/ 8 February 2013

Mining: ANC fired up over policy changes

Mining: Anc Fired Up Over Policy Changes

Throwing its weight behind incentives for absorbing ­unemployed youth and calling for teaching to be deemed an essential service.

The government also gazetted new wages for farmworkers, taking the minimum wage to R105 a day despite protests from the agricultural industry that this will threaten jobs (See "Farm wage hike brings little joy").

Concerns over clarity on policy positions and the practical implementation of party strategies persist, given the push back on these issues from important role players, including labour unions and business.

The party moved to address the question of the long-debated youth wage subsidy – for which the treasury had already set R5-billion aside. The proposal had stalled in negotiations at the National Economic Development and Labour Council owing to union opposition.

In its final policy resolutions from the Mangaung conference published last week, the ANC speaks of the need for the government to "act to improve the quality of active labour market policies, and create incentives for absorbing the young unemployed, so that young, unskilled job seekers can gain entry into employment more easily".

But after the party's national executive committee lekgotla last weekend, the matter was couched under the rubric of "youth employment support and incentive schemes". This is not surprising, given Cosatu's declaration that the federation has reached "no agreement" on a youth wage subsidy, calling it a "bogus scheme that would put millions of rands into the pockets of employers but do nothing to create more jobs overall or solve the underlying problems facing young workers". Cosatu spokesperson Patrick Craven said it would wait to see what the support and incentive proposals would entail, then discuss them within the alliance and with Nedlac.

"We shall look sympathetically at any genuine proposals to reduce youth unemployment," Craven said.

Recourse to strike
More on the subject is expected in the president's state of the nation speech next week.

Labour also took exception to reports that the ANC sought to make teaching an "essential service" – meaning teachers would have no recourse to strike. The South African Democratic Teachers Union made the point that this would not address the systemic and multifaceted challenges facing the education system. It said teaching could not be classified an essential service because teachers' strikes did not endanger the health, lives or personal safety of schoolchildren.

The national development plan, which has garnered increasing ­political support, stopped short of calling for teaching to become an essential service. In its original draft form, the plan proposed teacher pay be linked to the performance of the pupils. The national planning commission, which wrote the plan, said this was not feasible because of different factors that contribute to a child's performance, which teachers have no control over.

It did, however, stress the need for greater professionalism from teachers, calling on unions to play a more active role in addressing the capacity weaknesses among teachers. The plan also advocated the removal of union power in selecting principals or other promotional appointments.

But nowhere was worry over policy direction felt more keenly than at the 2013 Investing in Africa Mining Indaba, held in Cape Town this week.

Though the government extended a far more conciliatory hand towards mining at the event – stressing the need for more dialogue between the industry and the state – the lack of clarity over the framework that state intervention in the sector would take, as well as the proposed changes to existing mining legislation, left mining companies perplexed.

In the policy resolutions, the ANC listed the minerals it deemed "strategic and important assets", which include minerals key to manufacturing products such as steel and polymers, namely iron ore, coal and oil; base metals such copper and nickel; platinum group metals; as well as chromium, vanadium and manganese. It also included energy minerals such as coal, uranium, natural gas, shale gas and coal-bed methane gas; minerals for agriculture including phosphates and potassium; and minerals key to infrastructure including limestone and gypsum.

Special public policy measures
The list came with the proviso that, where these minerals required special public policy measures, these would be identified.

The resolutions coincided with Mineral Resources Minister Susan Shabangu's announcement last week that coal would be designated a strategic mineral, in a bid to protect domestic supply to Eskom. But whether this will entail interventions such as export permits on certain grades of coal remains unclear.

Proposed changes to the Mineral and Petroleum Resources Development Act, however, will allow the ministry to set aside certain percentages of strategic minerals mined in South Africa for local beneficiation.

This will no doubt extend to coal because of its importance to the domestic supply of electricity.

These amendments form part of the state's attempts to address what it deems unfair pricing in the steel and iron ore value chain.

The department of trade and industry has been pushing for a "developmental" steel price, along with access to secure supplies of affordable iron ore.

Trade and Industry Minister Rob Davies last year said the intended changes to the Act would be as effective as export taxes on iron ore and steel products.

Creating new industriesAt the mining conference, Shabangu said the identification of strategic minerals, particularly coal, was inte
nded to ensure security of energy supply, as well as boost local beneficiation of the country's mineral wealth. The minerals identified were intended to "create new industries in South Africa", she said.

She stressed, however, that no legislative amendments were "a fait accompli. Those [legislative] proposals have been accepted by Cabinet as proposals – that is very important. I've never heard of proposals being decisions."

The amendments would pass through the legislative process in Parliament, which would allow the wider public to give their input, Shabangu said.

Many of these statements were "confusing" to the mining industry, said Andile Sangqu, executive director of Xstrata South Africa.

On the question of coal, Sangqu said greater interaction with the industry would have been appreciated as pronouncements were made without clear guidelines and frameworks to give them "practical expression".


"The nature of those decisions and pronouncements impact on our own ability to invest in new projects."

Steven Kilfoil, director for mining advisory and corporate finance at Grant Thornton, said the clarification over which resources were deemed strategic and the fact that they extended to important industrial minerals, as well as precious metals, was positive.

The resolutions also lent support to the government's beneficiation plans, which were finally beginning to take off, he said.

"I am not sure people will view this as negative, as it's about how we exploit those minerals best," he said.

The uncertainty created by the proposed legislative changes, however, was likely to make investors uneasy, Kilfoil said.

Farm wage hike brings little joy

Against the backdrop of a renewed fight between unions and the government over a youth wage subsidy, labour won what could amount to a Pyrrhic victory – farmworkers, wages were set at a new minimum of R105 a day.

The department of labour announced on Monday that, as of March, farmworkers must be paid R105 a day, or R2274.82 a month, for the next three years, with wages increasing at inflation plus 1.5% during that time.

This left the argicultural industry reeling, and agricultural organisations warned that the 50% hike would hurt jobs

According to Michael Laubscher, chairperson of the Hex River Valley Table Grape Association, the increase put the jobs of an estimated 5 000 workers in the area at risk, and many of them were permanent employees.

The Hex River Valley is home to De Doorns, the epicentre of the farmworker strikes that precipitated the wage settlement. About 7000 permanent workers are employed in the 4000 hectare area, Laubscher said. According to farmers, to remain viable their target would have to be to employ one person for every two hectares, bringing levels of permanent employment down to 2 000 permanent workers in the region, he said.

Table grape farming was labour-intensive, with limited room to mechanise. Farmers were already under pressure to increase productivity and would have to take efficiency to new levels, he said.

Subsidised electricity
"But in other sectors, such as wine, it's not even an option; they will mechanise," he said.

The wage increases did not take into account the services provided to farmworkers by the majority of farmers, such as housing, subsidised electricity, crèches, funeral plans and transport, he said.

Farmers were also faced with very tough market conditions and their produce was being bought at the cheapest prices possible.

 "There's no minimum selling price for my products," Laubscher said.

The wage hike also coincides with increases in electricity and petrol prices.

Research by the Bureau for Food and Agricultural Policy revealed that an increase of the minimum wage to R105 a day would see many farms unable to cover their operating expenses, pay

back borrowings.

But of greater concern was that, with wages even at this level, most workers would not be able to afford enough food to maintain a healthy diet.

Distorted pricing structures
This has called into question the role of retailers and food manufacturers, who buy raw produce from farmers, yet sell food to workers at prices they cannot afford.

Cosatu acknowledged the problem on Wednesday.

In a statement the union federation said it would be launching a campaign against retailers "who pay farmers a pittance for the products that are produced on South African farms".  

It was partly these practices that had resulted in a "distorted pricing structure in agriculture".

Retailers had been central to structuring the apartheid-style cost practices in agriculture and promoted, profited and benefited from low slave wages, according to Cosatu.

Protests by both farm and retail workers outside the country's four major retailers were being organised for February 27, it said.

Cosatu also called on the Government Employees' Pension Fund to urge more responsible trading practices from retailers, because it was one of the biggest shareholders in these companies.