This week saw a frenzy of calls for the nationalisation of South African mines. It started with a call from the ANC youth league, one of the first testers of public and market opinion, and was quickly followed by a similar call by COSATU, despite General Secretary Gwede Mantashe denying nationalization of mines being on the ANC agenda. The debate was kept on top of the agenda with a call by the Young Communist League on Friday, supporting the ANCYL and COSATU in their calls.
I can already see commentators, very optimistically and self-assured, assert that in our advanced democracy and our liberal economy, nationalisation will not happen, since the voices of moderation within the ANC will hold sway and deliver us from this evil. To the naïve Afro-optimists I can only say, dream on. The high regard in which Fidel Castro and Hugo Chavez are held by said organisations, and other proponents of nationalisation within the ruling party, should be a clear indication that nationalisation has become a real possibility; I will not refer to it as threat for the fear of being labeled a negative afro-pessimist.
During a week of calls for nationalisation of mines, by the indisputable king makers of the African National Congress, the ANC Youth League, Young Communist League and COSATU, only one dissenting voice rose in the wilderness, that of Gwede Mantashe, who stated that the nationalisation of mines was not on the ANC agenda. The strong pro-nationalisation faction within the ANC cannot and must not be underestimated; after all, they managed to get Mbeki recalled despite calls from moderates.
It can be expected that the idea of nationalisation will be pursued with the same vigour as the recall of Mbeki, the removal of the Scorpions and the recent, swift hatchet job on the ANC board, all of these particularly hated thorns in the side of the left-wing of the ruling party, the same people calling for nationalization. This group, including Mantashe has been at the forefront of a campaign to transform the judiciary, currently a top priority with personal attention being given by the President. The fact that the group invoked their trump card, the clear reference to nationalisation in the “holy document”, the “Freedom Charter”, is a clear indication of their determination to succeed in their quest.
Gwede Mantashe the only voice speaking against the nationalisation should not inspire confidence with owners and potential investors in this critical industry. Mantashe’s views on a market economy are well known and will not make many capitalists jump with joy…a bit like having a wolf minding the sheep. The inimitable Mr. Mantashe was one of the first people mooting the possibility of a State Mining Company. He was, through his career as leader of the NUM and the SACP, an ardent supporter of extreme left economic policy and a vocal critic of business, in particular mining companies. Mantashe has also established himself as a manipulative man with many agendas who is no stranger to twisting the truth to suit his priority agenda at any specific point in time. In his climb to the top, his modus-operandi of divide and rule, left divided organisations in its wake whilst, his habit of changing his mind, twisting the truth and flatly denying responsibility does not inspire confidence. I will not consider it beyond Mr. Mantashe, to have instigated this call, creating a situation he can use, to manipulate the situation, a dangerous game indeed.
The comparison, Minister of Mines, Susan Shabangu, drew on the SABC program “Fokus” when asked about nationalization of mines, between a State Owned Mining Company and nationalization does not bode well. It opens the way for wholesale nationalization. The state-run diamond operations, she referred to, is hardly a pinnacle of achievement. This should have set alarm bells ringing. On Monday afternoon the ever-irritating Jesse Duarte said, “with the opinions on nationalisation a national debate is required” or something to that effect. We know how these things work. The noisy “king makers” within the Alliance becomes the voice in the debate through intimidation, anarchy and violence. In ANC-speak this means nationalisation is inevitable.
As things stand, and according to the Fraser Institute in Canada, South Africa is the third least attractive investment destination for international mining investors in Africa, beaten only by the DRC and Zimbabwe. This dubious honour was achieved because of deterrents such as environmental regulations, the tax regime and especially, the uncertainty as to the interpretation of new mining legislation, regulatory inconsistencies and misgivings about land claims. South Africa also received a poor score in terms of labour relations and security. We can now add an additional factor, one as bad as any previously identified factors, probably even worse, the threat of nationalization. History teaches us that chances of reasonable and fair compensation, in the event of nationalization, is almost zero.
It is no wonder that a company like BHP Billiton, who knew and had first hand experience of Mantashe as a board member at their Samancor Company, have made few investments in the South African mining industry in the last few years. On the contrary, they cancelled oil exploration plans, sold a large stake in Samancor and disposed of their interests in diamond exploration mining. Considering the withdrawal of top gold miner Barrick from South Africa, Anglo’s desperate scramble to get rid of their gold mining interests, Rio Tinto’s low-level presence in exploration projects and recent changes in management structure coupled with rumours of planned asset disposals in South Africa by Goldfields. The prospect youths and low-skilled workers miners, who do not understand the basic concepts of the need of fixed investment, the basics of supply and demand and the basic idea of profit and cash generation in a business running around creating mayhem in support of their call for nationalisation, could be the final straw for mine owners and potential investors.
Disinvestment and “investor strikes” are seldom accompanied by fanfare. Decision makers in mining, in many aspects often act very quietly in threatening situations, preferring to keep all future options open. They will more often than not, step back gently and observe the unfolding drama from a safe place whilst coldly and unemotionally assessing their risks before voting with their chequebooks. They will like in the case of Zambia and the former Soviet Union, bide their time and once the lesson has been learnt they will be back on their terms. They will not shed a tear for the destruction of the nationalised mines; after all, they will be the victims of nationalization.
Judging the success or rather the lack of success of some of the BEE mining ventures, all of them socially engineered initiatives, one wonders how long it will take to destroy a nationalised South African mine.