South Africa wakes up to reeling economy
The government has ended its conspicuous silence about the increasingly stressed economy, joining the strident chorus of concern that has been sounded by business and investors for months.
But for many it is too little too late, with the economy seeing its slowest growth since the 2009 recession and several economists predicting stagflation caused by an inflation rate of 5.9% paired with economic growth forecasts that have been adjusted down to about 2.5%.
Economic figures released on Tuesday showed that growth in the first quarter of 2013 was a mere 0.9%, compared with 2.1% last quarter. Manufacturing fared particularly badly, contracting by almost 8%, and the rand continued to fall, hitting new four-year lows this week and plunging to below R9.80 to the dollar on Wednesday.
In light of the news, the World Bank announced on the same day that it had adjusted South Africa's 2013 forecast for growth from 3.2% to 2.5%. The growth in gross domestic product forecast for 2014 was adjusted from 3.5% to 3.2%.
The information led ratings agencies to warn that the country may miss its economic growth target this year. Tax revenue would be lower than expected and budget deficits would be larger than foreseen, they said. The cost of borrowing by the government rose to its highest levels in seven months as spooked investors continued to sell South African government bonds, Bloomberg reported.
According to Nomura emerging markets economist Peter Attard Montalto, the stagnation reflected "the upstream and downstream impacts of the mining unrest last year, as well as wider labour issues across the economy".
The president's appeal
In response to the growing concern around the impact of the unrest, President Jacob Zuma appealed last week to the House of Traditional Leaders to warn miners about the catastrophic effects of unreasonable wage negotiation tactics. "We should demand better salaries and working conditions but we may not wreck the economy," Zuma said. "We could impoverish our country."
His words were part of a greater charm offensive the government is waging on investors. Two days earlier, Labour Minister Mildred Oliphant told Parliament she would engage labour unions in order to find a solution to their fractious relationships with one another.
Ongoing tensions in the platinum sector between the historic giant National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (Amcu) have sparked wildcat strikes and violence in the past three weeks, scaring investors and mirroring events that led to the tragedy at Marikana last year.
Minister of Mineral Resources Susan Shabangu announced decisive action in the National Assembly on Tuesday. Following the president's call for mining leaders to restore calm and confidence to the sector, she had held a private meeting with the minister of finance "in a bid to address the challenges" faced by the sector, Shabangu said.
"In this all-important meeting, we agreed on a specific programme of action," she said. It would include a particular focus on "supply and demand interventions", and a task team would present a progress report in a month. But according to critics, the efforts came far later than they should have and did not address the biggest issues. "She's certainly not addressing the main issues like upcoming wage negotiations," said Democratic Alliance MP James Lorimer.
NUM and Amcu
And a protracted turf war between the NUM and Amcu at the Lonmin mine looks set to continue for another six weeks. Amcu has been trying to oust the NUM from the mine since it was recognised as the majority union last month, but the Johannesburg Labour Court ordered on Wednesday that the NUM had until July 16 to try to recoup its membership before final counts were taken and a decision made whether the union would have to leave the mine.
Cadiz economist and mining analyst Peter Major likened the situation to putting an adhesive plaster on a gaping wound that's been getting worse for a long time.
"It's not addressing where the problem comes from," he said. "A Band-Aid is better than nothing but, you have to ask, who got the guy infected?" he said. "The state did by allowing workers to run amok. When wildcat strikes started, the government thought it was cute," he said. "They said, 'They're poking the eye of the old colonial mine bosses.' I hold the government accountable." Now the powers that be have been spurred into action by concerns that the economy could soon be in tatters, he said. "I think there's genuine fear."
But their actions have come too late, Major said. "They don't realise how far out of their depth they are. I'm glad Susan's taking the reins but she needs to go higher up. They're fooling themselves, having these meetings with mine management."
Other than referring to "supply and demand interventions", the speech gave no details about what action would take place.
The "government side" would be led by the national treasury and the departments of labour and of mineral resources, Shabangu said. Participation by the mining companies would be led by those who chaired the boards. "We will also engage the leadership of trade unions," she said.
But Lesiba Seshoka, speaking for the NUM, said the union had not been invited to the meeting. He added that the union had no desire to attend meetings where the government might dictate the wage increases for which the union should negotiate.
"Why would we go and argue with the regulator that seems to just decide the employees' behaviour?" he said. "When a senior officer gets 17% increases, the economy does not have a problem. But when the poor workers want a meagre increase of 60% to a total of R4 700 then the economy is crying foul."
Meeting shrouded in secrecy
Analysts and opposition parties say they are in the dark about what happened at a meeting held last Friday between the government and mining stakeholders, and those who were present have declined to share any details.
When the Mail & Guardian asked Lonmin whether it was present at Mining Minister Susan Shabangu's gathering, it said it could not comment because "it was a private meeting".
AngloGold Ashanti confirmed that its chief executive had been present, but said it was inappropriate to share any further details. Anglo American did not respond.
Asked whether the Chamber of Mines was present, spokesperson Vusi Mabena said the organisation's vice-president, Mike Teke, was there. Teke reportedly said that the leadership of the mining industry had reached an agreement, but Mabena could not confirm this. "It was CEOs at the highest level, that's all I know. The nitty-gritty of it is yet to come out."
Democratic Alliance MP James Lorimer said the meeting was "surrounded by a blanket of silence. No one wants to talk freely because if you say something against the government, then your mineral rights are under threat. "It could well be that this is all smoke and mirrors and the minister is trying to look good," he said.
The mineral resources department did not answer questions about what was discussed or when the next meeting would be held.