The possibility of possible nationalization of South Africa's key mining sector rumbles on. Is this likely to happen? Julian Phillips looks at the politics behind the rhetoric.Author: Julian Phillips
Posted: Thursday , 07 Oct 2010
BENONI (SOUTH AFRICA) -
The argument that South African mines will be nationalized stems from Julius Malema, the head of the Youth League of the ANC. It has been rumbling on for some time now. Mrs. Shabangu the Mines Minister previously stated that it would not happen in her lifetime. This was ignored by the Youth League who held to their position. At that time it was not on the Agenda of the ANC and was treated with a measure of derision by the ANC. Then the ANC conference happened and the ANC placed the issue on the Agenda to be discussed in 2012.
As in most countries internal national issues rise in importance far above international ones. The issue of whether the "previously disadvantaged classes" in South Africa are getting their ‘fair' portion of the country's wealth has been a burning issue since 1994 and is unlikely to go away.
THIS IS AFRICA
The quote from the film "Blood Diamonds" - "T. I. S. -This is Africa, is often used to highlight that thinking is different in Africa to the rest of the world. The developed world concepts that laws rule governments, good economic sense will prevail, education and understanding of western capitalism pervade all walks of economic life, do not apply in Africa, as history amply demonstrates. So, before taking this issue further in this article, readers must factor in certain sub-Saharan cultural differences that they are unaware of when it comes to such discussions.
Glance at the history of sub-Saharan history and you will see an overriding description of rulership by individual tribal leaders. Names like Robert Mugabe, Mobutu Sese-Seko, Hastings Banda, Idi Amin and in the past Shaka Zulu spring to mind. How did they get so much power? In that part of the world, an African chief is considered the father of the tribe. He has the right to everything and as a father, he is expected to look after his children. As such, it is deemed right that he should own everything. His word is law and that law may change from time to time, according to the situation he finds. Any Cabinet he may surround himself with is there to advise him, for he makes the decisions, not the Cabinet or party. In South Africa and Zambia's case this outlook has been modified to some extent, for in Zambia the government is a mixture of several tribes. In South Africa, while the Xhosa tribe is dominant, politics via the Unions has diluted the sole leader's power. Nevertheless, even there, government reflects the pressures of power and sees legislation as subject to those pressures. Government can alter legislation any time in these almost one-party nations. It is against this background that mining legislation should be seen.
The author experience this attitude first hand in Mozambique, when he quoted a regulation agreed with the World Bank on Debt Conversion. He pointed out to officials of that central bank that particular regulation, whereupon he got the reply, "Oh, that's only what's written". The top official in charge of the application, made it clear that his opinion at that time would override any such regulations.
As we have all seen repeatedly, since Robert Mugabe took the reins in Zimbabwe, the desire to control and own the wealth of their own country by the current leaders has been relentless, oblivious to the destruction of their own people's wealth and welfare, a repeat of what happened in Angola, the Congo, Rwanda and so on and on.
With this in mind one looks at South Africa, which to its credit has seen the reins of power held in ANC hands since 1994 and the overall shape of the economy is still much the same as it was prior to 1994. In that time there has been the pervasive policy of "Black Empowerment" steadily creeping into all walks of life. To date this has not sprinted to its objectives too quickly, in the hopes that the economic engine will run at the pace it did before 1994. The intention of the government there has been that the city should come to the village, but slowly we've seen the village come to the city. It is this process that will dictate the future of South Africa.
In South Africa. the fattest goose has always been the mining sector and the object of avaricious government eyes. But this goose has thinned tremendously in the past decade, as a rising Rand has choked off new growth in the gold sector and the tonnage produced has fallen from a peak of over 1,000 tonnes of gold to the present around 170 tonnes. Shallow mining of platinum is faring much better, so just as vulnerable.
The underlying belief in the heart of the Unions, that workers should get a bigger share of the profits through wages [rising faster than inflation] will see costs rising at an accelerating pace, making future growth in gold mining slow continuously.
NATIONALIZATION - A SOCIALIST POLICY OR AN AFRICAN ONE?
Please note that African Communism has little to do with Russian or Chinese Communism. Hence the above question. You have to blend the above attitudes to ownership with the unionism of the largest labor union in South Africa COSATU. The government has to rely to a great extent on COSATU's support to continue to rule unchallenged. There have been signs of deep discord between the two of late, for Black Empowerment appears to follow the traditions of tribal Africa more than it does Socialism, much to the annoyance of the Unions. The number of newly empowered Africans [and often related to political leaders] is very few, with the principles of the process broken repeatedly as a small number of nepotisticly linked individuals have gained great wealth while the poor majority remain as poor as ever.
[There is the tale of Wisdom Mbutu and Happy Boy Mtwetwe digging holes in the road and Happy Boy turns to Wisdom and says, "after the revolution the bosses will dig the holes in the road". Ten years later and after the ANC had power for many years, there they are, both still digging the holes and Wisdom says to Happy Boy, "I thought you said the bosses would be digging the roads after the revolution" to which Happy Boy replies, "We are!"]
The driving force behind the discussion on nationalization is the Black Empowerment process. However, as the efficiency of the system declines [you saw that in electricity and it's coming in hospitals, water and a host of state run or para-state run enterprises] it is clear to all, including the ANC, that such a step would mean a disaster for production and profits. It would also mean the end of foreign investments in South Africa. The nation cannot grow without foreign investments in the country. Despite all this, the issue is now on the agenda. It is the political shape of the country that will dictate whether nationalization will happen. We cannot rule it out as we felt we could a month ago. With BEE already demanding the 26% of South African mining be handed [almost free] to black ‘investors', there is a distinct possibility that nationalization could happen!
The conclusion of the discussion may well be two years away still, but the fact that it is on the Agenda of the ANC then will delay or deter foreign investment on a broad front in South Africa. Should it become a reality thereafter you will see South Africa slide down a very steep slope towards the state that Zimbabwe is in now. The lower prices South African shares have relative to their U.S. and Canadian counterparts, reflects this possibility.