NUM Secreteriat Report 2012

The table below indicates the Schemes Used:

Company # of employees Start date Expiry date
Palabora Mining 2,334 2012 Indefinite
Impala Platinum 28,074 2006 2016
Anglo Platinum 46,000 2006
Exxaro 9,500 2006 2011
Optimum Coal
Kumba 6,209 2006 2011
Anglogold Ashanti 2006 2014
Goldfields 2010 2015
Harmony 2012 2016
Northam

The table below illustrates the minimum dividends paid:

The table reflects the maximum dividends paid:

151 Secretariat Report to the 14th National Congress 2012.

The table below indicates the minimum pay-outs:

The table below indicates the maximum pay-outs:

3.4.7.1 The Reason for the • The capex requirements of
Differences: each company and its cycle
of development
• Mining companies in the study
mine different commodities • ESOP structures in the mining
industry are not homogenous
• The ESOPs were implemented
at different times • Most are equity driven

• Most were implemented when • Others e.g. Exxaro and Kumba
markets were at the top were new companies as a
result of corporate action
• Different companies have
different dividend policies, if • Different share price
any at all performance per commodity
and mining company

152 Secretariat Report to the 14th National Congress 2012.

• Most structures were debt understood,inlistedcompanies
funded at a rate greater than this can be undermined by the
dividend payment and capital companies’ dividend policies
appreciation • The potential financial benefit
largely is limited to R3,000 per
3.4.7.2 Key Observations: annum and not more than
• Most schemes are equity linked R20,000 over 5 years, except
• Fortunes of most schemes Kumba and Exxaro
• Reluctance on the part of most
rely heavily on share price companies, especially the
performance unlisted subsidiaries of majors
• Most of these schemes are to implement ESOPs
under water • ESOP agreements signed and
• Schemes crafted in anticipation structures agreed showed lack
of share price appreciation only of technical interrogation and
• Limited use of minimum dividend engagement between parties
payments mechanism • Limited access to key pay-out
• Whilst the trickle dividend information
principle is embraced and

The table below indicates the Schemes Used:

Successful ESOP characteristics Unsuccessful ESOP characteristics
Interest free funded structures Linked to the market or share price
Fortuitously in a commodity that outperforms the Acquisition at the top of the market cycle
market
ESOP done at the early stage of the company's Funded structures
growth curve
Spirit of the ESOP, driven by the intent to do good Debt serviceability that relies on dividend
and transfer meaningful value payment
Flexibility around being able to change Adverse impact of the compounded interest
parameters effect
Minimum value protection to ensure benefit flows Impact of market volatility on exit prices and
to employees value creation
Pricing fairly reflects the value of the asset Short dated, once-off schemes

3.4.7.3 NUM Intervention: • Premise to use independent
advisors who are aligned
With hindsight and lessons to and understand NUM’s
learnt, the NUM decided on goals and vision
the following to ensure a better
outcome for its members: • Advisors in turn have
engaged with other legal,
• Engagement of corporate tax and accounting experts
advisors to ensure sound structures

153 Secretariat Report to the 14th National Congress 2012.

• Greater engagement on • Debt write-off now an interest
technical issues & improved free scheme
responses
• Re-pricing of the base to
• Change in the rules of R320
engagement
• Payment of minimum cash
• Ensure that ESOPs do deliver guarantee in 2011
value to NUM members
• Amended Harmony ESOP
• Resist the temptation to Scheme approved by
approve a bad ESOP at all shareholders in 2011
costs
• Introduction of a minimum
• Educational thrust cash guarantee on SARs
(option like) share benefits
• Drive education for Trustees
and beneficiaries • Harmony Limited ESOP

3.4.7.4 Key ESOP principles • Launch of the new ESOP

• Engagement around key • Impala Platinum
ESOP principles and/or
guidelines to assist in the • A report that recommends
implementation of ESOPs key changes to be made to
the scheme in 2012 (being
• The requirement for an ESOP the half way mark)
brochure or booklet that
captures the NUM ESOP Way • Palabora Mining Copper
ESOP
• Desktop ESOP review
• A guaranteed trickle
• Different engagement tactic dividend of R7m per annum,
escalating at 5% per annum
• NUM is an equal at ESOP
engagement, supported by • An upfront cash payment
its independent corporate in December 2011 of
advisor approximately R16,000 per
employee
• Ensured greater involvement
of Shop Steward Councils • Key amendments to the
during the entire negotiation ESOP related agreements
process
3.4.7.6 Capacity Building
3.4.7.5 The Benefits of NUM and Way Forward:
Intervention:
• Need to increase education
• Restructuring of the and knowledge of NUM
AngloGold ESOP members who serve as
Trustees
• Extension of the life of ESOP
• Understanding of the ESOP
• Minimum cash guarantee Scheme
on loan (funded) shares
• Understandinggovernance,
• Re-instatement of previously key roles and responsibilities
lapsed shares of Trustees

154 Secretariat Report to the 14th National Congress 2012.

• Understanding of the Introduction of recurring
provisions of the Trust Deed Schemes, especially by
and other key agreements companies that implemented
successful Schemes
• Trust Law and Administration
Push back by some investors,
• Lack of an information or notableCapeTownbasedasset
knowledge bank of key management companies to
statistics and information increase the lock-in periods in
on the Scheme other transactions

• Urgency to improve on The winds of change to date:
information in-house
• Increase in company funded,
3.4.7.7 The ESOP Environment: interest free transactions

Interesting and significant • Transaction values and exit
changes in the ESOP mechanisms less transparent
environment:
• Increase in the number
The advent of the Evergreen of unlisted subsidiaries of
Scheme major mining companies
doing ESOPs
Link to life of mine
• The implementation of
No equity ownership, but minimum (floor) and
perpetual right to share in a maximum (cap) benefits to
financial benefit ensure better value transfer
and protection
Fully paid up Schemes being
introduced • Restructuring of earlier ESOP
schemes due to poor market

3.5 Membership Analysis

Age group Male Female Unknown Membership
gender but without age
UNDER 20 13 3 have date of group data 22
20 TO 39 86992 21837 birth 116194
40 TO 60 88737 7592 74001 114208
Over 60 3757 183 6 4203
Unknown 0
7365

17879

263

155 Secretariat Report to the 14th National Congress 2012.

Breakdown by Age 116194
114208
UNDER 20 4203
20 TO 39
40 TO 60 FEMALE
OVER 60 3
21837
Breakdown by Age and Gender 7592
183
Under 20 MALE 7365
20 TO 39 17879
40 TO 60 13 263
Over 60 86992
88737
3757

156 Secretariat Report to the 14th National Congress 2012.

Membership per Gender
Age Group of Paying Membership
Age Group per Gender

157 Secretariat Report to the 14th National Congress 2012.

3.5.1 Recruitment a manner that would factor in
the possibility of an error on the
We continue to recruit members figures by ten (10%) percent. The
in bigger numbers than any table below illustrates workforce
other union in South Africa. We estimation per province per sector
have taken recruitment more and how the regions performed
seriously in recent years and our in terms of recruitment.
strategic decision to incorporate
recruitment into our performance Workforce in mining, construction
system has paid off. Coupled and energy in 2010
with this is our decision to acquire
a reliable membership capturing Kindly note that we are updating
and monitoring system. We can data on 2012 workforce figures
proudly declare that we are and would be in a position to
now having a good and reliable provide figures per sector in
membership system. the 2013 Central Committee
report. The importance of the
Research conducted in 2010 figures below is to illustrate the
provides an estimate of the need for the NUM to continue
workforce in the three sectors. analysing provincial and regional
However we have put in place workforces in order to determine
a marginal error of 10% on each recruitment targets and allocate
sector meaning that we have adequate resources to identified
calculated the workforce in such sectors and regions.

No Name of Region Workforce - mining, 2012 Membership Variance
energy &
1. Carletonville construction in 2010 26, 188 25, 287
2. Eastern Cape 51 475 4 971 58, 400
3. Free state 27, 637 60, 363
4. Highveld 63 371 28, 360 124, 640
5. Kimberley 88 000 9, 556 12, 444
6. KZN 153 000 9, 263 232, 737
7. Matlosana 22 000 17, 599 48,405
8. North East 242 000 27, 444 113, 556
9. PWV 66 004 55, 271 237, 254
10. Rustenburg 141 000 93, 699 79, 301
11. Western Cape 292 525 10, 122 161, 878
173 000 310, 820 1, 154,265
TOTAL 172 000
1,464,375

158 Secretariat Report to the 14th National Congress 2012.

3.5.2 Challenges and competitors found that only one small rival union
is increasingly complementing its
We continue to do threat analysis smaller size with militant, chaotic,
from our competitors in the sectors. reckless and violent recruitment
The following can be reported per campaigns. The Everest, Lonmin
sector: and Impala strikes are recent
examples of the tactics used by
3.5.2.1 Mining this union. The information we have
is that this union’s balance sheet is
We are receiving more threats weakening hence the dangerous
from smaller rival unions mostly moves it is making regardless of
where we have internal leadership the injuries and sometimes loss of
problems and weak branches. We life accompanying these tactics.
have conducted research and

3.5.2.2 Membership growth 2009-2011 (membership captured in system only)

No. Name of Region 2010 2011 % Variance
Membership Membership
1. Carletonville 25 803 26 188 +1.19% +308
2. Eastern Cape 4 500 4 971 +10% +471
3. Free State 28 164 27 637 -2% ±527
4. Highveld 24 538 28 360 +16% +3822
5. Kimberley 5 953 9 556 +60% +3603
6. KZN 9 788 9 263 -5% ±525
7. Matlosana 19 363 18 309 -5% -1054
8. North East 28 888 27 444 -5% -1444
9. PWV 49 908 55 271 +10% +5363
10. Rustenburg 89 918 93 699 +4% +3781
11. Western Cape 8 801 10 122 +15% +1321
295, 624 310,820 +5% +15, 196
TOTAL

3.5.3 Recruitment Award winners performance target of the relevant
pillars at head office and all the
We have placed recruitment at Regional Committees. We would
the centre of our work and we like to congratulate the following
must applaud ourselves as a regions for their hard work on the
union for agreeing to incorporate recruitment and for achieving
recruitment in the performance or exceeding their allocated
system of the union and into the

159 Secretariat Report to the 14th National Congress 2012.

recruitment targets between 2010 put in place, the region which
and 2011. The regions are placed takes the first spot wins a shield
in the numerical order of 1, 2 and while second and third places win
3. In terms of the criterion we have trophies:

No. Name of Region Percentage achieved
1. Kimberley 60%
2. Highveld 16%
3. Western Cape 15%

3.6 Policy matters Of the 50GW electricity required
for South Africa, the IRP 2 commits
We have separate documents on a to a 9,600 MW full nuclear fleet
number of policy issues for Congress’ by 2030, which, in their view, “will
consideration. provide acceptable assurance of
security of supply in the event of
3.6.1 Energy a peak oil-type in fuel prices and
ensure that sufficient dispatch
3.6.1.1 Integrated Resources Plan 2 able base-load is constructed
to meet demand in peak
The Department of Energy hours each year.” The IRP2 also
(DoE) released the Integrated commits to have built by 2030,
Resources Plan (IRP2) for 6,982 MW in savings from energy
electricity in 2010. The IRP2 is efficiency (EE) and demand side
a 20 year electricity capacity management during the same
plan. It does not necessarily time; 19,000 MW from renewable
deal with issues concerning the energy, 33% of which will be wind
infrastructure nor the overall and solar.
energy needs for the country but
is key input into those plans. It Participation into the public
aims to provide an indication of consultation process of the IRP2
the country’s electricity demand, was frustrating to the union. At the
how this demand will be met and National Economic Development
what it will cost. So, the key to the and Labour Council (NEDLAC)
IRP2 is determining the electricity participation in the consultative
demands of the country for the process was frustrating with the
future, decide on electricity Department of Energy officials
generation technologies to meet refusing to keep commitments.
this demand and include costs. During the engagement, a
On March 17th 2011, the Cabinet request was made to government
approved the IRP2. to provide an impact analysis

160 Secretariat Report to the 14th National Congress 2012.

report on jobs and employment energy sources – biomass, wind,
in the energy sector, electricity solar and small scale hydro.
prices and the impact on the However, in 2010, the Department
working class in general and of Energy initiated a process to
the poor in particular. This is yet review the target of the White
to happen even though the Paper. We have not received a
Cabinet has already made a report from this process.
pronouncement on the IRP.
Nonetheless, the IRP 2 has
3.6.1.2 Renewable Energy committed 6,982 MW savings from
energy efficiency and demand
In 2003, the Cabinet approved side management and 19,000
a White Paper on Renewable MW from renewable energy.
Energy. The White Paper had a The role of Independent Power
target of 10, 000GWh renewable Producers (IPPs) is significant in
energy contribution to the final delivering this target. The issue
energy consumption by 2013. of ownership and control of
This target was aimed to be the renewable energy sector
met from biomass, solar, wind, should be subjected to thorough
and small-scale hydro. In 2008, scrutiny. Ownership of our
a process to review the White strategic energy sector cannot
Paper was launched. By 2009 be handed to private ownership
service providers were to have without some regulation and
been secured and based on policy guidance related to
the project timelines, and in the benefit of communities,
December 2010 the review should decentralisation of the energy
have been concluded. However, service and ownership and
we are now in 2012 and there has control of the renewable energy
been no communication in this sector in particular.
regard.
Globally, Renewable Energy
Renewable Energy is an integral is making significant gains
part of our industrial policy, the in terms of attracting private
developmental path and the investments. According to the
green economy and the green Renewables 2007 Status Report,
deal. We are remaining vigilant commissioned by the Renewable
in monitoring and analysing Energy Network for the 21st
developments in relation to the Century, an estimated $71 billion
renewable energy sector. was invested in new renewable
capacity worldwide in 2007, up
Renewable Energy has a role from $55 billion in 2006 and $40
to play in the transition towards billion in 2004. The largest country
low carbon economy and in shares of renewables annual
advancing and strengthening investments were Germany,
the green economy. The 2003 China, USA, Spain, Japan and
White Paper on Renewable India. In Germany, investment in
Energy set a target of 10,000 GW renewables grew by $14 billion
to be produced from renewable in 2007 mostly for wind and solar

161 Secretariat Report to the 14th National Congress 2012.

PV, and investment in China Market Operator (ISMO) Bill which
was $12 billion, mostly in small will plan, procure power and enter
hydropower, solar hot water and into power purchase agreements.
wind, and the USA came third COSATU participated at NEDLAC
with over $10 billion investments in engagements around this Bill
in renewable energy. This and had opted for a safer option,
excludes the subsidies and other which was that, the bill be passed
forms of government support with an understanding that the
for renewable energy. A trend is ISMO would be an empty shell
developing by the global powers until a socio-economic impact
in the nurturing and development assessment analysis was made by
of renewable energy sources. the department. This would cover
job creation, pricing of electricity
According to the World Nuclear and poverty reduction through
Energy Status report of 2010/11 creation of opportunities for the
commissioned by the World Watch working class and the poor. We
Institute, in 2010, all renewables don’t support this ISMO which we
excluding large hydro received think will fragment Eskom.
$381 billion of global private
investment (nuclear got none) This congress must debate and
and surpassed nuclear (375 GW) resolve the role of IPPs in the
power’s total global installed South African energy sector and
capacity. Within a few years, the restructuring and possible
they will exceed its output. During unbundling of Eskom. So far,
the same time, nuclear energy indications are that renewable
received zero private investment. energy target implementation will
The installed capacity of global be left in the hands of the private
renewable energy is 381 GW sector. As a union, we have been
and greater than the nuclear outspoken and cautioned against
energy current capacity of 375 the fragmentation of the public
GW (before the nuclear disaster service, which so far, has led to
in Fukushima). Already there’s the creation of wasteful entities
a significant shift towards the with no clear role and inevitably
optimal use of renewable energy wastage of resources. Rather than
in major economies. handing over parts of the strategic
sectors of our economy, the
3.6.1.3 Independent System State must endeavour to create
and Market Operator its own capacity to undertake
(ISMO Bill) implementation of programmes
and projects – from construction
In 2003, cabinet took a decision to commissioning of power plants.
that 30% of all electricity should
be produced by independent 3.6.1.4 Policy Gaps
power producers (IPPs). However,
there have not been any serious The overriding objective of the
investments by IPPs so far. In post-94 policies is to achieve a
2011, cabinet approved the draft significant reduction in poverty
legislation for the establishment through the creation of decent
of an Independent System and jobs, creation of training and

162 Secretariat Report to the 14th National Congress 2012.

business opportunities and Energy generation through
delivery of basic services to the coal and oil production
rightful beneficiaries. It is also threatens to change life as
important to state that policy we know it. Threatening water
makers in SA have to consider supply, intimidating crops and
the relationships between labour introducing the world to weather
and capital in public policy patterns never experienced
choices especially if they carry before including the melting of
heavy political costs. Finally, glaciers in the North Pole and
it’s important for policies in the droughts and famine in the South.
alliance to achieve consensus
on issues that have traditionally Those advocating for a nuclear
been divisive, specifically on renaissance are seeing it as a
transparency of government panacea to the climate change
policies, on the privatisation crisis. However, issues such
of key sectors of our economy as radioactive waste, costs of
including electricity and on constructing nuclear plants and
the issue of the energy mix that funding for nuclear energy have
including nuclear power. In our not been properly addressed.
energy debates we note that Furthermore, As of April 2011, 64
all energy policy developments reactors throughout the world
must influence existing policy have been listed as under
such as industrial and minerals construction. The reactors would
policy. add a total capacity of about
62.5 GW, with an average unit
Whilst we agree on the size of around 980 MW.
development of a comprehensive
and inclusive energy policy, Of interest is that, twelve of
we disagree on elements of the reactors listed as under
the restructuring and reform construction have been in this
processes that corporatized list for more than 20 years. The
the electricity ownership and USA Watts Bar-2 project holds the
introduced privatisation. record for being longest on this
list, with the initial commissioning
3.6.1.5 Nuclear Energy date being December 1972.
The Iranian Besheher follows the
There has been a lot of debate USA project, having been under
on various mediums around the construction since 1975.
issue of nuclear energy. Some are
seeing the renaissance of nuclear More recently, in Finland, the
energy while others are disputing
it and arguing that the debate in Olkiluoto nuclear plant provides
itself is opportunistic as it arises at
a when every reasonable being another example of cost
views environmental degradation
as a global concern as climate overruns and delays. After four
change is a global threat to life
in general. years of construction, thousands

of defects and deficiencies were

identified. Originally, the project

was budgeted for about $4

billion and due to delays, by 2009

the project had budget overruns

163 Secretariat Report to the 14th National Congress 2012.

of more than 50% of the original of its first French next-generation
price. Prices continue to sky- EPR nuclear reactor by another
rocket unabated as further delays two years to 2016, saying it
due to various reasons including expects the project’s costs to rise
safety concerns continue to affect to 6 billion euros ($8.52 billion).
the project . The construction of The same thing happened in July
the plant started in May 2005 2010; the state-controlled utility
and the commercial operation, delayed the commercial start
envisaged in 2009, has not been of the 1,600 megawatt nuclear
realised. It is now envisaged that reactor by two years to 2014. At
the plant will be able to produce the time, it had also raised its
electricity in 2013, which means cost estimate for the project in
the project is effectively four years northern France from 4 to 5 billion
behind schedule. Euros.

The French, with extensive Considering that there is very
experience in nuclear energy insignificant private investor
construction – 80% electricity interest in nuclear energy, the
generated from nuclear energy, challenge of financing nuclear
have experienced similar consistently remind us of the risk a
problems to Finland. Their country has in rolling-up a nuclear
Flamnville nuclear project has programme. As demonstrated
experienced budget overruns above, even the French whose
and construction delays. Reuters country is 80% nuclear energy
reported on July 20,, 2011, that powered, are battling.
EDF had delayed the completion

164 Secretariat Report to the 14th National Congress 2012.

For health and safety, we radioactive waste geological
must draw lessons from the repository site. The site should
experiences from Fukushima, have been in operation on 31
Japan, which was hit by nuclear January 1998 but more than
disaster last year. The Tokyo 10 years later, the site is still
Electric Power Company (TEPCO) undergoing preparations, which
is going through bankruptcy due is an indication of the unviability
to the disaster that was caused of the deep geological disposal
by an earthquake and huge option. The U.S. Congress voted
Tsunami in Japan. The tragedy to cut the 2008 budget for Yucca
has cost the company $100 billion from $494 million to $390 million,
so far. Japanese authorities had reflecting a dwindling confidence
to consider nationalising the in this project.
company to avoid bankruptcy.
TEPCO was transformed from It is therefore our view that the
being the world’s fourth-largest government should amend
nuclear utility worth billions of this policy and assumes its role
dollars into a liability requiring a as a guardian of the interest
State bailout by a single incident. of South Africans. The industry
must manage its waste, should
The issue of radioactive waste it be allowed to operate in South
is a constant reminder of some Africa. The NUM current policy
of the serious challenges facing is opposed to nuclear energy
the nuclear energy sector. In because of health and safety
2008, Parliament approved the concerns.
establishment of the Radioactive
Waste Disposal Institute, whose 3.6.1.5 Coal
purpose is to manage radioactive
waste on behalf of radioactive The 1992 deregulation of coal
waste producers. This policy mining, presented an opportunity
takes away the responsibility of to private players to dominate
radioactive waste management the sector. As far as we are
from industry to the government. aware, the main players in the
The polluter pays principle and South African coal sector include
the responsibility of the polluter to Xstrata, Vale, Rio Tinto, Exxaro and
ensure the safety of humans and BHP Billiton. The production and
the environment from their activities beneficiation of the coal sector
is compromised by this policy. is in private hands while the role
of government is to watch and
Experience and lessons from monitor the performance of this
other countries informs us sector.
that there are no solutions to
radioactive waste disposal. Eskom buys electricity at an
Developed countries have spent unregulated price, which
a lot of resources in trying to impacts on the pricing of the
find a solution. For example, in electricity tariffs. The policy gap
the USA, the government has is that there is no requirement
spent billions of dollars preparing for the beneficiation of strategic
the Yucca Mountain high-level minerals such as coal in South
Africa.

165 Secretariat Report to the 14th National Congress 2012.

Around 72% of South Africa will continue to increase. The
primary energy is from coal. Over beneficiation strategy of the DMR
half of this is used for electricity (June 2011) proposes amongst
generation and a quarter for others the following for the
liquid synfuels. Unlike other optimal value creation of coal:
commodities, coal remains
unregulated and according to • Policy support for clean and
the White Paper on Energy Policy, efficient use of coal in power
1998, this will remain the case for generation to encourage the
the foreseeable future. uptake of existing advanced
technologies for low emissions
According to the White Paper
on Energy Policy, South Africa • Investment into research,
has coal reserves of 121 billion developmentanddemonstration
tonnes. Of this, 55 billion tonnes of new technologies and carbon
is classified as economically capture storage
recoverable.
• Investment in R&D to find
The finite nature of coal reserves
does not present an acute innovative means for
problem to South Africa in terms
of physical supply, even with beneficiation of gasses emitted
projected growth in electricity
demand and industrial coal in the generation technology
demand. South Africa could
produce, physically, all its liquid • Investment into metallurgical
fuels demand from local coal research to disentangle
for the next 150 years at current uranium and coal in the
demand rates. Therefore the Springbok flats coalfields,
NUM proposes that further coal- which will increase the
to-liquids plants be developed country’s reserve base of coal
under state ownership. and uranium

Currently, 33% of the coal mined • Some of the concerns with
in South Africa is exported. Of regard to coal are related
the total domestic supply, 55% to environment, sustainable
is transformed into electricity, developments and climate
21% into petroleum products, change. Furthermore, the
4% into gas, and the remaining South African coal-power fleet
20% is directly used (ERC 2003). is old and operating at far
According to the DoE (2007) the less capacity and therefore
world currently relies on coal for generating significantly less
40% of its electricity and 66% of electricity. Also, more power is
steel production is dependent lost during transmission as there
on coal. This effectively means are entrenched infrastructural
that the rapid industrialisation problems in the sector.
currently taking place in China
and Asia is dependent on Therefore the following proposals
coal suggesting that demand should be considered by the
Congress:

• The commercial arrangements
of Eskom exempt the smelters
from tariff increments because
the price of aluminium isn’t

166 Secretariat Report to the 14th National Congress 2012.

regulated in international resource most limiting to national
development. Its availability now
commodity markets. The and in the future is closely linked to
rainfall, temperature, management
financial costs for South Africa and land use practices.

are astronomical. In 2009, The direct causes of atmospheric
change and the enhanced
Eskom lost R9 billion of taxpayers’ greenhouse effect are human
activities such as the burning of
money because of this. fossil fuels and the clearing of
natural vegetation for agricultural
• The long duration of the purposes.
contracts is problematic in that
it magnifies the risk and the These activities emit a variety
commitment -- the negative of gases, the most important
commercial terms are set to of which are carbon dioxide,
continue until at least 2025 methane and nitrous oxide (which
contribute to global warming);
• Furthermore, in the context of nitric oxide and volatile organic
the debate, it must be noted that compounds; sulphur dioxide and
the industry is entirely foreign- dust and smoke particles. Sulphur
owned, with control exercised by dioxide and nitric oxide together
parent companies in Australia are deposited as acids, which
while the smelting industry is are corrosive to buildings and
dominated by a consortium harmful to ecosystems as certain
of Japanese companies with plant and animal species are
smelters throughout the world. very sensitive to changes in soil
The industry consumes almost and water acidity. Acidification
8.85 per cent of all the electricity of surface water also makes it less
consumed in SA; suitable for drinking, irrigation,
and industrial uses. Certain
• The greenhouse gas emissions gases, such as the ozone-
produced to satisfy this demand depleting chlorofluorocarbons
for energy are substantial. (CFC’s), find their way to the
Overall, the activities of the upper atmosphere, where they
aluminium smelting industry destroy ozone, the chemical
were responsible for greenhouse which blocks harmful ultra-violet
gas emissions in 2010 well above radiation.
11 per cent of South Africa’s
total emissions (excluding d-use The energy sector, which includes
change). electricity generation, emissions
resulting from oil and coal refining
3.6.2 Environmental case to produce petroleum products,
coal mining and gas extraction,
3.6.2.1 The impact of climate wood burning and the burning
change of coal and oil to produce heat
for industrial and other purposes,
South Africa is a climatically sensitive is the single largest source of
country. Most crop agriculture
takes place where it is only just
climatically suitable, particularly
with respect to rainfall. Water is the

167 Secretariat Report to the 14th National Congress 2012.

carbon dioxide (CO2) and is hard to prove statistically with
sulphur dioxide (SO2) emissions such a short record.
in South Africa. This is mainly due
to the reliance on coal and oil The population in South Africa
or its products for the country’s was 40.6 million in 1996, and is
energy purposes. growing at about 2% per year.
If this trend persists, by the year
Emissions from vehicles 2035, there will be nearly 82
million people living in South
(aeroplanes, ships, trains and Africa, and dependent on the
same level of natural resources
road vehicles), contribute 44% which are already under pressure
to adequately meet demand.
of the total national nitric oxide Roughly half these people live
in towns and cities, and many
emissions and 45% of the total live in informal and inadequate
housing. In both rural and urban
national volatile organic carbon centres, many people do not
have access to water supply
emissions (VOC). Volatile and sanitation, electricity, and
other services. The population
organic carbon emissions is more mobile now than in the
last century, and factors such
(VOC) combine with nitric oxide as employment opportunities,
land reform and restitution, and
and carbon monoxide, in the immigration from other countries,
are causing the population in
presence of sunlight, to form urban centres to grow rapidly.

photochemical smog, which Levels of poverty are
highest amongst the black
contains gases which are toxic population, reaching over 60%.
Unemployment on a national
to plants and animals. This is basis is also high, and highest
among the black population.
particularly a problem in urban Although the education system
has been reformed and all South
areas. Africans now have access to
education, approximately 7.5
Agricultural activities contribute million people are functionally
the most to methane emissions illiterate. These, and other factors,
(48% of the national total) and contribute to the high crime rates
nitrous oxide emissions (78% of the currently experienced in many
national total). Concentrations urban centres.
of carbon dioxide as measured
at Cape Point show an overall Although most people have
increase of approximately 0.6% access to health services,
per year. public facilities are often under-
resourced and unable to meet
Carbon dioxide is measured at
Cape Point. In general, the worst
air quality in South Africa occurs
when wood, dung or coal is used
as fuel inside poorly-ventilated
dwellings, in informal settlements
and rural villages, adversely
affecting human health. On
average, the temperature
stations in South Africa showed
an increase of 0.2° C during
the 1990s, which is not yet a
cause for alarm. The increase in
temperature may be associated
with global warming, although it

168 Secretariat Report to the 14th National Congress 2012.

demands. For reasons of cost or Warmer temperatures in South
culture, many people also seek Africa may lead to:
the help of traditional healers. The
most important notifiable disease • Changes in biogeographic
is tuberculosis, accounting for distributions and loss of
nearly 4% of all deaths. The biodiversity
extent of HIV infection and AIDS
is not accurately known at this • More human deaths,
time, but projections include a
reduction in life expectancy to 40 especially among the elderly,
years by 2010, and a loss of 20%
of the work force within the next due directly to heat waves
six to seven years.
• Greater risk of epidemic
In South Africa, historically the infectious illnesses, such as
mining sector mined and no malaria (due to an expansion
proper rehabilitation and mine of suitable habitat for
closure programmes were in mosquitoes which transmit
place. This has resulted in a malaria)
number of challenges whose
impacts are now becoming • Malaria epidemics have been
visible after many years of linked to both temperature
neglect by the respective mining and rainfall in South Africa,
companies, some of which have and appear to show a steady
closed down. increase overall since 1993

This lack of accountability means • Increased ozone levels in the
that the Government becomes lower atmosphere (resulting
responsible, thus the working from nitrous and hydrocarbons
class is exposed to incur the reacting in the sunlight) lead
cost(s) which should have been to respiratory health effects
borne by the mining companies.
The poor of the poorest continue Depletion of upper atmosphere
to be exploited in such cases, stratospheric ozone will result
hampering poverty eradication in more of the harmful ultra-
programmes. violet B radiation reaching
ground level. This would lead
The recent Acid Mine Drainage to increases in skin cancer
(AMD) challenges are a result and cataracts, and possibly
of mineral deposits from un- reduction in the effectiveness of
rehabilitated mines. These mineral the immune system. Some of the
deposits overflow to community highest pollution concentrations
streams, thus affecting the poor are found in rural, indoor
communities. environments. The impact
(sickness and mortality due to air
The impact of the state of the pollution) in South Africa has not
environment been quantified. It is especially
a problem for children of low-
income families, who live mainly
in rural areas and in inadequate
housing.

169 Secretariat Report to the 14th National Congress 2012.

More people mean more Mines that have not been properly
demand for resources. In 1996, closed, lead to flooding of water
domestic demand for water in those mines and thus exposing
was 11% of the total. By 2030 it surrounding communities and
is predicted that this demand mines to flooding. This also results
will increase to 23% of the total. in unstable soil ground, e.g.
Already alternative sources of threat of flooding in a mine in the
freshwater (such as desalination East Rand and flooding of central
of sea water and importing Johannesburg.
water from other countries) are
being investigated to meet this The International and National
demand, although these are responses to environmental
currently prohibitively expensive challenges
and may not be environmentally
sustainable. 3.6.2.2 International response:

Uncontrolled settlement In 1990, South Africa became a
signatory to the Montreal Protocol,
development can also result in the purpose of which is to limit
the emissions of substances
problems of pollution, health harmful to the ozone layer.
This protocol has been highly
hazards, and inadequate successful. South Africa signed
the United Nations Framework
housing and service provision, Convention on Climate Change
(UNFCCC) in 1994, and ratified it
contributing to informal sector in 1997. Such signatories lead to
different conventions such as the
activities and crime. Natural Kyoto Protocol and subsequent
ratifications, which South Africa
resources in areas surrounding is signatory to. Recently in
2011, South Africa hosted the
settlements are generally under Convention of Parties 17 (COP17)
on climate change; however a
greater pressures than those second commitment to the Kyoto
Protocol was not signed.
in areas of less dense human
3.6.2.3 National response:
habitation.
A massive electrification
The impacts of poverty on the programme aimed at replacing
environment include deforestation the use of coal and wood as a
from excessive collection of domestic energy source, and thus
wood for fuel, soil degradation improving indoor air quality in rural
through cultivation of unsuitable areas and informal settlements.
soils, and exploitation of rare Nearly 1 million households have
and endangered species to been electrified since 1994, but
supplement incomes. An inability coal and wood remain important
to adequately provide for the fuel sources for reasons including
basic needs of the population customary domestic activities.
will lead to collapse of the
natural ecosystem services and
deterioration in quality of life.
The greater impacts of AMD are
ingestion of radioactive materials
by communities in affected areas,
thus child birth abnormalities and
burden of diseases breakout to
the government and ultimately
societies.

170 Secretariat Report to the 14th National Congress 2012.

Since South Africa is a A policy on the National
climatically-sensitive country, the
issue of climate variability and Response on Climate Change
potential climate change is taken
seriously at the national level. An was developed and passed by
interdepartmental committee on
climate change commissioned the National Assembly. Several
reviews on the subject. As NUM
we are not represented at this policies, addressing some of the
committee, and thus the worker
voice is missing. challenges highlighted have

been developed by various

government departments

and are being implemented

and monitored within those

departments.

3.6.2.4 The NUM and the used to build organisations. We
environment must sustain our participation
in these events and lead
(i) Possible Themes for NUM organised labour campaigns
and debates.
Events such as COP 17 provide
an opportunity for rallying Two themes are explored
longer-term union programmes below, identified because they
helping the NUM advance address real challenges faced
its positions, campaigns and by the NUM and society in the
solutions related to climate transition to a climate-resilient,
change. They can also be low-carbon economy while

171 Secretariat Report to the 14th National Congress 2012.

giving expression to relevant terms of what they are mining,
COSATU policies and resolutions. and what their jobs are. Not all
members are in coal mining,
(ii) Theme 1: Jobs for miners and some members may not
in a just transition be miners but have jobs that
can transfer to another sector
While the NUM understands (e.g. drivers). Cross reference
the imperatives for a climate- this audit to what mining
resilient, low-carbon economy, resources and activities will
it has a responsibility to or won’t be affected in the
defend the interests of its transition, and link them to new
members in the transition and job opportunities.
to ensure that the transition
is just. Among other aspects Create a database to track
this means ensuring miners retrenched mining workers,
are not stranded jobless. The and those under threat, e.g.
COSATU Policy Framework on how many miners, ages,
Climate Change says: skills, location etc. While the
union cannot take long-term
`The evidence suggests that responsibility for non-members,
the transition to a low-carbon there may be creative collective
economy will potentially create strategies across unemployed
more jobs than it will lose. miners and unions. The NUM
But we have to campaign for itself established cooperatives
protection and support for with dismissed workers in the
workers whose jobs or livelihoods 1980s, and can learn from the
might be threatened by the successes and failures of its
transition. … We also have to own experiences.
ensure that the development of
new green industries does not These activities can be
become an excuse for lowering continued at branch level, as
wages and social benefits. part of organising.
New environmentally-friendly
jobs provide an opportunity Identify emerging job
to redress many of the gender opportunities:
imbalances in employment
and skills.’ • There may be ‘just transition’
opportunities in mining
The ‘Jobs for miners in a just sectors which are not carbon
transition’ theme takes forward intensive, for example
COSATU campaigns for a mining of the metals used
living wage and decent jobs. to manufacture renewable
The following approaches energy technologies.
and activities could form part
of working around this theme. • Work with the Department
of Environmental Affairs’
(iii) Keep track of the Sector Education and
situation of members Training Directorate and
the Development Bank of
Conduct an audit to determine SA on an audit of the skills
the profile of NUM’s members in

172 Secretariat Report to the 14th National Congress 2012.

that will be needed for a Research and record any ‘low
green economy. carbon’ training or re-training
programmes already run
• Consider the research or being developed by the
mining companies. Campaign
by Million Climate Jobs for companies to create such
programmes. This could be
Campaign to potentially at little or no extra cost to
companies if Skills Levy funds
create ‘climate jobs’ in the are used.

following sectors; mining, Engage government and
management on ‘sunrise’ and
transport, construction, ‘sunset’ strategies for jobs. This
can include starting ‘climate
manufacturing, energy, job loss funds’ to provide good
pensions and benefits to older
agriculture and food, workers as some jobs are
phased out. This could be part
financing, local government, of the campaign for benefits as
part of decent jobs.
tourism and hospitality,
Take the lead:
waste, water and sanitation.
• Embark on member
The NUM needs to discuss education to ensure they
understand the contributions
the nature of its participation of mining to climate change,
the changes that are
in the campaign. needed, and the impact on
the industry.
• In the context of COSATU’s
2010 ‘Growth Path Towards • Through NEDLAC and
Full Employment’ document, Chamber of Mines structures,
lobby for local manufacture begin engagements on
and decent job creation in climate change, aimed
low-carbon technologies, at specific and targeted
such as renewable energy. strategies for both emissions
Joint efforts with other reductions and job creation
relevant affiliates will build in the mining sector.
solidarity.
• Spearhead job creation
(iv) Prepare members to in rehabilitating old
transition mine sites, funded by
the mining industry. The
It must be stressed that there is Department of Mineral
no way our economy can drop Resources has some funds
coal mining overnight. Coal for rehabilitation of mines,
mining jobs will be around for but these are insufficient
decades to come. ‘First in, last and could perhaps best be
out’ principles can be applied used to catalyse initiatives
so that that new entrants to
the job market are redirected
to the new ‘low carbon’ jobs,
while coal jobs are retained for
existing mineworkers.

Use workplace forums to
make sure management
keeps workers informed
about envisaged changes
to machinery, processes and
work organisation, and that
workers have a say.

173 Secretariat Report to the 14th National Congress 2012.

at abandoned ownerless to pay to clean up when the
mines, or train rehabilitation
workers. Mineworkers would companies should have
be best placed to do this work.
Rehabilitation of mines can done it when wrapping
be done in a way that is as
labour-intensive as possible, up their mining; or carbon
especially in restoring
sites to as environmentally emissions which create
sound a state as possible.
In addition to creating jobs, climate change). The NUM
rehabilitation is essential to try
to restore ecosystem services can support measures to
which rightfully belong to us
as a nation. internalise externalised

(v) Theme 2: Real solutions, costs.
not dead ends
• One way of bringing
The declaration from the
October 2010 labour/civil the externalised costs of
society conference states “We
need to … migrate the economy emissions into companies’
from one based on coal to a
low-carbon … economy. … We financial statements
have to make sure that we are
in charge of this process and (‘internalising’ them) is a
do not become the objects of
it.” Instead of taking a defensive carbon tax, as proposed
stance, NUM can shape the
form a just transition takes in by Treasury. Companies will
the interests of its members and
the working class more broadly. resist the tax, and argue that
Some possible ‘real solutions’ to
promote and take forward are: the added costs will lead

(vi) Internalising externalised to job losses, in an attempt
costs
to get union support for
• Externalised costs are the
social and environmental their position. However, by
costs that companies do
not carry, but pass on to penalising carbon-intensive
the workers or citizens (like
miners who get sick from activities and rewarding low-
asbestos and receive no
help from companies or carbon efforts, the effect
acid mine drainage which
taxpayers are now having of the tax is to shift energy

behaviour, not to shrink the

enterprise. The tax need

not affect jobs, depending

upon how companies deal

with it. If companies shift

their electricity and petrol

consumption and sources,

they will pay less carbon

tax and likely save money

on their energy costs.

The union can engage

management to ensure

that companies shift to low-

carbon approaches and

hence avoid the taxes, in

such a way that jobs are not

lost.

• Investors are increasingly
looking to make investments
into socially and
environmentally sustainable
companies. NUM together

174 Secretariat Report to the 14th National Congress 2012.

with SACCAWU, SATAWU, defends ecosystems and
CEPPWAWU, BCAWU and allows for development.
SACWU, led the way in In terms of South Africa’s
establishing the Community endowment of mineral
Growth Funds investment resources, some promote a
vehicles managed by Old ‘use it or lose it’ approach,
Mutual against a set of social but we must be sure that we
responsibility criteria. The do not ‘use it’ at the expense
unions could re-examine of losing other essential
these criteria to strengthen ecosystem services, like
the environmental criteria. water, with which we are
not richly endowed. We
Further examples of also must not lose the
ability of poor people
internalising externalised costs and workers to survive the
impacts of climate change,
are found under ‘Climate- but strengthen their climate
resilience by defending or
resilient mining’ below. improving livelihoods and
food security.
(vii) Climate-resilient mining
NUM can engage the
• The ability of workers and the government agency SANBI
poor to respond creatively to, (South African National
withstand and survive climate Biodiversity Institute) on a
change is strengthened coal mining strategy that it is
by addressing all our embarking on, which aims to:
developmental challenges:
poverty eradication, decent • steer coal mining coal away
jobs or livelihoods for all, from areas of high biodiversity
access to good education or hydrological importance
and healthcare, and
empowerment of women. • support the Department of
Underpinning all human Mineral Resources and coal
activity are the ecosystems we mining companies with tools
depend on for air, water and that aid decision-making in
food. Ecosystems are already relation to the first aim
severely compromised, and
with climate change impacts • participate in national
having an ever worsening debates on energy, water
effect, it is critical to maintain and biodiversity, adopting
if not increase ecosystem the view that all can be
services. accommodated within the
country’s developmental
• Mining is well known to be path
destructive of ecosystems
and livelihoods based on The danger of corruption
them, and yet currently arises throughout the mining
provide thousands of regulation chain, from
jobs and the engine of granting of licences, through
our economy. NUM can environmental compliance
champion a sustainable
development approach,
which both restores and

175 Secretariat Report to the 14th National Congress 2012.

monitoring, to rehabilitation the location of mines:
of closed mines. These
undermine the integrity of and • Where are the areas that most
delivery by our developmental need to be avoided, in terms
state, which seeks long-term of ecosystem services?
benefits for the nation, not
short-term profits for a few. • Whereandunderwhatconditions
Workers may be aware of does it not make long-term
instances of corruption that economic sense to permit mining,
could be referred to COSATU’s and thus probably exploration?
Corruption Watch. Conditions could include low
financial provision for labour and
(viii) Approval of mining environmental measures, high
licences and uneconomical water use,
likely legacy and risk.
NUM can monitor progress
on the targets in the delivery • What specific mining methods
agreement for Outcome 10 must be prescribed for certain
from the Ministry of Evaluation mines or resource deposits
and Monitoring, which require to ensure reduced impacts
the Department of Mineral (for example, only board-
Resources and Department and-pillar mining for coal
of Environmental Affairs to deposits)?
finalise a list of sensitive areas
for mining by 2013, and a Mining licences are only
legal resolution for mining supposed to be granted if certain
regulation by 2015. labour and environmental
requirements are met. But the
Mining activities can be sheer volume of work in reviewing
planned in such a way as to and approving prospecting
make least negative impact on and mining applications,
continued ecosystem services, means the Department of
and communities’ livelihoods Mineral Resources cannot
and health. Work is underway always thoroughly check that
to map the location of mineral all requirements are and will be
resources for mining, with the satisfied.
important areas for water and
biodiversity, to inform decisions (ix) Monitoring of
about where mines could be, or environmental compliance
should not be, located. Within
this context of an ecosystems Government capacity to do
approach, NUM could add
other dimensions, identifying environmental monitoring,
where there is a greater
need for jobs, or for existing enforcement and compliance is
livelihoods to be maintained.
The following questions should weak and under-funded. There
be considered when planning
are not enough inspectors,

and in some cases knowledge

and skills, to effectively exercise

oversight and enforcement

of the regulations and of the

requirements agreed to when

the licence was granted.

176 Secretariat Report to the 14th National Congress 2012.

Within the Department of without legal sanction, or will
Mineral Resources there are act to avoid a carbon tax,
only 78 officials at all levels, reduce costs (such as water
with a target to service over 1, or electricity, or more costly
040 mines and sites (which is mining processes or sites),
less than the number of active reduce risks (such as future
mines). Even at full capacity, it water shortages or trade
would take years to meet their barriers), attract investment
current annual targets. The or expand markets (with low-
Department of Water Affairs carbon targets in their own
has only 19 officials for all countries, foreign investors
water inspections in all sectors may be under domestic
across the country, and has pressure to seek ‘greener’
admitted that it is not coping investments), improve their
with the inspection backlog of sustainability (for example,
water use licences for mines, by attracting and retaining
and that many mines are not staff with scarce skills, some
in compliance with licence of whom may hold ‘green’
conditions or in possession values), improve their BBBEE
of the relevant permits. In scores or image (for example
contrast, there are over 900 through corporate social
Environmental Management responsibility expenditure).
Inspectors in national and
provincial Departments of There are high barriers to entry
Environmental Affairs. The into the mining sector, and
usual problems of overlap, lack more established wealthier
of coordination and different companies are more likely
mandates exist (so one to afford the measures
inspector cannot check and required to operate in a more
act on all Mineral Resources, environmentally sustainable
Water and Environmental way, and to rehabilitate
issues in one site visit). mines upon closure. New
entrant companies may
Companies will do the least be less able to invest in
that they can get away with environmental management.

177 Secretariat Report to the 14th National Congress 2012.

Government development will be challenged on both
water availability and extreme
financing (Industrial rainfall events. A starting point
could be addressing the acid
Development Corporation, mine drainage threat.

Development Bank) could be (xi) Renewable energy:

geared to specifically skew The case for fast-tracking
renewable energy supply at
financial support to cater for scale in South Africa is crystal
clear, from the perspectives
environmental management of climate change mitigation,
job creation, energy access
costs, thereby enabling new, for all, and national energy
security. NUM can join the
responsible entrants. push for more renewables in
the national energy supply
Environmental officers within mix, faster.
NUM branches could be
trained to act as the eyes To ensure that it is ultimately our
and ears for overstretched own economy and workforce
environmental inspectors, as that benefits, there are many
for labour, and health and initiatives pushing for local
safety inspectors. This could manufacture of renewable
also build organisation, energy technologies, for
creating more activities and example:
value for members.
• The government agency
(x) Rehabilitation of closed or South African National Energy
abandoned mines Development Institute (SANEDI)
is supposed to be a catalyst
Before a company can close for renewable energy projects,
a mine, the Department of including local manufacture
Mineral Resources must issue a and skills development. They
closure certificate to certify that say they have a “big focus on
the mine has been properly local employment creation
rehabilitated and closed opportunities, with regional
according to conditions in the training centres to be introduced
mining licence and law. There over time.”
is a backlog of such certificates
waiting on the Department, • There are Department of
and the responsibility for Science and Technology
implementing rehabilitation is initiatives, including the South
in limbo between the company African Renewables Initiative
and the Department. Under (SARI) which is trying to make
‘Take the lead’ in ‘Theme 1: Jobs it easier for companies to
for miners in a just transition’ invest in renewables. At the
above, it was suggested that moment it is mainly overseas
NUM could drive job creation in companies which have
rehabilitation of old mine sites. the capacity, but SARI has
means to encourage local
Restoring ecological and manufacture.
water functionality at disused
mines will help provide more
clean water and protect us
from floods in a changing
climate where we know we

178 Secretariat Report to the 14th National Congress 2012.

• The 2009 Review of the disused mines or in aquifers.
Renewable Energy White As yet the technology is not
Paper said that government commercially available, and
must commit to enough its long-term consequences
renewables in the energy are not understood. Research
mix to make it worthwhile for into such technologies should
companies to invest in local be considered and countries
manufacture. The Department where such technologies are
of Energy commissioned used should be studied, and
a study, which has never then decisions made.
been released in public,
which would give very useful There are other so-called
information. ‘clean coal’ technologies.
Concerns exist regarding
Job growth in the renewable the economic viability of
energy sector represents an these technologies and
opportunity for all workers. Not the timeframe of delivery,
all workers employed in the potentially high hidden
mining sector would be able economic costs in terms of
to take up such jobs, due to social and environmental
different skills sets or where damage, and the costs
the workers live. Strategies to and viability of disposing of
bridge these gaps are set out removed carbon and other
under ‘Prepare members to toxic matter.
transition’ in ‘Theme 1: Jobs
for miners in a just transition’ (xiii) Fracking
above – including highlighting
that the transition will not be a Shell and others in the
sharp one, but take decades. Petroleum Agency of South
Africa have applied to explore
An opportunity to shape the some 90 000 km2 of the Karoo,
transition would be to use with a view to fracking for
union investment or pension shale gas. Fracking involves
funds to set up worker-owned drilling extremely deep wells
renewable energy projects, or into horizontal geological
to participate in public/private formations and pumping in
partnerships. The Industrial a mixture of water, chemicals
Development Corporation and sand to break up the
has R22.4-billion for feasibility shale rock and free the
studies and loans for green natural gas trapped inside.
economy projects, which Even before extraction
unions could perhaps access. begins, extensive fracking
and geological modification
(xii) Carbon capture and is required to determine
storage the probable extent of the
available gas resource. The
Carbon capture and storage extraction process (‘mining’)
involves capturing carbon then involves extensive
dioxide emissions from large emissions – probably more
installations that burn fossil so than petroleum products
fuels, and storing the carbon
dioxide deep underground in

179 Secretariat Report to the 14th National Congress 2012.

and possibly no better than Renewable energy resources
coal. The gas product that offer the country far
is extracted is almost entirely more immediately viable
composed of methane, and sustainable energy
which is more powerful than development options than
carbon dioxide in terms of its shale gas.
contribution to global warming.
Processing involves substantial We invite the Congress to discuss
methane gas leakage during fully and develop a clear union
production, transport and stance of fracking looking at
processing of natural gas. both negatives and positives.

Fracking also requires huge 3.6.2.5 Summary

volumes of water; extensive A National task team that was
responsible for the coordination
infrastructure, typically of the COP17 must be allowed
to continue with its work
requiring several injection and finalise a draft policy
document to be sent to the
wells per square kilometre; and NEC for approval. Also, the
delegation team that attended
management of large volumes the COP17 must be used as the
anchor team to coordinate the
of flammable, potentially toxic drafting of regional inputs so
that a draft policy document is
drilling mud from each site. developed. Also, working with
the national task team, assist in
The process therefore poses the restructuring process of the
health and safety structure`s
high risks, particularly of decision on implementation.

groundwater contamination.

Interference with ancient

geological formations may

not only release methane

into aquifers, but also cause

new connections between

aquifers. It would take many

years to develop a reasonable

understanding of the

consequences of such risks

180 Secretariat Report to the 14th National Congress 2012.

3.7 Investments and Social responsibility 3.7.1.3 Challenges/Risks

3.7.1 Mineworkers Investment Trust (MIT) • The lack of Public Benefit
Organisation (PBO) status for
The MIT was established in 1995 by the the MIT is a huge challenge.
NUM after identification of a need to As a result of the lack of PBO
improve the quality of life for its members, status the MIT is a tax paying
former members and their dependents entity whereas the money
through investment opportunities. being paid for tax should be
It was always understood that such used for the beneficiaries.
opportunities would exclude possible
conflicts of interest with NUM in the • In the event that MIC is unable
mining, energy and construction sectors to pay dividends to the MIT,
and that through the creation of a more the beneficiaries will be at risk
sustainable asset base the MIT would due to lack of funding.
realise income for social development
programmes in the areas of education 3.7.1.4 Future plans
and micro enterprise development. The
MIT was capitalised with an R3m seed • MIT will ensure that MIC gives
funding by NUM. The MIT established the dividends consistently.
Mineworkers Investment Company (MIC)
and also owns NUMPROP. • MIT intends to ensure that the
beneficiaries get sustainable
3.7.1.1 Vision: future funding.

o To improve the quality of life of • MIT will ensure that the
our beneficiaries;
beneficiaries and the
o Mineworkers Development
Agency(MDA) companies account regularly.

o JB Marks Bursary Trust Fund • MIT is in the process of
establishing the Sam Tambani
o Elijah Barayi Memorial Training Research Institute which will
Centre(EBMTC) be another beneficiary of MIT

3.7.1.2 Achievements 3.7.2. Mineworkers Investment Company
(MIC)
• The MIT has been able to
ensure sustainable funding of The MIC was established in 1995 by the
the beneficiaries through the MIT with the seed funding received from
dividends received from MIC. NUM. The company is run by a small close-
knit team with great skill and experience.
• Funded the purchase of the The company’s portfolio consists of
Midrand property for EBMTC respected and strong performers which
include:
• Funded the bursaries for JB
Marks students • FirstRand

• Funded more than 90% of the • BP
programmes of MDA
• Peermont

• Izazi

181 Secretariat Report to the 14th National Congress 2012.

• Metrofile 3.7.2.4 Future plans

• Tracker • MIC plans to invest in the
following sectors:

• Gesat • Healthcare, renewable

• Setpoint energy, property, retail and

telecommunication

• Nimble Group • The MIC plans to ensure that it
delivers consistent dividends to
• Primedia MIT

• Westcon

• Esatvaal 3.7.3 Mineworkers Development Agency
(MDA)
3.7.2.1 Vision
The MDA was established in 1987
The vision of the MIC is to be a following the huge mineworkers’
premium active broad-based strike of that year. The main aim
black economic empowerment of the MDA was to ameliorate the
(BBBEE) company. social and economic impact of
retrenchment on mineworkers, their
3.7.2.2 Achievements families and their communities. The
MDA has a presence in 4 areas in
• The MIC has consistently paid South Africa, 6 districts in Lesotho
dividends to MIT and 4 districts in Swaziland.

• MIC has received the Best 3.7.3.1 Vision
Established Black Business
award and the BEE deal of the MDA is a leading, innovative
year award. development agency that
facilitates sustainable livelihoods
• The MIC consistently ensures in Southern Africa.
that there is transformation in
the investee companies. 3.7.3.2 Achievements

• Good corporate governance. • The MDA has trained
communities in food security
• Strong balance sheet. in Mohala, Ntlenzi and
Welkom. The programme
• Committed to supporting has impacted on 22,969 lives.
Corporate Social Investment
Projects

3.7.2.3 Challenges/Risks • MDA trained communities
to establish community
• Market volatility gardens. The programme
assisted communities to
• Poor performance of investee improve their technical and
companies business knowledge. This
impacted on 161 households.
• Reinvestment, refinancing

requirements from investee • MDA introduced a

companies Woolgrowers support

182 Secretariat Report to the 14th National Congress 2012.

programme in the Eastern • MDA is operating Moliko
Cape. The aim of the Micro Finance scheme in
programme is to introduce Lesotho and South Africa.
farmers’ ways of making The purpose of the scheme
livestock realise economic is to lend money to micro
value and potential through enterprises. The scheme
producing quality wool for received funding from the
sale. Three hundred and Lesotho government and
seventyfourfarmersbenefited Old Mutual.
from the programme.
3.7.3.3 Challenges
• Income generation project.
The aim is to increase • Diversification of funding and
household income. increasing the funding base.
MDA is currently heavily
• TB Vumbulula campaign. dependent on MIT funding.
The purpose of the project
is to improve the health • Lack of progress in MDA/
of communities through TEBA development merger
information sessions. Fifty HIV process
positive former mineworkers
benefited from the project. • Promotion of Moliko Finance
in the mining sector as a
• Community self-help groups. sustainable development
The programme assisted vehicle for empowering
communities with financial communities.
literacy.
• Richard Meeran and Richard
• The MDA has conducted an Spoor lawsuits. These have a
enterprise and leadership potential to cause confusion
development programme in the industry.
in Lesotho. Eighty-six
people benefited from the • The Asbestos Trust has
programme. outstanding business which
the claimant expects MDA
• The MDA in Lesotho is to complete while the
assisting Richard Spoor to funding of the project has
trace former mineworkers come to an end.
who suffer from Silicosis to
lodge a compensation 3.7.3.4 Future plans
claim from the mines. To date
1,126 have been traced. • Implementing the strategy

• MDA is running a nursery • Mobilisation of funding
project to benefit former resources with strategic
mineworkers. partners.

• MDA ran an intergrated • Increased engagement with
key stakeholders to unlock
agri-business support opportunities mainly NUM
to assist MDA to enter the
programme in Swaziland construction and energy
sectors.
through funding from Rand

Mutual Assurance. There

were 31 beneficiaries in this

programme.

183 Secretariat Report to the 14th National Congress 2012.

3.7.4 NUMProp • Establish networks with key
role players in the property
NUMPROP was established market
in 1993 with the sole purpose
of providing NUM with office • Offer competitive property
accommodation. The NUMPROP management services in
board subsequently adopted a the market
strategy to commercialise the
company in order to be an active • Creation of sustainable
player in the property market. financial wealth for MIT.
NUMPROP is currently not making
any profit due to the fact that it is • We are investigating a
not properly funded. possibility of MIC taking
over NUMProp.
3.7.4.1 Vision
3.7.5 Elijah Barayi Memorial Training
To be the leading player Centre (EBMTC)
in the property market,
having a global footprint The National Union of Mineworkers
thereby adding value to our (NUM) 1993 National congress
beneficiaries. adopted a resolution to establish
a training centre. The centre is
3.7.4.2 Achievements a nonprofit organisation, which
is a vehicle for training and
• NUMPROP has provided NUM development of stewards and
with office accommodation. leadership.

• NUMPROP has managed to By the end of 1993, the union’s goal
reduce the overdraft from was realised when Comrade Cyril
R3m to less than R100 000. Ramaphosa officially opened the
centre on the 4th of December
3.7.4.3 Challenges/Risks 1993.

• Inability to raise capital to This centre is named after the
realise the strategy first President of COSATU and
the first Vice President of NUM,
• Internal skills gap Elijah Barayi. Mining, Energy
and Construction workers have
• Risk exposure the ability to realise their destiny
through education and training.
• Market dynamics and
fluctuations 3.7.5.1 Vision of the EBMTC

• Lackoffacilitymanagement The vision of the EBMTC is to
in owned buildings facilitate the logistics and other
related requirements of NUM
3.7.4.4 Future Plans members to participate in the
education discourse.
• Continue to facilitate
property requirement for
NUM through property
ownership and leasing

• Participation in BBBEE
programmes

184 Secretariat Report to the 14th National Congress 2012.

3.7.5.2 Key successes • Lack of buying in from other
stakeholders to support the
• We have acquired new FET model
premises in Midrand.
• Shifting from the old operations
• EBMTC has been awarded to the new strategy
provisional accreditation from
ETDP-SETA (ETDP 10528). Six 3.7.5.4 Strategy for the next 3
assessors and six facilitators years
are now accredited by the
ETDP-SETA • Toestablisha(private)FETcollege
that will offer qualifications in
• Managed to complete the trade union practices.
establishment of a Second
training centre in Midrand • To provide accredited training
programmes and skills
• Managed to submit our WSP/ development courses
ATR to ETDP-SETA
• To facilitate an assessment
• Managed to hold board and centre for RPL and learner ships
sub-committee meetings as
scheduled • To manage quality conference
and banqueting facilities for
• Two senior executives (Executive our stakeholders, business and
Director and Accountant) the public
have been appointed along
with an additional 15 new staff • To promote our services, brand
members which brings the total and image with integrity
number of employees to 35.
• To develop employee skills
• The long-term loan of R4 and career paths
million was repaid to MIT
• To acquire sustainable financial
• Training Courses: more than support
60% of all training courses are
attended by NUM members 3.8 Please See Annexures.

3.7.5.3 Key challenges

• Lack of funding to sustain the
FET college model

185 Secretariat Report to the 14th National Congress 2012.

3.9 Summary the NUM remains a united, ever-growing,
revolutionary union.”
It is clear that significant gains and
indeed strides have been made by the Building a strong organisation at all
organisation since the 2009 Congress. levels is a key pillar in the on-going
Our membership figures have grown effort to transform the workplace and
from 295,624 in 2010 to 310,820 in 2011. society. NUM should continue with
In the same vein, the collection of its long term vision for organisational
membership fees has increased by a renewal to address challenges
substantial R117 million -- from R92.2 highlighted in the organisation report.
million in 2009 to the R209.2 million Particular attention should be paid to
realised in 2011. This is largely due to building strong work place structures in
the Membership Management System branches as these are essential for the
which was introduced in the latter stages reproduction of leadership. We need to
of 2009 and fully implemented in FY further investigate and report in the next
2010. In order for the union to continue central committee the deviant conduct
to build and reap the benefits of this highlighted in the report and how to
growth, particular attention needs to be root out this unbecoming and unethical
paid to the services we provide for our conduct. To that extent, a project plan
members overall. Similarly, questions must be rolled out in order to realise
have to be asked in order to achieve this objective. Furthermore, the NUM
sustained organisational continuity: should contribute to the building of a
strong ANC, SACP, COSATU and mass
o How many of our stated objectives democratic movement. Organisational
guide our practice? resolutions should spell out how this will
be achieved concretely. The NUM should
o Do we still have a class enemy to also intensify its workplace struggles for
confront or have we started to look a living wage, better working conditions,
for it from within? skills development, and equity as well
as workplace change. To this end, a
o Do we still share a common vision? bargaining agenda for the coming
period should be determined by this
o Are we still a collective at all levels? congress and grounded within structure
If not, how does any degree of of the union. The NUM structures must
fragmentation assist capital in develop capacity to recruit, organise,
advancing its own objectives? educate and defend the organisation.
The slogan “Organise or Perish” or
o What lessons can we draw from “Organise or Die” must be enforced
other trade unions at home and in order to reach the long cherished
internationally to improve our own 400,000 membership target. All these
engagement strategies? objectives and goals can only be
realised by a dedicated and disciplined
Our theme for this Congress is: leadership corps and members. The
Celebrating 30 years of Unbroken organisational structures should have
Revolutionary Trade Unionism. As we the capacity to eject any individual or
look towards the next three years we individuals advancing alien tendencies
need to grapple with these questions within the mighty NUM. These include
and also consider resolutions that will but are not limited to:
enable this great union to transcend. As
our President so eloquently puts it: “…At
all times, let us endeavour to ensure that

186 Secretariat Report to the 14th National Congress 2012.

• Spontaneous abortion of democracy o Abuse of power
• Negative leadership contestation
• Factional candidates without o Insincerity
leadership ability
• Tribalism o Manufacturing enemies from
• Prevarication within
• Interest on leadership by external
forces (service providers and o Doing wrong things with
management) confidence

• Deficit of class consciousness o No respect for the organisation
o Sexual harassment
o Barbaric and Neanderthal acts o Reversing hard earned gains
o Fighting one another through our
class enemy o Application of violence instead
of dialogue

o Lack of discipline

187 Secretariat Report to the 14th National Congress 2012.

SECTION C ECONOMIC REPORT

188 Secretariat Report to the 14th National Congress 2012.

04 Economic
Section

In order to realise the vision of the NUM it is The watchwords commonly used in
important to view its continued growth and nearly all reports are uncertainties and
effectiveness within the broader economic vulnerabilities.
context. This is imperative as the union seeks
to maximise its position as the largest union 4.1.1 Global Economic Trends &
in South Africa and the region. Conditions

This section focuses on economic analysis The financial turmoil generated
and conditions, both globally and in by the intensification of the fiscal
South Africa. To this end, we will review the crisis in Europe has spread to both
trends and socio-economic conditions developing and high-income
in the global economy. It will trace back countries, and is generating
the root causes of the prevailing socio- significant headwinds. The root
economic circumstances and will highlight causes of the pan-European
the considerable regional variations in not government debts date back
only economic growth and employment to the decades of continued
conditions, but also underline a vastly public borrowings by nearly
different social and welfare environment all European governments.
emerging in different geographic regions. The tipping point, however,
We will then review the socio-economic was the 2008-2009 financial
circumstance in South Africa, with special and banking crises that forced
emphasis on unemployment, poverty and these governments to provide
structural inequalities- dubbed as the massive bail-out packages
“triple evils” of our contemporary political to their banking systems. In
economy environment in the country. Lastly, effect, what was technically a
we will examine some policy interventions private banking financial failure
that need to be considered so as to deal was turned into a ‘national’
with the challenging problems facing our fiscal problem. Operationally,
society. it meant the nationalisation
of the private sector financial
4.1 The Global Economic outlook liabilities. As a result government
finances in most of the major
The world economy has entered a European countries such as
very difficult phase characterized by the UK, France, Italy and Austria
significant downside risks and fragility. ended up with excessive and
unsustainable debt - they were
so-called “overleveraged”.

189 Secretariat Report to the 14th National Congress 2012.

Operationally, over-indebted low or no growth prospects, these
governments had not only short
governments have no room term but also medium term fiscal
challenges.
to intervene whether for
By mid-January 2012, it was
macroeconomic purposes or evident that many European
governments had to be
for social welfare reasons. In downgraded for sovereign debt
purposes. Standard & Poor’s
addition, the cost of government downgrading of nine European
countries on January 13th, 2012
debt in Europe skyrocketed. As had global ramifications beyond
Europe, with considerable impact
shown in Figure 1, below, the on the developing countries too.

developed countries of Europe

were suddenly forced to borrow

at rates much higher than their

developing country counterparts.

In a short period of time, the risk

premium attached to countries

such as Ireland, Portugal, Spain

and Italy multiplied. In the face of

Figure 1: Persistent concerns over high-income fiscal sustainability have pushed up
borrowing costs worldwide

CDS spread on 5 year sovereign debt, basis points Change in 5-year sovereign credit-default swap, basis points
(as of Jan. 6th, 2012)*

With downward revisions in global countries -- Brazil, India, and
GDP growth, many developing to a lesser extent Russia, South
countries also face declining Africa and Turkey -- has slowed
economic prospects. In addition, partly in reaction to domestic
capital flows to developing policy tightening. As a result, and
countries have dropped by despite relatively strong activity
almost half as compared with in the United States and Japan,
last year, Europe appears to have global growth and world trade
entered recession, and growth have slowed sharply.
in several major developing

190 Secretariat Report to the 14th National Congress 2012.

In the process, a shift in global such as Mexico, Brazil, South
capital flows, and change in Africa, India, and Turkey was
the risk appetite, has led to considerable with direct impact
currency depreciations across on the price levels and with
many developing economies. As mixed blessings for many of these
illustrated in Figure 2, the extent economies.
of currency volatility in countries

Fig. 2: Capital outflows resulted in significant currency depreciations for many
developing countries

Percent change in nominal effective exchange rate (Dec. - Jul. 2011)

For many developing countries, in general. Non-oil exporting
these global conditions have nations, in particular, have felt
led to considerable socio- the welfare stress substantially.
political challenges. Against Food and energy price increases
the backdrop of continuous have been further compounded
rise in food and energy prices by large scale job losses, and
(see Fig. 3 below); many nations a material decline in income
have faced socio-political stress, earnings of the lower income
emanating from a rapid fall in the groups within the developing
welfare of the working class and nations.
that of the lower income families

191 Secretariat Report to the 14th National Congress 2012.

Fig. 3: Food and Energy Price Indices over 2000-2011 Period

Socio-political stress and rising the developed nations have been
unemployment, however, are far more adversely affected than
not confined to the developing the developing countries. And,
nations. Over the past two years, as said before, for the first time

Fig. 4: Unemployment in Developed and Developing Countries, 2009-2011 Period

192 Secretariat Report to the 14th National Congress 2012.

the governments in developed year expanding at a close to
countries have no fiscal space 20 percent annualized rate
to provide relief. To the contrary, (3m/3m saar), but weakened
in countries such as the UK, sharply beginning in the
Italy, Ireland, Greece, Spain and second quarter and declined
Portugal, the governments have during much of the third
shedding jobs and reducing quarter. Since then activity
welfare benefits at the same time. has picked up and expanded
The interplay between the fiscal at a 5.9 percent annualized
crisis in Europe and the global rate during the three months
economic downturn has exacted ending November 2011.
a material tax on the poorer
groups worldwide. • In Latin American and the
Caribbean, activity in the
Of course, the decline in global GDP region’s largest economies has
has not affected all geographic been slowing mainly because
regions equally. A recent World of policy tightening and earlier
Bank report summarised the exchange rate appreciations.
regional conditions as follows: For the region as a whole
industrial production has
‘Regional data suggest a been declining since May,
generalized slowing among and was falling at a 2.9
developing economies, mainly percent annualized rate in
reflecting domestic rather than the three months ending
external factors. November, while GDP in Brazil
was stagnant in the third
• In the East Asia and Pacific quarter. Weaker export growth
region, industrial production (reflecting a slowing in global
growth eased from a close trade volumes and weaker
to 20 percent annualized commodity imports from
pace during the first quarter China) is also playing a role.
of 2011 (3m/3m, saar), to 5.6 Regional export growth has
percent in the second quarter. declined from a 14.1 percent
Since then growth recovered, annualized rate in the second
except in Thailand where quarter to 5.2 percent during
flooding has caused industrial the three months ending
production to decline sharply. November.
Excluding Thailand, industrial
production for the remainder • Activity in the Middle East
of the region accelerated to a and North Africa has been
10.1 percent annualized pace strongly affected by the
in the three months ending political turmoil associated
November 2011 (5.7 percent if with the ―Arab Spring‖, with
both Thailand and China are recorded industrial activity
excluded). in Syria, Tunisia, Egypt and
Libya having fallen by 10, 17,
• In developing Europe and 17 and 92 percent respectively
Central Asia industrial at its lowest point according
production also began the to official data. Output has

193 Secretariat Report to the 14th National Congress 2012.

recouped most or more than of Nigeria. Recent months have
all of those losses in Egypt and however shown a pick up. In the
Tunisia. Elsewhere in the region three months ending in August,
output has been steadier, industrial activity expanded at
but weakened mid-year and 0.8 per-cent annualized rate,
was falling at a 0.8 percent supported by output increases
annualized rate during the among oil exporters and
three months ending July despite a decline in output in
(latest data). South Africa during that period,
the region’s largest economy.
• Activity in South Asia, like Industrial activity in South
Latin America, has been Africa has since strengthened,
dominated by a slowdown in growing at a picked up to 14.9
the region’s largest economy, percent annualized rated in
India. Much weaker capital the three months ending in
inflows and monetary policy October. “ (Global Economic
tightening contributed to the Prospects, Vol. 4, January 2012,
2.9 percent de-cline in India’s P. 14)
industrial output in October
(equivalent to a 12.4 percent In light of the foregoing, it is safe
contraction at seasonally to state that the global economic
adjusted annualized rates growth is at best tentative, with much
in the three-months ending potential downside. All forecasts
October). Elsewhere in the suggest a material scaling down of
region, industrial production the global GDP, from the previous
in Sri Lanka and Pakistan is estimates of 5 to 6% to 3.5 to 4%
expanding rapidly. The global average growth at best. Developed
slowdown has also been countries in particular face a fairly
taking its toll on South Asia, with bleak prospects in the short term.
merchandise export volumes Not only economic performance,
which had been growing but also socio-political conditions
very strongly in the first part in these countries remain volatile,
of the year, declining almost with potential adverse effects on
as quickly in the second half the global financial and economic
-- such that year-over-year stability.
exports in October are broadly
unchanged from a year ago. In this highly uncertain environment,
developing countries should
• Industrial activity in Sub- assess their vulnerabilities and be
Saharan Africa (Angola, prepared to deal with both the
Gabon, Ghana, Nigeria, and immediate and longer-term effects
South Africa are the countries of a possible downturn. Domestic
in the region for which industrial economic and structural factors
production data are available) should, in particular, receive high
was declining in the middle policy priority to ensure that the
of the year, with all countries socio-economic conditions are not
reporting data showing falling or left totally vulnerable to global geo-
slow growth with the exception political and financial uncertainties.

194 Secretariat Report to the 14th National Congress 2012.

4.2 SA Economic Outlook since the dawn of democracy in 1994,
the economy registered its first negative
The SA economy has not been immune growth of -1.9% in 2009 as shown in Figure
to the aforementioned global trends. 5 below.
After 15 years of uninterrupted growth

Fig. 5: SA Gross Domestic Product Growth 1991 - 2010

4.3 Economic sector analysis positive growth rates in 2010 and 2011,
the rate of GDP growth and employment
Whilst the GDP growth rebound was have not reached the pre-crisis levels.
sharp, and the economy registered

Fig. 6: South African Non- Agricultural Formal Sector Employment 2006-2011

195 Secretariat Report to the 14th National Congress 2012.

As shown in Fig. 6, the rebound in the has been little evidence of job creation
total non-agriculture employment as illustrated in Fig. 7. This further
trends has been slow. Moreover, the aggravated the political economy
recovery in employment conditions challenges facing the country. In
has not been uniform across different particular, the fall in manufacturing and
sectors of the economy. Sectors such as mining employment over the recent
mining and manufacturing have faced past poses serious inequalities within the
harsher conditions. As a result there rural segments of the society.

Fig. 7: Manufacturing and Mining Employment

Despite the overall economic recovery, The decline in the country’s industrial
therefore, the unemployment rate production base is of particular
increased in 2011. Moreover, declining concern for both the short and medium
growth prospects and persistent term prospects. The process of de-
bottlenecks in socio-economic industrialisation within the economy
infrastructure do not augur well for a has been at play over a relatively long
meaningful reduction in the prevailing period, dating back to the mid-1980s as
unemployment levels. shown in Figure 8 below.

196 Secretariat Report to the 14th National Congress 2012.

Figure 8: Manufacturing Growth and Contribution to GDP

Manufacturing contribution to GDP (%)

The decline in relative share of in the index of manufacturing employment
manufacturing in GDP has been associated over the period. In absolute terms, this
with a substantial loss of employment in this means a loss of over 500 000 employment
sector. Figure 9 illustrates the falling trends opportunities in the manufacturing sector.

Figure 9: Trend in SA Manufacturing Employment 1980-2011

197 Secretariat Report to the 14th National Congress 2012.

A blend of macroeconomic policies, socio-economic structural reforms,
infrastructural deficiencies and shortage economic transformation, and fiscal
of skills has combined to undermine reform and modernisation. Meaningful
the resilience of the SA manufacturing and sustainable job creation, promotion
sector. of high economic performance and
improvement in general social welfare
In the recent past, the rapid rise of critically depends on addressing these
electricity charges and the uncertainty binding constraints on the economy.
around the availability of power It is apt to underline the important fact
have further exacerbated the loss of that none of these constraints will be
competitiveness in SA’s manufacturing removed without dedicated, resolute
activities. and sustained government leadership.

These very factors have equally Pervasive poverty, systemic unemployment,
undermined the productive activities and structural inequality are the three
and investments in the mining sector. The obstinate political economy challenges
fact that over the past decade the real facing South Africa. The legacies of
output in the mining sector declined, apartheid, compounded by some key
despite the super-cycle of commodities, ‘government failures’ since then, have
is a testimony to the unfavourable policy culminated in the prevailing intractable
and logistical framework facing the socio-economic problems. We are told
mining sector. Consequently, jobs in this that at the forefront of the failures has been
sector have been lost, and opportunities human resource development. At present
for expansion and job creation in the the single most obstinate factor hindering
mining industry have been stifled. economic growth, development and
welfare is the inadequacy of our education
4.4 State intervention and training system. Widespread shortage
of skills within the society is but one of its
In addition to the aforementioned manifestations.
global adverse conditions, the
economy has had unresolved structural It is a fact that the modernisation and
setbacks related to inadequate socio- technological upgrading of the economy,
economic infrastructure, shortage of ever since 1994, have increased the
skills, mal-functioning municipalities, economy’s skills intensity sharply. This
lack of adequate electricity and micro- in turn has accentuated the systemic
managerial fiscal problems. The rating unemployment problem. Meanwhile, the
agencies have placed the country’s country’s human capital accumulation
sovereign risk rating under constant has proved wanting. Whilst much has
watch, and South Africa’s prospects been achieved in promoting access to the
have been downgraded from ‘stable’ to public schooling system, improving the
‘negative’ during 2011. quality of the education offered in many
parts of the country leaves much to be
Whilst it is important to highlight the desired. ‘Unemployability’, widespread
considerable gains made since vacancies and the huge skills gap have
1994, it is as critical to underline the emerged concurrently. As a result, the
challenges remaining in the path of income and wealth inequalities within
society have been exacerbated.

198 Secretariat Report to the 14th National Congress 2012.

Furthermore, intra-racial inequalities have also increased as shown in Table 1, below:

Table 1: Inequality shifts by race: Gini coefficients for 1995 and 2005

Race 1995 2005

African 0.55 0.56

Coloured 0.49 0.58

Asian 0.45 0.53

White 0.39 0.45

Total 0.64 0.69

Source: Bhorat & van der Westhuizen (2008) Internal obstacles to socio-economic
growth, on the other hand, remain under
As illustrated in the above table, the mal- the full control of the government and
distribution of income has worsened our national institutions. Given that the
across all racial groupings as well as problems we face require a direct and
within the country as a whole. In addition, immediate solution, it is important to have
at this level of inequality, the country an open and comprehensive discourse
has become possibly the most unequal on some of its key elements. Some of the
society worldwide. Inequality of access to strategic policy choices made, and some
resources in turn creates a raft of socio- of the approaches employed may well
political complexities. For one, it raises the require revision, fine-tuning and in some
general systemic socio-political risk within instances outright change.
the economy, deterring investment and
job creation. In addition, it makes the poor The severity of the challenges facing
more and more dependent on government our society is such that both private and
hand-outs, and this dependency in turn public resources ought to be aligned to
places additional pressure on the public ensure a meaningful and frontal attack
sector capacity to deliver. In a situation on the root causes of the structural
where public sector capacity is already factors causing the continuation of the
stretched to the limit, and has left much aforementioned ‘triple evils’ in our society.
to be desired, this leads to growing social
frustration and discontent. In times of economic contraction, one of
the key elements of economic policy is
It is stating the obvious that the SA economy a ramp-up of infrastructure investment,
faces both external and internal challenges primarily spearheaded by the public
at present. Whilst the external constraints sector. Provided the infrastructure planning
are essentially geopolitical, financial is properly done, and its implementation is
and institutional, they require a complex professional, such investments tend to have
mix of sustained political leadership maximum multiplier effects on economic
alongside simultaneous technical policy recovery. In such cases, the probability of
coordination across a number of regions ‘crowding-in’ is at its peak.
and sovereign territories worldwide.
Importantly, whilst SA may be able to make At the allocation level, fiscal resources
a contribution towards the global attempt are traded among competing ends.
to overcome these problems, they remain For example, the extension of the child
essentially outside the sphere influence of grant to the age of 18 is estimated to put
the SA government.

199 Secretariat Report to the 14th National Congress 2012.

another 4 million beneficiaries on the capacity is not in dispute. This
government’s monthly welfare payroll. is possibly the most vivid, and
The medium-term social consequences potentially devastating risk in
of such a policy aside, its immediate fiscal the fiscal landscape, capable
implication is a reduction in infrastructure of undermining the much-
investment, be it ‘social’ or ‘economic’. needed public sector investment
This trade-off has considerable socio- programme.
economic consequences. In general,
populist fiscal policy may be seen to have Both from a political economy
a short-term political gain, but its socio- perspective and for reasons of
economic effects are destructive over the short-term economic stimulation
medium term. Over time, such policies of the economy – given the
constitute a major fiscal risk that takes cyclical downturn – fiscal policy
decades to expunge from the system. has to fulfil a two-fold objective.
Firstly, its operations have to
It is worth noting that whereas, social become a great deal more
security is supposed to cushion the most efficient so as to be able to ‘do
vulnerable, it is generally acknowledged more with less’. Secondly, it has
that this is a short-term measure. Over to undergo a tectonic shift to be
the medium to long term, the education able to plan and implement a
system should help build human capital well-coordinated public sector
and provide a springboard for economic investment programme with a
and social mobility. Retrospectively, it is view to expanding productive
now evident that the inability to improve capacity and stimulating
the quality of the education and training economic performance.
system over 1994–2011 has deepened the
skills mismatch in the economy. Instead of Over the past decade, this lack of
addressing the underlying institutional and competent capacity has led to the
structural issues of the education system neglect of some vital infrastructure
and that of human resource development planning such as sustainable
more generally, the response has been energy, water resources and
to propose the expansion of welfare human resource development.
payments to the youth in the 18–25 age Most commonly, the country’s
brackets. This clearly is not sustainable. ageing urban infrastructure has
Sooner or later the fiscal constraints will been largely ignored. Even the key
limit the effectiveness of this approach. metropolitan centres suffer from
basic symptoms of decay in their
Given the widespread and deep structural urban utilities, poor institutional
issues facing the country, what follows are performance and weak financial
suggestions on a number of policy options management capability. More
that may help us deal with the underlying generally, the local government
causes of the problems: institutional infrastructure has been
left to falter. To indicate the severity
4.5 Policy options and related challenges of the problem, it suffices to note
that according to a Municipal
4.5.1 Public Sector Implementation Demarcation Board (MDB) study
Capacity Needs Urgent Attention in 2008, 23% of the municipal
chief financial officers only had
That the South African public sector Grade 12 certificate, 64% of
lacks competent implementation technical services managers had

200 Secretariat Report to the 14th National Congress 2012.