Silicosis compensation: whose problem is it?

Evidence suggests that trusts do not provide the best solutions to the problems of compensation for occupational diseases – especially when dealing with the magnitude of silicosis claims in South Africa

The silicosis issue seems now to have been decided with an agreement, sanctioned by the court, to establish a trust that will pay compensation. According to press reports, the mining industry will contribute R5 billion to the trust. The sum probably excludes administrative and legal costs which are specifically covered by the trust. This article attempts to answer the questions: Should the matter have been decided differently?  And who should have been responsible for the resolution?

First, it is necessary to recap some background. Miners and ex-miners claimed compensation from their employers and ex-employers, arguing that they had contracted silicosis-related diseases, due to the fault of their employers.

The matter was further complicated as many of the miners also suffered from tuberculosis (TB), which is a well-known, airborne, contagious disease and is not necessarily an occupational disease. In addition to silicosis, other occupational diseases exist within mining and other industries. Therefore, one could argue that silicosis should be regarded as simply one form of this type of problem.

Silicosis in the mining industry came to the fore at the end of the 1800s, following the discovery of gold on the Witwatersrand. Miners were attracted to the area from various parts of the world, many from Cornwell in the United Kingdom (UK). Following the start of the Anglo-Boer War in 1899, mining operations were suspended and the Cornish miners were sent home.

After the war, they were recalled to South Africa – and it was discovered then that a large proportion had died. The reality of silicosis was revealed, causing an outcry that resulted in the establishment of commissions in the UK and South Africa to investigate the matter.  Many other investigations followed, making silicosis probably one of the world’s most investigated diseases.

Early on, the mining industry decided to pay compensation to miners who had contracted the disease. The industry also established medical facilities to help to care for the sick. At the time, compensation was regarded as generous and, partly for this reason, skilled miners from other parts of the world were attracted to South Africa.

In those early days, silicosis seemed to attack only white miners and, because of this, the disease was referred to as the White Death. The point is that right from the beginning the mining industry decided to compensate miners who contracted silicosis, and the process has been followed for well over a century.

An alternative would have been for the mining industry to take no responsibility for compensation and leave miners to rely on common law to sue employers – a route which, at the time, was perceived as senseless. The idea that a claim could be brought for some unknown act that may or may not have taken place, and had caused a miner to contract silicosis some 20 to 40 years earlier, would have been laughed out of court.

 

In essence, the system of paying compensation was introduced because the common law route was not considered an option. This was also the case in many other countries around the world. On this point, in South Africa there has never been a report of a case in which an employee has successfully sued an employer for contracting an occupational disease.

The most recent development in the silicosis saga – to establish a trust from which suffers of the disease will be compensated – comes as a result of an out-of-court settlement following a class action, which focused on getting employers to agree to a settlement, rather than seeking judgement on the merits of individual cases.

However, a pertinent question arises from the decision: Why should the mining industry pay compensation in first place? What seems to be a satisfactory answer has its roots in economics and, indeed, over the years some judges have suggested it. Some mining activities impose costs which may not be captured by the market. The argument was put forward in the 1920s by UK economist AC Pigou and developed further by Nobel Laureate Ronald Coase in the 1960s.

Coase called these costs “social costs”.  Jurists such as Harvard University’s Roscoe Pound had earlier taken a similar view. A miner contracting a disease imposes costs. He loses his income because he cannot work. He incurs medical expenses and his family is left destitute. These costs (social costs) have to be borne by someone – to a large measure the miner’s family.

It can be argued that social costs are normal costs of production and should be included as such by employers. However, a possible problem arises in that not every employer will agree to bear social costs – so an alternative is to manage the problem through legislation.

In this sense, mandatory workmen’s compensation becomes the most efficient way to resolve the issue, with social costs included in the costs of production, paid for by the employer, and passed on to consumers through the market’s price mechanism. Employers therefore discharge their obligations by paying the levy – simultaneously removing uncertainties surrounding the role played by occupational diseases in industry.

To the extent that a problem may exist, it becomes the problem of the fund – which government administers. Therefore, it becomes government’s responsibility to manage the fund in a way that balances the interests of all stakeholders.

In light of this, the answer to the question of who should have resolved the issue of silicosis compensation becomes clear: it is a government problem, not a private-sector problem. When the Workmen’s Compensation Bill was passed into law – which included compensation for occupational diseases – the responsibility of the employer was to pay the levy, with operational responsibility in government’s hands.

It was recommended nearly 40 years ago that there should be only one system for occupational compensation – having two occupational disease funds does not make sense. The latest court case was totally unnecessary and could have been solved legislatively, quickly and at virtually no cost.

We now have a trust, which is effectively a third fund. This fund is not subject to parliamentary oversight. It is another untidy add-on. More importantly, there is evidence from other countries to suggest that trusts do not provide the best solutions to the problems of compensation for occupational diseases – especially in terms of the magnitude of silicosis claims in South Africa.

Published by

Albert Mushai

Legally Speaking is a regular column by Albert Mushai from the school of Economics and Business Sciences, University of the Witwatersrand. Mushai holds a master’s degree from the City University, London, and was the head of the insurance department at the National University of Science and Technology in Zimbabwe before joining the University of the Witwatersrand as a lecturer in insurance. 
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