One solution to crisis facing South Africa

State, business and workers must find common ground

THE tragedies of De Doorns and Marikana are different in scale and intensity. But both indicate failure to learn from our recent history and to build on what is good for the economy.

A bit of background is necessary to illustrate the point.

Sometime in the mid to late 1990s the South African economy was in trouble. Hundreds of thousands of jobs were at stake in the mining sector, the biggest employer.

How was President Nelson Mandela going to deal with the huge expectations from the masses who had just gained political freedom?

Added to this, the ANC had promised heaven during the elections.

Surely, these expectations were never going to be reconciled with the fact that South Africa was approaching its own version of the latter-day Greek economic tragedy.

At the heart of the problem was the possible shut-down of many mining operations. The reason for the crisis in the mining sector was that the gold prices had taken a knock because of the cheap sale of gold by the Bank of England. The bank had threatened to sell even more gold.

Simple economics dictated that excessive supply relative to the demand meant a drop in the price of gold at a certain point.

This made gold unprofitable. SA's mining industry had reached that point.

The gold mines were no longer making a profit, so hundreds of thousands of mine workers had to be retrenched, thereby plunging their families into extreme poverty.

The tax revenues to the fiscus were going to decline dramatically, worsening the new government's prospects of using state coffers to lift the poor out of decades of apartheid neglect and misery.

With this gloomy picture likely to become reality, the stakeholders in the economy - the government, mining mining companies and labour - decided to hammer out a pact.

They formed a gold crisis committee that among other things had to find ways to soften the blow on mining workers and save jobs.

Workers had to give up demands for salary increases and in some cases salaries were allegedly frozen to save the mining houses from collapse.

These in turn had to guarantee the long-term employment of workers as soon as the gold price crisis had been resolved. While the deal seemed to hold precariously, the government was piling pressure on the British government to halt the Bank of England's gold sales.

Eventually, the crisis was mitigated, although many workers lost their jobs. But the pain was softened, mainly because everyone's interests were affected.

The stakeholders desperately needed each other - not to dish out favours, but in regard of their own interests.

As philosopher and economist Adam Smith once remarked: "It is not from the benevolence of the butcher, the brewer or the baker that we can expect our dinner, but from their regard to their own interest."

The government knew that its political credibility was at stake if hundreds of thousands of jobs were suddenly lost. The mining moguls understood what it meant if they went bust and had to face the difficulty of reviving dead mining operations in future. The unions appreciated the importance of holding on to something beyond just threatening to go on strike.

With this model of stakeholder capitalism having shown some success, why then was it dumped?

Could it be that under current circumstances, all stakeholders are unable to figure out where their interests and those of their partners lie?

Soon after the gold crisis, the mining sector went back to its old ways. While selfish interests reigned supreme, there was a clear lack of mechanism to pursue sectarian interests by taking into account other's interests.

The glue that held stakeholders together ruptured. And the long-term consequence was Marikana and the rise of political demagoguery that sought to whip the emotions of workers into a violent frenzy.

Like Marikana, the ongoing violence in De Doorns in Western Cape illustrates the heartbreaking inability to learn from our own history - recent, not ancient.

The response of our political leadership to crippling strikes is typically to dismiss them as pure labour matters that ought to be resolved by business and workers in the bargaining chamber.

That the state itself stands to lose hundreds of millions of rands in tax revenue does not seem to matter. It would perhaps matter if the salaries of politicians were linked to the GDP performance of the economy.

As for businesspeople, whenever workers go on strike, they blame the labour laws. They also have many flimsy excuses not to negotiate with workers or give them a better deal.

Stakeholders need to redefine their interests and find ways to resolve conflict in the interests of the economy as a whole.

For a start, they must give up their useless strategies. Political leaders must stop giggling and dancing. Business must stop the blame game. Workers must stop the petulance.