The Minerals Council South Africa, which represents 90% of South Africa’s mining industry, says a "highly unionised" labour force has led to workers’ pay increase while productivity has declined.
In a note published this week in response to Stats SA’s Quarterly Employment Survey for the for the second quarter, the council said there was a "decoupling" between real gross earnings and labour productivity in mining.
"Growth in real gross earnings is faster than labour productivity. Mining employees are getting paid more relative to the value they produce ... This is an indication of a highly unionised workforce which can negotiate relatively higher wage increases," acting chief economist Bongani Motsa wrote.
He said the mismatch between productivity and wage growth could lead to inflationary pressures, tighter profit margins and a reduction in global competitiveness.
The economy as a whole recorded a 0.2% quarter-on-quarter increase in wages, including bonus payments and overtime, and a 3.4% year-on-year growth in remuneration to R986.8bn. In the mining sector, remuneration was up 2.2% in the quarter at R49.8bn.
The council said evidence of wage growth outpacing productivity could be seen in the industry’s gross operating surplus (gross profit generated by a business before accounting for taxes, interest and dividends), which had fared badly since the Covid pandemic.
Motsa told Business Times a balance between labour productivity and increases in real wages was required.
"I am not a proponent of low wages compared to inflation; we should acknowledge that they should be in line with the growth of production and productivity."
Still, he said mining differed from sectors such as such as manufacturing because tonnage and productivity declined with the depletion of resources.
"The legislation is pro-labour instead of a balance; it should also cater for businesses."
Motsa cited the ferrochrome industry as an example, saying it has not been competitive since 2014, and hence producers were cutting jobs.
"If you look at the rate of profitability in mining, it is volatile and it is predominantly contracting ... [but] compensation of labour has been positive from 2016; it does not follow profitability."
Mining unions said the council was biased.
National Union of Mineworkers spokesperson Livhuwani Mammburu said Motsa’s comments reflected an agenda by members of the council to replace permanent employees with contractors.
"They are trying to say that with permanent workers they are not achieving productivity, which is a lie. Our members are working very hard underground. They are still earning lower salaries than management. Look at what the CEO of Sibanye-Stillwater [Neal Froneman] received before he stepped down; it was in the millions.
"They are trying to justify this thing of replacing permanent workers with contractors through retrenchments, and we are aware of that strategy. They want to fool the public, saying workers are not reaching productivity when they are coming up with a strategy of retrenching workers and replacing them with contractors," Mammburu said.
Gideon du Plessis, secretary-general of Solidarity, argued that wage hikes in mining were not excessive.
"CPI-linked increases alone often mean that workers fall behind financially, and you are getting poorer every year. Above-CPI increases, on the other hand, support genuine financial progress."
Du Plessis said offering decent wage packages ensured labour stability and productivity.
"In this regard, it is essential that the Minerals Council not only considers the financial implications of wage increases but also compares labour relations across the sector," Du Plessis said.
"There is a clear distinction between mining companies that refuse to go above CPI and those that understand the long-term value of a motivated workforce."
He called on the Minerals Council to scrutinise the substantial remuneration packages and annual increases awarded to mining executives.
"These should be analysed both in terms of their financial impact on companies and the broader perception they create about inequality within the mining sector."
Mining analyst Stephen Meintjes said the mining industry and employees should find middle ground when it comes to compensation.
"This comment from the Minerals Council hints that government and labour must both come to the party to re-establish growth now.
"Maybe if labour takes cognisance of this very real need now, the mining industry could let the unions have a boom-time bonus or two when the time comes?"
The Quarterly Employment Survey indicated the mining industry added 2,000 jobs in the second quarter, mainly in the chrome, coal, platinum group metals and gold sectors.
There was a 2.1% fall in overall employment for the quarter, with the economy shedding 80,000 jobs quarter on quarter, bringing total employment down to 10,509,000 in June from 10,589,000 in March as a result of job cuts in services, trade, manufacturing, construction, transport and business services.
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