The obvious reason is that the world demand for the
commodities that the company produces has fallen, making its production
uneconomic. But there is much more to
this scenario.
The prime reason is that ANC-promoted demands for increased
wages and benefits for the workers pushed up the costs of mining, ably assisted
by the plethora of regulations, fees and costs loaded onto the mining industry
by the Government in its striving to fund the tens of thousands of
non-productive civil service employees who have been added to Governments
payroll to replace the load on the unemployment roll in an effort to buy the
votes of those people. This situation
has been developing for years, making it impossible for the mines to enjoy the
minerals boom while it was running, and rendering the mines, on which the
country depends for a large part of its foreign exchange earnings and tax
revenue, unable to build the reserves and to fund the developments that would
have carried it over the present recession.
The lack of economic understanding of the ANC has resulted
in it implementing the belief that the trade unions and the bulk of ANC voters
have, that government revenue is a bottomless pit to provide money ad
infinitum, with no need to care for the sources of that munificence. This belief matches the view that companies
have an equally unlimited source of funds to distribute to the workers, to fund
the insane BBEEE policies, to provide the infrastructure that the Government is
unwilling to offer in support of the employing and revenue-producing activities
of the country. The trade unions have
been adamant in their demands for higher wages, better benefits, regardless of
the warnings that have been given that higher wage costs must inevitably lead
to reduced employment, and not caring about the huge effects of the violent
confrontations they produce.
The chickens have now come home to roost, with Anglo
American reducing employment by 85 000 in an attempt to stay in
business. The disaster that the
Government, working diligently with COSATU, has been working to create, is
happening, and that disaster is building.
On average, each employee who will lose his job supports at least ten
others directly, in his extended family, and in at least another ten to fifteen
jobs, a total of at least one million jobs, via the Multiplier Effect. This effect states that each job created
results in between ten and fifteen other jobs being created, in upstream and
downstream industries, in the businesses in which the new employee spends his
wages, in the farms that grow the food they need to survive. The Multiplier Effect works at least as
effectively in reverse, and usually much more quickly, as huge numbers of jobs
are lost and the economy spirals down into recession or stagflation. It has a domino effect par excellence. It is hard to overstate the effect on South
Africa and its economy that the situation in Anglo American will have, and the
worst of it is that the recovery, if, indeed, it happens, will take much longer
to bring about.
The downgrading is not solely an Anglo American
problem. The effect of it will remove Anglo
American securities from the possible investment lists of international
investors and lenders, ensuring that a large proportion of the pool of funds on
which the company could draw is effectively blanked off for it, and for the
country. It is not only a question of a
higher rate of interest. It implies that
the funds pool is not accessible. The
company has been on that list for many decades, and it has been regarded as an
icon of the mining world, and of the South African economy. Its fall from that status will be viewed by
many investors as a warning sign of what is happening in South Africa, and will
result in a warning note being posted against the names of other, similar,
South African icons.
The ANC and its communist partners, the SACP and COSATU,
have achieved something that not even the Apartheid government was able to
do. One wonders whether they are proud
of it. The able assistance of the ANC in
the partial withdrawal from South Africa of another large mining company,
Glencore, and the Government-promoted inducement to it to hand over a viable
coal mine to the ANC associates, the Guptas, certainly indicates that at least
some in power are rubbing their hands in glee, while the voters who blindly
support them are turning to God for help in their poverty-stricken future,
knowing that they cannot expect any from the ANC. The historians of the future will probably
mark this event as the beginning of the final collapse of an economy that was,
before the ANC took over, an example to the rest of the world.
No comments:
Post a Comment