Capital's Insatiable Drive for Profits at the Heart of South Africa's Wage and Employment Crisis

By Dale T. McKinley · 13 May 2013

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Picture: uusc4all/Flickr
Picture: uusc4all/Flickr

If capital is to be believed, it is the worker who is the main source of South Africa’s contemporary social and economic problems.

Every time the annual season of wage negotiations is about to begin, as it is now, representatives of capital unleash a tsunami of propaganda about workers’ ‘high and unaffordable’ wage demands. Dire warnings of destructive social unrest/conflict, high inflation rates, poor competitiveness and generalised economic devastation roll off their silver-lined tongues. The underlying message is neither subtle nor sanguine; the wage demands of workers are to blame for just about everything bad that is happening in our society.

Of course, propaganda is one thing, reality another; something even the most serious disciples of capitalism have always understood. Adam Smith, the author of what many consider to be the ‘Bible’ of free-market capitalism (‘The Wealth of Nations’ published in 1776) noted that while “English businessmen frequently complain about the high level of wages” and argue that “this is the reason why they cannot sell their goods at prices that are as competitive as in other countries … they remain quite silent about their high profits.”

Such silence, Smith noted, was a conscious way of obscuring the fact that “in many cases, the high profits made by capital are much more to blame for price rises than are exorbitant wages.” On this front, little has changed in the last 237 years. Indeed, if there is one essential constant in the capitalist production process it is, as Smith himself confirmed, that “labour is the true measure of value”.

In the words of Belgian political scientist and historian Eric Toussaint, capitalists “have also forgotten (or never even bothered to understand) that workers are not free not to sell their labour power.” After all, the labour power of workers is the only thing they have to sell in a capitalist economy in order to make a living. Workers have no other means of access to the means of production, the very thing that defines class position and privilege under capitalism.

Today’s capitalists and no more so than in South Africa, are trying to airbrush their own capitalist history. They want us to naively believe that society can only progress by affirming their ‘freedom’ to intensify and expand the exploitation of workers’ labour power; that their endless, ‘by whatever means necessary’ pursuit of profits is an enabler as opposed to a destroyer of socially and economically productive labour. This is one of the key reasons why Karl Marx’s study of capitalism remains absolutely relevant today.  As Toussaint points out, this is the case precisely because the contemporary reality of the capitalist system “remains one of a struggle over attempts by capital to increase, and attempts by the working class to resist increases in, the rate of profit.”

When applied to South Africa’s post-1994 developmental trajectory it should come as no surprise then that there is an inverse relationship between capitalist profits and workers’ wages. According to economist Asghar Adelzadeh, the rate of profit in the economy from 1994-2012 has increased by almost 250%, while our own official Stats SA agency shows that from 1994-2010 the real wage share of South Africa’s Gross Domestic Product (GDP) has decreased by around 7%.

Such a huge gap, which symbolises nothing less than a massive transfer of wealth from the already poor majority to an ever increasing uber-rich minority, has been made possible because of a consistently pro-capitalist, anti-worker macro-economic policy. The policy framework, which includes the current National Development Plan, and which capital has always selectively embraced, has catalysed reductions in real wages by prioritising an export-led growth centrally based on wage suppression for workers. In turn, this has facilitated the consistent moves by capitalist employers to largely remove meaningful cost-of-living adjustment clauses in labour agreements and casualise labour such that the historic ‘social wage’ accompanying permanent employment/ job security has been thrown in the developmental rubbish bin.

This reality is made all the more tangible for that majority when the relevant rate of increase in prices (inflation) is factored into the equation, remembering that the generalised rate of inflation is an average (the latest average being 5.4%) and that our own Stats SA calculates inflation for five different expenditure groups. In this respect, as the Labour Research Service (LRS) shows, since mid-2012 the inflation rates for the ‘very low’ and ‘low’ expenditure groups (i.e. the unemployed and workers) have been almost 2% higher than those for the ’very high’ group (i.e. the capitalists). When applied to specific items in the expenditure basket which the poor and workers spend a greater portion of their income on, the average price increase for public transportation comes in at 16.1%, while food, housing and water/electricity prices are all far above the generalised inflation rate.

Specific wage data (for 2012) compiled by LRS only serves to further confirm the overall picture of Dickensian wage inequality. While the median minimum wage for workers was R2 300 per month across nine sectoral determinations and R3000 per month across all bargaining councils, the median  wage for executives at 80 JSE-listed corporates was R483 000 per month and for CEOs, R758 000 per month (these exclude bonuses and Long-Term Incentives – LTIs - such as share equity schemes). Over the last two years, the average wage of workers stands at R114 per day while the average wage package (inclusive of bonuses/LTIs added) of corporate CEO’s comes in at R32 204 per day.

Taking a closer look at the recent wage-profit nexus of one particular corporate – Anglo American Platinum (Amplats) – reveals a consistent pattern of manipulation that proves the general ‘rule’. Research by political economist Dick Forslund shows that at the end of 2009, Amplats laid off 12 000 workers and announced an expected 99% decline in headline earnings per share (the general marker of corporate profitability).  Yet, six months later a 532% rise in headline earnings was being proudly proclaimed.

The following year (2011), profits of R1.3 billion were reported but then after a ‘tough’ 2012, Amplats announced that they had taken a 562 cents per share loss from the 1365 cents profit per share in 2010/2011. And then just last week, they revealed plans to cut another 6000 jobs in order to “restore profits”, a move which one Goldman Sachs analyst claimed did not go far enough to “implement the corrective measures for the benefit of the shareholders”.

If there is any remaining sympathy for ‘poor’, struggling capital, it must surely be blown away by the fact that the overall share of revenue accruing to workers in the platinum industry declined from 60% in 1998 to just 27% by 2010, a time period during which record profits for shareholders were being made and bonuses/LTIs for executives handed out.   

It’s not hard to figure out that what is really at stake for Amplats (and for all other corporate capitalists) is ‘restoring’ and when possible, surpassing previous levels of profits as opposed to just making a profit.  Massive lay-offs of workers boost prices by (temporarily) cutting production which, in turn, ensures higher profits for shareholders. The wages and indeed lives of workers are peripheral; intensified exploitation of their labour, essential.

Workers are not the perpetrators of South Africa’s wage and employment crisis, they are its fodder. All the while, it is capital that is feeding at the trough.

Dr. McKinley is an independent writer, researcher and lecturer as well as political activist.

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Independent rationalist
15 May

Is this a Typo?

Thanks for the balanced perspective. Is the percentage quoted in the 5th-to-last paragraph correct: "Yet, six months later a 532% rise in headline earnings ". 532% is ridiculously high so it may be a typo?

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Independent rationalist
15 May

Not a Typo

I thought the article's remark on the rise in Amplats earnings, which was quoted as 532% was a typo, but this is actually on the Amplats webpage: "Anglo Platinum reports headline earnings of R2,559 million for the half-year ended 30 June 2010. This represents an increase of 532% when compared with the first half of 2009. Headline earnings per ordinary share increased 527% to 1,028 cents." []

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Rory Verified user
18 May

Democratic Industry

Our economic organisation is essentially adversarial. Unless we change it the kind of problems that we are currently experiencing will remain unresolved forever. We need economic enterprises which are democratically organised. The Scott Bader Commonwealth [ ] is a world wide economic enterprise that is totally democratic in structure. The people who work there do not need to join unions.

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