platinum (Implats) and AMCU, and dissolved less than 2 weeks later, hadn't worked and employers and employees must sort out their own differences. What a paradox!

So much for government employing everyone, and government task teams actually helping out. Isn't it amazing that South Africa blames Israel and the Arabs (since 1967, the Palestinians) for not being able to sort out 3,500 years of historical problems, but this same South African government cannot sort out 5 months of labour strikes in the Platinum Industry?

In South Africa, as elsewhere, it is actually up to employers and employees to resolve their differences. If this strike continues then as in other industries, users of platinum will find alternative ingredients for achieving their products and the platinum mines in South Africa and elsewhere will close. This isn't so far fetched. It happened with Vanilla in Madagascar which increased 10 times in price from 1993 to 2003 (http://www.irinnews.org/report/46230/madagascar-feature-downside-to-rising-vanilla-prices) and then the users of Vanilla found a chemical alternative and the price plummeted.

IMHO, it is time for workers on mines and other industries in South Africa to start up-skilling themselves and their children. The mines have built more than enough schools, clinics, etc, in the mining areas. Many of these are unused or vandalised. I believe this is the critical problem. Unskilled workers don't understand the value of education and believe their problems can be solved with government grants.

The reason South Africa has such a big wage gap (Gini coefficient) between rich and poor is because of the huge lack of skills in the South African workforce. Until this problem is resolved by the workforce's children wanting to do better than their parents and becoming educated and having an environment themselves that allows them to set up SMME's and employ other people, the Gini coefficient will continue to worsen.

And then back to my hobby horse. I still believe that the biggest culprit in our lacklustre growth is lack of electricity. And the world bank agrees with me: http://www.engineeringnews.co.za/article/bank-cites-labour-tensions-as-it-again-cuts-sas-growth-outlook-2014-06-11/rep_id:3182

More at http://mypowerstation-sa.blogspot.com/2013/09/south-african-strikes-and-electricity.html "South African Strikes and the Electricity Crisis".