Focus: The Marikana Massacre: wages as the blind spot in the tax evasion debate

Abstract

12 | International Union Rights | 25/1 FOCUS | TAX AND TRADE UNION RIGHTS No doubt, workers across the world were shocked as striking mine workers at the South African town of Marikana were shot to death during their strike for higher wages in 2012 at Lonmin Plc, the third largest platinum mining company in the world. Thirty four workers were massacred by police on 16 August. Ten had already been killed in the days before. Most of them when a police General ordered tear gas and shock grenades against a peaceful march1. Among the ten were also two police officers and a security guard. The Marikana death toll is in fact above 50 today, due to suicides in directly affected families. As for injured and traumatised workers and family members, they can be counted in hundreds. Most of the victims were rock drill operators (RDOs). The RDOs were paid a basic wage of about 5000 South African Rand per month (corresponding to $600 at that time). They demanded a basic wage of 12,500 rand per month ($1500 USD). In September after the massacre close to 200,000 mine workers in all kinds of mines were on strike for R12,500. To workers in South Africa, also outside mining, the ‘R12500’ became a symbol for having a life. In the eyes of established South Africa, however, the mine workers were ignorant of the realities in the mining industry. The workers effectively demanded an increase of the basic wage by 150 percent! This was considered outrageous and completely utopian. ‘Wage evasion’ as one deadly factor In 2014, the power of the Marikana Commission of Inquiry (MCI) gave two researchers from AIDC access to the financial statements of Lonmin’s subsidiaries in South Africa. One question was, if the R12,500 demand was at all ‘affordable’, because Lonmin had refused to negotiate. This was a small part of the Commission’s task to give a background to the catastrophe. The financials of daughter companies are confidential. Only the annual reports of a mother company that sell its shares on the stock market are public. This is the legal situation in South Africa, and in most countries. Still, it is the local subsidiaries that pay taxes to the government and wages to the workers. As a rule, they employ the whole productive workforce. Lonmin Plc is based in Britain. In 2012 it employed some 50 managers. Lonmin’s largest South African subsidiary Western Platinum Ltd (WPL) employed 25,000 of Lonmin’s workers in 2012 (with another 3000 employed by the subsidiary Eastern PL). The confidential financial statements showed that WPL every year had transferred an average R245 million in ‘sales commission’ to a letter box company in Bermuda. But there was no one in Bermuda selling anything. The company receiving these millions had the exact same address as Appleby Services – the law firm at the heart of the Paradise Papers. When this went public, Lonmin argued that the transfers were shifted to its South African head office affiliate Lonmin Mining Services (LMS) in 2008. The audited financial statements of WPL showed however that the transfers to Bermuda continued right up until 2012. If the R245 million sent to Bermuda were divided by 4000, the number of RDO workers, this alone covered a wage increase of about 100 percent, or R5000 per month. Another R200 million per year was sent from WPL to LMS in ‘management fees’. This helped to pay huge salaries to forty managers. From 20102012 , they also received share based payments bonuses, costing WPL R100 million per year. That alone corresponded to an additional R2000 wage increase per RDO worker. On top of this, a net payment of R758 million was made from WPL to London in 2006. Lonmin Plc sold a South African mine to its own subsidiary WPL. This selling of a mine to oneself, as it were, was advantageous because of the double tax agreement with South Africa. Lonmin does not pay taxes in the UK, only in South Africa. An unexamined perspective For public sector workers, corporate tax dodging represents a threat not just to their labour conditions and livelihoods but to the essential services they deliver...