Thank heavens the strike in the platinum mines is over. It lasted five months to the day. It lost the workers a lot of pay, the companies nearly half a year's worth of revenue and the small companies in the supply chain much of their trade. It has disrupted operations underground and great care will have to be exercised in recommissioning the stopes.
It will take time to heal the relationship between management and employees and time to restore the families and communities around the mines to normal life. Nobody knows yet what the long-term economic consequences of the strike might be. The mines may have to become more mechanised and the low grade shafts may have a shorter remaining life.
We now have the prospect of further strikes in other sectors of the economy and one can only hope that they will be more speedily resolved. However, it is an appropriate time to revisit an idea that I put forward on this website some time ago and mentioned on the John Robbie breakfast show the other morning.
Spread ownership of companies to workers
The proposal is that every company beyond a certain size in every industry should have an employee share ownership scheme. The ownership side of black economic empowerment has up until now made a small group of people - many of whom had no previous links to the industry in which they were invested - sensationally rich. They were 'connected' and, like the Russian oligarchs, were in the right place at the right time.
Meanwhile, the people who are central to a business and come to work every day - namely the workers - have no stake in the vast majority of companies in South Africa. How morally right is that? They produce the goods, they risk their lives, they put in the extra mile and, yes, they do get wages and other benefits; but those wages and other benefits will never make them as rich as the BEE beneficiaries of equity schemes.
Thomas Piketty, the author of Capital in the 21st Century, was quite right to point out that inequality in the world is now back to where it was at the beginning of the last century. Owners of capital have done very well out of the recovery of the stock markets since 2008. Many stock exchanges are at record highs because all the new money printed by central banks has bypassed the real economy and gone straight into shares and property. The gap between the super-rich and the middle and working classes is at an all-time high.
The reason Piketty gave for this is that the return on capital employed has consistently outstripped GDP growth in the last 30 years, and is likely to continue to do so for a long time to come. So, guess what you can do to narrow the gap? Make the workers - not the government - the owners of capital. Obviously the best way to do this is to give them a stake in the enterprise they work for so they feel part of it.
Examples of John Lewis and Kumba
John Lewis, a retail chain in the UK, is owned by its own staff through a partnership scheme. They all share in the profits. Here in South Africa, Kumba Iron Ore has an employee share ownership scheme which since December 2011 has paid out gross dividends to individual employees in excess of R600 000. Think about that! R600 000 is R12 500 per month for four years and that was in addition to his or her basic wage. It does not stop strikes but it does reduce the odds that they will go on for a long time.
For all those critics of employee share ownership schemes, my question is simple: how can you give a CEO shares in a company as an inducement for better performance and not apply that principle to all management and workers? When people say to me that such-and-such an industry is not appropriate for an employee share ownership scheme, my immediate response is to ask whether the allotment of shares feature in the current packages of the top executives. If so, game over.
I know the unions may not greet this idea with huge enthusiasm as it can be perceived as dividing the loyalties of their members between the company and the union. There is also no guarantee of a monetary gain from the shares, which must be understood by the recipients. However, it can be argued that part of an employee's package should be related to the fortunes of the industry and the company, because it is less likely to cause retrenchments than raising fixed wages to an unrealistic level. Flexibility in a portion of the remuneration will protect jobs in tough times.
Moreover, it should please the followers of Karl Marx and the creators of the Freedom Charter who basically believe a country's resources and means of production should be in the hands of the people. While my proposal does not go all the way - because investors must have a fair share of the potential reward for the risks they are taking in putting up the money to establish the business - it achieves some kind of balance between those who provide the money and those who provide the work. They can be considered partners in building the enterprise and running it.
Why don't we lead the world in the creation of employee share ownership schemes in South Africa and show that the problem of inequality can be partially resolved in this way? It is better than having our credit ratings downgraded on account of uncertainties in the labour market. It is also one step towards a more inclusive economy.
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