Business Day column: State must face reality of job losses in mining

20 July 2016
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UNEMPLOYMENT is desirable. That is what I told the Minerals Petroleum Board when I gave evidence on "the surge in job losses in the mining industry". They might regret having invited me, but I hope not. They were congenial, probing and attentive. They raised challenging questions to which my responses seemed well-received.

Most jobs should be "lost". Eventually. That is what they should tell the minister who mandated the inquiry. But will they? Do political imperatives allow them to be frank? They should add, of course, that employment carnage can be reversed by labour policies that lower employment cost, pro-investor policies that attract mining companies, foreign exchange policies that stop pretending they "defend" the rand, and industrial policies that encourage income and incentives (unlike "beneficiation").

Promarket reforms can offset job losses. Eventually most jobs in most sectors must be replaced by other jobs. All jobs were lost in the ox wagon, chimney sweeping and switchboard industries. Elevators used to have "lift drivers".

There are no more mimeographers or comptometrists. Copiers replaced "copy typists" who made "carbon copies" on manual "typewriters" manufactured by people who lost jobs. Mercifully, progress offered more and better jobs elsewhere. When British coal mines could no longer be mined profitably, they were subsidised. The more sensible it became to retrench coal miners, the more they were subsidised. Subsidies reached such absurd levels that it would have been cheaper to send mine workers on permanent vacation. Such madness is commonplace in rich countries. SA cannot afford it.

The underlying reason for all job losses is negative returns. People are employed if employing them is worth more than it costs. Unless you are a politician. Then you can spend other people’s money on wealth-wasting nationalised industries and unsustainable "public works". The Minerals Petroleum Board has to decide which jobs should be lost, what will save and create viable mining jobs, and what should not be done in response to popular rhetoric.

Job losses due to resource depletion or declining mineral prices — the coal price, for instance, fell by more than 50% in five years — should be allowed and encouraged. But they should be offset by investor-friendly reforms. Investment and jobs in beleaguered minerals can gravitate towards viable minerals and other sectors. The board is unlikely to be honest about the fact that mineral right nationalisation misappropriated most of the wealth with which replacement jobs could have been created, a problem that ensuing legislation compounded. What it should recommend is as obvious as it is politically daunting.

The government can cut the cost and risk of employing people if it liberalises labour law. In mining, it can restore the rule of law, which entails legal certainty, security and the separation of powers. Virtually every new policy increased administrative discretion, risk, uncertainty, insecurity and the conflation of powers. It is impossible, as employers keep explaining, to plan and invest when no one knows what the rules of the game will be tomorrow or when secure rights are eroded towards a vanishing point.

Being in mining is like playing soccer under a biased referee and without rules. When I asked a mining boss why they were so pathetic about representing their interests, he said they were terrified of victimisation by omnipotent officials. The government should debunk the fantasy that mining is a bottomless pit (pun intended), and stop imposing anti-employment demands on mines including lavish community development projects, training schemes, discriminatory taxes and extreme environmentalism. There are no free lunches. Job losses will be reversed when anti-investor policies are reversed.

Louw is executive director of the Free Market Foundation.

This article was first published in Business Day on 13 July 2016

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