11 Jun

A solution to South Africa’s mining strike?

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Members of the Association of Mineworkers and Construction Union (Amcu) have been on strike at Anglo American Platinum, Impala Platinum, and Lonmin in the North West platinum belt since January 23 demanding a basic monthly salary of R12 500.

 

It is estimated that to date mine workers have lost R9.8 billion in salaries while the companies have lost around R22 billion. The human distress that surrounds this issue eclipses the numbers and a speedy and sustainable resolution to the impasse is vital not only to stem the sliding Rand but also to put an end to the violence and suffering of the miners and the communities that reply so heavily on the mining sector.

 

I pose the following idea as a potential solution using Anglo American Platinum as an example. The market capitalisation of Anglo American Platinum is around R129 billion according to Bloomberg. It has a total work force of approximately of 50 000.

 

Anglo American Platinum, like most listed companies, has a share incentive scheme. These schemes give executives an option to purchase the companies share at a certain price – the scheme in essence “lends” the money to an employee so that the employee can take up the option. The difference between the option price and the increased value of the share belongs to the employee. There are time frames involved but normally an employee can exercise the option after three years, at which point the share should have grown and the difference is a “bonus” to the employee. It is a bit more complicated than this, but you get the jest.

 

If an employee has a share option, it stands to reason that it is in their best interest for the business to do well. The better the profits, the more the share will climb thus producing a bigger “bonus”.

 

The suggestion is as follows: take 5 percent of Anglo American Platinum and place it in a Share Incentive Trust. This will equate to a once off expense in the income statement of R6.3 billion. Give all the employees a share option at the current price. If you divide the share options equally amongst the 50 000 staff, each staff member in theory has a base share option of R126 000. A ten percent increase per year in the share price will eventually give each employee R12 600 a year or an effective R1 050 per month. 

 

By implementing this suggestion the miners will have ownership of the mine they work. It will increase productivity due to the fact that a culture will develop of working harder to achieve better profits which will translate to bigger ”bonuses” and hopefully less strikes. 

 

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