07 Aug

Our disenfranchised labour force

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With strike season on the horizon, one has to ask why are unrealistic demands made? We have high unemployment rate yet labours' demands are so unrealistic that one cannot just brush such a strange phenomenon away. 


I often criticise unions for holding our economy to ransom. Although my viewpoint stands, one has to ask, what is the root of the problem? Yes, most trade unionist don't have a clue about basic economics and their interests are self serving. But why would the collective leadership of unions play Russian roulette with our economy? By doing so they are worsening the economic woes of our beloved land to the extent that their intent almost borders on treason. So why is that happening?


I believe the problem to be a basic one, inclusivity. Our labour force feels disenfranchised and not part of an inclusive economy.  If you don't share in the spoils of the economy, don't expect the labour to care about the greater good of the country, it's unrealistic. Please believe me that it has taken me years to reach this realisation. Speaking to the poor and marginalised, the trend is the same. We are seen to be capitalists without a heart and no compassion. We are seen as individuals that don't really care. The feeling is that we are all completely driven by profits, IRR and the desire to look good amongst our capitalist peers.


When there is a dip in company profits we retrench easily but maintain the luxurious lifestyles which are the envy of so many people. Retrenchments take place with little concern of the social and economic impact it has to families and communities. So when industry talks to labour to produce more in less hours and be committed to improving results, the invariable question on labour's lips is "why?, why should I?" It's a fair question having regard to the fact that when companies are flourishing like mining companies, labour doesn’t see dramatic increases in their income or living circumstances. So when commodity prices drop and margins are squeezed, why should they care? Obviously if they don't, it could cause the mine to close. But unfortunately labour feels so disenfranchised that they will not care.


What is the answer? We cannot simply re-engineer our macroeconomic eco system. I think we can start with some steps. Some steps that shows that industry actually cares. It must not be done because we have to, it has to be done willingly and with open arms. There must be a real, genuine desire to change. 


We need a mix of capitalism and socialism, a unique solution for us to address past injustices. Lets called it capsolism. Labour must have real ownership of the economy to the extent that labour is affected upwards or downwards depending on GDP. So when there is growth in the economy, labour can feel it in their pockets. When the headlines say GDP has grown by 5%, understanding the macro lags, labour can purchase more. This level of understand must be entrenched at schools and in companies. This can only be achieved through real ownership.


Labour ownership can commence with share incentive schemes which most listed companies have. It is a once off cost and it is explained in my blog dated 11 JUNE 2015. Below is an extract of that blog:


"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."


Also, profit share of companies to a broad base. Normally that is reserved for management and executives. Why should that be? Bottom line, we need labour and labour needs industry. It's time that we started trusting each other if we really want to change our economy. Let’s listen to each other.


Dave Romero

Group CEO

Believer in change.

Read 1043 times Last modified on Sunday, 07 August 2016 17:07
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