It seems difficult to write about South Africa without writing about its mines. The country’s rich mining reserves play a vital role in the country’s economy, and indeed its very consciousness. Now the raging debate in all of South Africa, after the hosting of what was undoubtedly a very successful soccer World Cup, revolves again on its mines. Should the country nationalize its mines? That is the question that South Africa is asking.
Previously, we had written about how South African mines, despite their undoubted riches, remain vastly underutilized, given the country’s dependence on platinum mining. Frequent labor problems and prolonged power outages have caused concern over the profitability of the mining industry in South Africa. But now, ahead of the African National Congress’s (ANC) national general conference in September, the ANC’s Youth League leader Julius Malema has raised the thorny and contentious issue of nationalization. Malema wants the state to control around 60% of new mines, although the ANC has urged caution on the issue.
In its discussion document for the national general council, the ANC stated that debates on the nationalization of mines are ‘vexed by the fact that nationalization takes many different forms,’ and pointed out that Zambia had a fairly disastrous experience when it nationalized its copper mines in the 1970s. At that time, the Zambian government had found it difficult to manage the mines, and had to hire private companies to manage them. As copper prices plummeted, it was the state that bore the losses while the private companies had the luxury of continuing to receive the management fees. Given that background, the ANC has stressed that proposals for nationalization of mines need to be more specific, and also address questions relating to ownership of assets, their management, the costs to the economy and the biggest question of them all: just what are the chances of success or failure? The South African government, led by Jacob Zuma, has stated that nationalization is not on its agenda, despite pressure from Malema. During a recent visit to the U.K., the African President vehemently stated that there was no law in South Africa that requires the government to nationalize mines. “The nationalization of mines is not government policy at all,” he told Bua News.
However, what is of real interest to the ANC is that the economy be weaned of its dependence on mining, and develop what it calls a ‘more equitable and inclusive economy.’ Currently, mining generates around 30% of South Africa’s export revenue, and is responsible for 500,000 direct jobs, clearly a dependency that cannot disappear overnight, as the ANC admitted.
Although it is unlikely that the government would undertake any action in the near future, investors have fretted at the thought of nationalization of mines in South Africa. Despite Zuma’s assurances, this is not an issue that may die down in a hurry. Simply put, South Africa cannot be separated from its mines.
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