1. SOUTH AFRICA: NATIONALISATION AND THE MINING SECTOR

As of late, the political atmosphere has been clouded with varying judgements on the great issue of whether South African mines should be nationalised or not. The camp in favour of nationalisation, Former President of ANC Youth League, Julius Malema echoes the words of the Freedom Charter in that “The National Wealth of our country… the mineral wealth beneath the soil, the banks and the monopoly industry shall be transferred to the ownership of the people as a whole”. The camp not in favour sees this vision in a different light.

Nonetheless, this essay investigates the feasibility of nationalising the country’s mining sector from both a theoretical and empirical stand point.

2. WHERE IT’S ALL STARTED

Nationalisation of mines has been called for in order to give back to the country as the government will have direct control over the sector. This, they believe, will present more employment opportunities, better working conditions for miners, a more efficient distribution of income and overall improvement in service delivery. Julius Malema (the main instigator behind the call for nationalisation), proposes that the state take a controlling share of 60% in all private mines, all which will be managed by a state owned mining firm (LeadershipOnline, n.d).

According to Malema, nationalisation will achieve the following:

➢ Increase the State’s budget for social development objectives;
➢ Be a basis from which the country’s minerals are locally beneficiated and industrialised;
➢ Improve the pay and working conditions of current mineworkers (LeadershipOnline,n.d).

3. THE GLOBAL EXPERIENCES ABOUT NATIONALISATION

The notion of nationalisation, however, is not a new or adolescent one on the global field. Many countries have attempted to nationalise and take public ownership of various industries, with both political and economic motives. More relevant, countries that have pursued mine nationalisation include Chile (1972), Sweden (1957), Sri-Lanka (1971),
Zambia (1970’s) and Botswana. Investigating some of the above countries may allow us to learn from international experience and improve our judgment.

4. On the contrary

Botswana presents a different, more positive case study. It is ever so commonly held up as a successful model of nationalisation (Coetzee,2010). Botswana nationalised their diamond mining sector and were able to manage the mines without any negative fiscal effects. However, the nationalisation didn’t quite meet intended objectives of greater distribution of income , a lowering of the unemployment rate as well as poverty alleviation. The people of Botswana did not benefit from the profit made through the diamond mines (Van Wyk, 2010). With an unemployment rate between 25% and30% and half of the nation living below the poverty line, Botswana has the highest poverty gap in the world and suffers from an uneven distribution of income. All this shows that the objectives sought through nationalisation are far from attainment.

5. In general

Research points out that nationalisation is feasible and viable more in some countries than others but has a limited life cycle and is highly dependent on the chosen commodity such as the Venezuelan encounter in the Orinoco oil fields. In this case, poverty was not addressed from the ground but the state was able to balance it’s books and create a number of jobs. Nonetheless, the aforementioned international examples shed some light on the argument of whether South Africa should nationalise mining or not.

6. WHAT ARE RISKS?

Eskom made a loss of R3 billion in 2009, SABC made a loss of R910 million in the same year while Alexkor, a government mine, made a loss of R77 million (Leon, 2010). All of these are state owned enterprises and their lack of success questions the government’s management skills and whether it will be able to run such a big sector as mining. On the other hand, the Kwa-Zulu Natal Treasury economist Clive Coetzee draws attention to the fact that the private sector already has the human and intellectual wealth to maintain this sector and thus there is no need for the state to intervene.

7. The Difficulties of Compensation

One trade union leader even warned that nationalisation without compensation would spark up a revolution due to the large number of South African citizens who would lose their pensions. However, Dr. JamesMotlatsi, former president of the National Union of Mineworkers, reportedly said in the Mining Weekly that he believes that even nationalisation WITH compensation is a hopeless case as the government does not possess the R2-trillion-plus that it would cost to purchase the mines (Leadership Online, n.d). The cost would obviously be a burden on the ordinary citizens. After all, every cent that would be spent on compensation is a cent that could have been spent on other worthy social development programmes such as rural development schemes and the building of hospitals/clinics.

8. WHAT ABOUT InvestmentS?

Another negative effect that nationalisation would have is the possible decrease in foreign direct investment. Leon, pointed out that nationalisation would “create fear among foreign investors, especially in a country that has a history of failed state owned enterprises”,
(Leon,2010). After all, when foreign investors want to invest in a country, they first investigate and take into account how the government of the country in question manages it’s state owned enterprises. If the government has failed to successfully and effectively manage them, uncertainty will increase from investors. Sadly, as we discussed earlier, South Africa has a rather unimpressive history of state owned enterprises and this may scare off potential investors.

9. WHAT DOES THE FREEDOM CHARTER SAYS?

Another strong argument advanced by many questions the motives of those who are in favour of nationalisation. As mentioned, those who are in favour of nationalisation often invoke the Freedom Charter and are confident that it calls for nationalisation. However, this is not entirely the case. The Freedom Charter demands that “The mineral wealth beneath the soil, the banks and the monopoly industry shall be transferred to the ownership of the people as a whole”. Paradoxically, ownership by the state is not quite exactly ownership by the people, as Joe Slovo and other socialists now concede (Louw, 1991). Private ownership, in essence, is ownership by the people, especially in a widespread free market.

10. ANTI-NATIONALISATION ARGUMENTS

Furthermore, what will be the effect on Non-Profit Organizations (NPO) if mines are nationalised? All through 2009, some R5.1 billion in private sector funding flowed to NPO programmes and projects for job creation, health, education, housing, health community development and many other social development services (Brown, n.d). It is reported that the mining sector contributes an average of 20% and spends significantly more on Corporate Social Investment (CSI) than any other industrial sector (Brown, n.d). This dismisses the argument that mines should be nationalised because they do not give back or reinvest enough into communities.

11. ALTERNATIVES THAT CAN MATERIALISE

There are other ways in which Government can achieve it’s objectives of social development apart from through Nationalisation. There are many other job-creating, socially uplifting possibilities that the government can consider, even within the mining sector. Democratic state power can be used to leverage transformation within the mining sector. For instance, the government could impose National Shipping Quotas on the mines (Cronin, 2009). After all, more than 90% (by volume) of all our exports – which are mainly minerals – are by sea. Invoking a Shipping Quota would allow the government to achieve immediate transformational objectives without nationalisation.

12. CONCLUSION

All things considered, it is quite transparent that the nationalisation of mines is not feasible for South Africa. The reasons for doing so are vague and both the financial and economical implications would be a burden for the entire country. International experience from countries such as Zambia, Venezuela and Botswana, demonstrate the potential flaws and dangers involved with nationalisation. Our government should rather focus on other means of liberating it’s people from financial captivity and dwindling economic conditions.