“Under the Labour Relations Act (LRA) of 1995, the majority union on any given mine has sole organising rights and it is in effect then the only party that enters into bargaining with the firm.  Representation thresholds are too high for rival unions to attain.  To be the majority union is a big prize to fight for.  Neither NUM nor Amcu now have any incentive to change the status quo, and it suits them that the LRA (even in its 2013 amended form) does not require a secret ballot.

Under these conditions, however, it is rational for union bosses to encourage their members to go on strike (and allow intimidation of those who would have preferred not to).  Each set of union elites must appear more militant and credible to its members than their rivals.  This means each union has to make incredible wage demands to avoid being seen to be weak, and risk losing valuable (scarce) members.  Being reasonable in these conditions does not pay, even though perpetual strikes may precipitate industry decline and consequent job losses”.

Labour law fuels strife on mines: written and published yesterday by Ross Harvey, a senior researcher at the South African Institute of International Affairs, in BDlive and Business Day [subscription required].

Further excerpts

A new paper in The Extractive Industries and Society argues that labour relations in SA’s mining sector are best characterised as a prisoner’s dilemma.  Each player’s dominant strategy lands them in a mutually destructive outcome.

In other words, labour unions have a strong incentive to fight for unworkable wage increases for their shaft-level workers, and companies have as strong an incentive to resist those demands.  Even though greater degrees of co-operation would yield mutually beneficial outcomes, neither player is sufficiently incentivised under current conditions to change strategies.

. . . . .

The paper argues that “the game-theoretic framework helps to make sense of the empirical reality that the institutions governing labour relations in SA are producing some of the very dynamics they had sought to avoid when initially formulated….  For as long as the LRA in its current (badly amended) form governs the labour landscape, game theory predicts continued destructive strike action.  The significant welfare cost to the country is already being borne out….”

Mining industry contraction in SA is especially painful because of the extent to which almost every other sector is beholden to it, and because mineral exports earn the majority of foreign revenue.

Unless policy makers are willing to change labour legislation to allow for greater degrees of inclusion at the bargaining table and to introduce secret balloting, firms and unions will continue to play aggressive strategies that result in mutually destructive outcomes.

Unfortunately, this antagonism “always comes at greatest cost to the poor….” Those who can afford it least will suffer most.