Nationalisation by stealth - until mines hit back
www.iol.co.za/business/business-news/nat...s-hit-back-1.1129057
September 1 2011 at 05:00am
By Allan Greenblo
There’s nationalisation and there’s nationalisation. There’s nationalisation of the seizure variety, punted by Julius Malema, and there’s nationalisation of the subtle variety, arguably already in play. When such cabinet heavyweights as the Mineral Resources Minister Susan Shabangu, Public Enterprises Minister Malusi Gigaba and Higher Education and Training Minister Blade Nzimande speak out against nationalisation, which nationalisation is it?
If it is nationalisation in any form, President Jacob Zuma could simply say as much and lay the issue to rest. He doesn’t because he can’t. To breathe easily is premature. Under resolutions of the ANC national general council, a task force was appointed to investigate nationalisation around the world. Gigaba has indicated that it would report back to the ANC by the end of this year. Additionally, it is to consider the formation of a state-owned mining company.
This raises the spectre of subtle nationalisation. It is the theme of a carefully crafted presentation by Hulme Scholes, a Johannesburg-based expert in mining law, likely to put the wind up anybody in a stupor that the debate will blow away. He anticipates that within the next five years there will be legislation providing for the forced sale to a state mining company of shares, or other participation interest, in every South African mining company.
Try to fault him. His cry is for the mining companies to become involved directly, not through the Chamber of Mines, in vigorous debate with the government if there is to be a chance of radical state intervention being prevented. Otherwise it will happen by default.
In a general sense, expropriation of assets is legitimate. But the warning point here is the 2008 Expropriation Bill, to become effective with “public purpose” defined to include “any purpose connected with the administration of the provision of any law by an organ of the state”, and “public interest” to include reforms “to bring about equitable access to South Africa’s natural resources”.
In section two the bill provides that “an expropriating authority may expropriate property for a public purpose or in the public interest subject to compensation contemplated in section 25 of the constitution”. Scholes believes that the way is being prepared for the formation of a state mining company, possibly funded by the Chinese government. This prediction is grounded in an interpretation of numerous public statements.
To take a Reuters report following state visits last year: “Deputy President Kgalema Motlanthe and Xi Jinping (Chinese vice-president, expected to become president in 2013) will co-chair the fourth China-South Africa bilateral commission and sign a number of agreements… Beijing sees global mining power and regional financial services leader South Africa as a vital source of commodities and as a stepping stone to access other African states. For South Africa, China also serves as a model of state action in the economy.”
Already there has been the freeing up of the state-owned African Exploration Mining and Finance Corporation (AEMFC) to compete for prospecting and mining rights. In the granting of rights, the precedent is established for the state to be both player and referee.
The corporation could be further advantaged when applications are made for new-order rights, particularly if the mining houses are unable by 2014 to reach the stringent transformation targets set out in the mining charter. Such are the targets, Scholes contends, that the mining houses have been “set up for failure”.
The next phase would be a state-owned mining company to absorb AEMFC. This has been proposed by the National Union of Mineworkers (NUM), citing the Freedom Charter and other historic ANC pronouncements, at hearings of the parliamentary portfolio committee. Neither individual mining houses nor the chamber attended.
The NUM says a state mining company should be established under the Department of Mineral Resources and not Public Enterprises. Mining rights should be awarded as follows: 31 percent to a state mining company, 49 percent to private investors, 10 percent to employee share ownership schemes, and 10 percent to “communities”. Investments of state-related bodies, such as the Industrial Development Corporation and Public Investment Corporation, should be consolidated in the state company. And 10 percent of all raw materials extracted by any company should be handed to the state company for beneficiation.
Moreover, says the NUM, the state should be allowed to expropriate not less than 50 percent of existing mines. It also wants the Mineral and Petroleum Resources Development Act amended to provide that the state company holds 60 percent of all shares, as well as “rights of determination”, in mining ventures. The Cosatu union further proposes that the amended act apply to new and renewed mining licences, and a moratorium placed on the issuing of licences until the act is amended.
It doesn’t necessarily follow that the NUM will get what it wants. However, there are powerful forces working in tandem. These forces are the task team and the national general council of the ANC.
The stated process of the parliamentary portfolio committee is to draft legislation in accordance with the council’s recommendations. Scholes considers on a present reading of the process that draft legislation, to establish a state mining company along the lines that the NUM presented to the portfolio committee, is inevitable.
Note the contrasting approaches between the ANC Youth League and the ministers. The former is ideological, to seize assets without compensation and the consequences be damned. The latter is pragmatic, seeking solutions to “the evil triplets of poverty, inequality and unemployment”, as Shabangu puts it. Turning his back on “unconstitutional measures”, Gigaba want to “unite the country”.
Read between the lines. First, the mining houses will have to go all-out to ensure compliance with the mining charter. They need to demonstrate that they are adequately addressing the “evil triplets”. Shabangu has explicitly warned them to “do more to improve the lives of those living near their operations”. Second, Gigaba’s assurance that “unconstitutional measures” are off the table implies that expropriation remains on it; but with compensation. Since the government doesn’t have the amounts required, who’ll pay? Take a guess. Mining agreements have been struck with China, but details are under wraps. Third is the concept of a state-owned mining company. It might not exactly help to “unite the country”, to use Gigaba’s phrase, but it should help to unite a fractious ANC looking increasingly eastwards for strategic partnership.
Allan Greenblo is editorial director of Today’s Trustee (
www.totrust.co.za
), a quarterly magazine mainly for trustees of retirement funds.
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