The Great Resource Scam

We recently witnessed, without to much fanfare and hardly a whisper of gnashing teeth, one of the biggest robberies off, in Malema’s words; “the mineral resources lying below the South African soil”, belonging to the people – in a truly socialist sense – of South Africa. The resources robbed was not diamonds, or indeed platinum and gold; it was lowly iron ore – the feedstock of the ferocious Chinese and Indian industries. The robbers, ironically, was not evil white colonialists neither were the vile Apartheid era oppressors; they were not even mighty imperialist raiders from Europe and North America – no; in this case the robbers were local people; heroes conspiring with new age Moguls to relieve the people of their hard fought wealth.

In this intriguing tale of robbery and deceit a whole chunk of iron ore reserves were stolen from an unsuspecting Kumba iron ore by master of deceit Jagdish Parekh – agent of the Gupta brothers, big friends of; you guessed it; Jacob Zuma and partners. Parekh and his cohorts in Imperial Crown Trading – Kgalema Mothlanthe, Duduzane Zuma and others – invariably with the help of loyal cadres in the Department Minerals – illicitly used stolen Kumba documents to apply for the mineral rights which was conveniently allowed to lapse by another company run by modern day moguls; Accelor Mital. The chairman of the company – victim of the scam; Kumba Iron – was none other than Lazarus Zim, co-owner; with the Guptas; of a company called Afripalm.

For those not grasping it all yet; besides the shenanigans of the politicians and their appendices – Mothlanthe, Zuma and others – which is anyway expected and par for the course, we have a situation where the honourable Mr. Zim seems to be closely connected to the band of raiders – RCT and stand to gain handsomely from this latest scheme to enrich and reward the select few with the spoils of the struggle. Whilst Zim plots with the raiders, he remains the chairman – receiving a handsome fee for his efforts – of the company, KUMBA Iron, which will be irreparably harmed by the actions of its chairman and friends. Now, unless I’m mistaken, to be the chairperson of a public company requires a high level of integrity and the chairperson of such companies are expected to have the best interest of the company at heart.

This case presents a clear conflict of interest and to call Zim a man of integrity would be stretching the truth. Instead of taking the honourable route and resign as chairman, Zim, after being pushed, agreed to recuse himself from KUMBA board discussions involving the ICT issue – a very convenient arrangement. He can use that time and over a cup of coffee, can discuss ICT strategy with the Guptas, young Zuma and Parekh.

My gripe today however is not with Zim; after all his actions are not extraordinary. Truth be told, I would’ve been extremely surprised; even shocked had he acted in a different manner. My gripe is with the board of Kumba who, petrified of being called racist or anti-transformation, accept the untenable situation; the only sign of resistance; an odd cowardly remark dropped in passing by board members hoping to placate their nagging consciences.

Board members fearing the racist label are the same people running around claiming, after the fact, their innocence and rabid opposition to apartheid. Today these captains of industry are as silent as their predecessors in the apartheid years; a silence then, that only broke when they saw the writing on the wall. Once again these brave men of integrity are carefully watching for the writing to appear; the sign for them to allow their integrity to once again burst into the open.

My message to these captains of industry; moral pillars of big business; stock up on bully beef and candles, fill up the water cans; there is a long wait ahead – I hope you will find your integrity and values at the end of your vigil.

The ANC, Australia and the Super miners

 

Some may wonder why South Africa missed the boat, so to speak, during the last resource boon. Why did most resource rich countries, notably some of our African peers and in particular Australia, outperform South Africa by miles?

The answer lies in the policies of the ruling party, and not having learned a thing, the brilliant Fred Gona, chairperson of the Parliamentary Portfolio Committee on Mineral Resources, having flipped the Chamber of Mines the proverbial bird by not reading their objections to the course being plotted, are dead set on engineering a “compromise” that will satisfy Julius Malema’s nationalisation dreams and the Anti-Malema faction with the establishment of a state owned super mining company to be managed in the same effective manner as ESKOM, SABC, Denel, Transnet and SAA; a company which will, with the assistance of the taxpayer, distribute great riches to the deployed and their patrons. Like Malema, the well informed Gona assures us that, despite popular belief and countless reports to the contrary, South Africa remain the most mineral rich country in the world.

Ever wondered why foreign investors are not falling over their feet to invest in this untold mineral wealth? To add substance to the learned Mr. Gona’s claims we just have to look at the Pamodzi/Aurora great gold venture. For those who have not followed the saga; a year or so ago, Pamodzi Gold Mining Company – a company scavenging off the remains of mostly worked out gold mines, effectively abandoned by the bigger players reluctant to invest in these carcasses because of prohibitive regulations, restrictive labour practices and other risks – ran out of cash. Having assured investors of a major foreign investor, who subsequently miraculously disappeared, they; Pamodzi, went into liquidation with the only benefactors the BEE partners and their patrons – the directors.

The liquidators soon announced that Aurora, a company high on big names – Zuma, Mandela and Hulley better known for mining dirt in Presidential trials – but light on management savvy; with the backing of a filthy rich Malaysian, will take over Pamodzi. For good measure they will ad Primrose Mining who owns mines that were mined to extinction a century ago, to their magnificent portfolio. The Malaysian disappeared into the remote forests of Borneo it seems; the mines produced nothing but polluted water which was pumped, untreated, into the surrounding streams; the workers were not paid and apparently starved of the property but these small challenges did not deter the great new age miners. They soon found a new backer but somehow the tight fisted greedy bastard became dodgy and, much to the delight of many – including the great number of ANC parliamentarians who lauded and cheered Malema’s nationalization submission to Parliament – the liquidators announced that a Chinese Consortium are preparing an offer to take over this poisoned chalice.

Given the hullabaloo over the super mining tax proposed by the Australian Government, with the giants of the Mining world BHP Billiton, Rio Tinto and Xstrata threatening to take their toys and go play elsewhere, many must be wondering why the global miners are so relaxed about the intention of the ANC and the future of their investments in South Africa, especially in view of Gona’s tales of the untold mineral riches lying below our soil. Truth is; they’ve are here; they’ve experienced mining in South Africa and they don’t like. The big players do not trust the direction of the industry, they dislike the uncompetitve labour set-up and anarchic unions demanding pay way beyond their skill level; they do not take kindly to the implied and the real threats to their tenure. Knowing Africa however, they remain condescending. Their attitude; keep quiet, patronize them whilst sweating the assets, discount the in the balance sheet, they build for the distant future, twenty-thirty years hence, when, like with Zambia and the DRC, they can walk right back in, this time invited, and, in the ashes of a decimated industry find a few embers to nurture and build into new industry on their terms.

The rosy picture of our mineral wealth, pictured by some, is belied by the behaviour of BHP Billiton, a company with its roots in South Africa and being steered by a South African. They have sold much of their interests in South Africa; amongst others a thriving Chrome and Ferrochrome business and diamond interests, simultaneously allowing licences and options in other minerals and oil to lapse. The BHP Billiton exit strategy is simple, milk ESKOM for what they can, sweat their coal and manganese assets and avoid green fields projects investment.

The BHP Billiton model is closely followed by others. Rio Tinto, chaired by a South African, has not made a significant investment in South Africa for ages, preferring to invest in Zimbabwean Diamonds and Namibian Uranium whilst flogging a large part of their stake in Palabora Mining Company, a dying and marginal asset, to BEE entities. Barrick, the world’s biggest gold miner only maintains a token presence in South Africa whilst expanding their operations in Tanzania. Norilsk recently got rid of all the technical expertise housed in their Johannesburg office, deciding to maintain a small administrative staff to keep an eye on their joint-ventures with the likes of ARM, whose chairman Patrice Motsepe, is not against nationalization as long as he gets enough for his, not insubstantial, chunk of worthless Harmony shares. Meanwhile Xstrata, another miner being steered along by a South African, having dipped their toes into Platinum mining with their Angloplats joint venture and a small investment in their own Elands Platinum Mine are not prepared to convert their 25% investment in major platinum player Lonmin into full ownership and are seemingly reluctant and circumspect with any new Ferro Alloy and coal investments, probably considering the risk as excessive.  

It is ironic that the mighty De Beers – on the bones of their backside because of some worthless South African assets and the loss of their marketing stranglehold – consider sending their explorers trudging, like Frank Zappa’s Nanook and the evil seal hunters, across the Canadian Tundra, to dig through the perma-frost and the deadly yellow snow (where the Huskies go) so that they can mine the rich diamond veins lying underneath freezing lakes, less risky than investing in South Africa. Anglo Ashanti would rather invest in the war torn DRC than in South African gold projects whilst Randgold Resources would, according to their great African Leader – Mark Bristow, rather face the logistical nightmare of building mines in godforsaken parts of Mali, Ivory Coast, Senegal, DRC amongst other, than face the insecurity of super miners like Gona and his political backers Malema and others. As if all of that is not convincing; the mighty Goldfields, unable to make much from “the biggest known gold-resource” in the world – South Deep, are now celebrating the success of their exploration teams discovering new deposits in Peru and whilst the production from South Africa are shrinking with the dawn of every new day; their investments in places like Ghana, Peru and Australia – in some instances they have to build their own power generation plants – are showing excellent returns in the wake of a high gold price.

To think that study tours to Venezuela will bring answers is rather foolish and a thinly veiled reason for another overseas trip. Perhaps the wannabee miners like Gona, Malema, Kulubuse Zuma and Kodwa Mandela, their friend Hulley and others like them should visit 3762countries that are struggling to rise from the ashes of socialist agendas and learn how to stay out of the quagmire. Perhaps Jacob Zuma should’ve dragged his friends from COSATU of to India to see how they the Indians work and find out why they can be competitive.

In Australia, when Kevin Rudd announced his populist “mining super tax”, his ratings initially shot up. However, the Aussies being relatively educated, and having assessed the effect of this tax on the goose laying the golden eggs, are now giving Rudd the thumbs down and his ratings are dropping. In South Africa, if a politician conjures a populist hair-brained scheme, any opposition to that plan will result in thinly disguised threats and punitive measures by deployed cadres, making life impossible for such opponent whilst hardening the resolve of government to destroy. Makes one wonder; what did those convicts that built Australia have?

Nationalisation – A Matter of Life and Death

The nationalisation debate or non-debate, depending on your perspective, could become a matter of life and death it seems. Given the quarters in which the discussion rages at it fiercest, where stabbings and burnings are at the order of the day, some statements by major protagonists could  turn out rather prophetic.

I am referring of course to the spat between the Minister of Mines and the ANC kindergarten. Malema started this dice to death when he stated that nationalization of mines will happen in his lifetime, which means – given the average life expectancy of the South African male being down to 47 – the window for this envisaged nationalization of mines, particularly gold and platinum mines – Malema’s stated target – cannot be too far away. Those having false hopes that the window may be enlarged by Malema’s longevity, think again – the tsotsi’s obesity problem is likely to make the window even smaller and he,  realizing the risk,  are upping the ante on this matter.

Susan Shabangu, in reply to the Tsotsi, and in a desperate attempt to calm the nerves, told mining investors – already suffering jitters when they hear the words South Africa  mining and investment spoken in the same sentence – that nationalization will only happen over her dead body.

Shabangu’s statement are contrary to her position only a few months ago when she made her “State of the Industry” address, stating emphatically that mine owners will wish her dead for various reasons. Ironically, that same mine owners are now praying that she outlasts Julius.

However, those naively pinning their hopes on Shabangu, dare I remind you that the same Shabangu has made a number of U-turns on this subject? The statement by the DMR that state ownership of strategic mineral mines is just another form of nationalisation – nationalisation by stealth so to speak.

Anyone trying to get clarity from Gwede will be left justifiably confused, as Chris Barron found when he interviewed the “Jumping Jack” last week.

As for the leading fornicator, he is too busy building a nation to care about insignificant and boring little debates amongst the minnows. That is the stuff that his “Loottenants” deal with.

Anglo America, hedging their bets will not be derailed by the confusion and Cynthia Caroll, whilst promising a bail out for ESKOM and a great partnership in “strategic” coalmines, are reportedly consuming copious amounts of Chivas with the Tsotsi, discussing compensation for nationalised mines – anything rather than getting into bed with Mick Davis.

Transformed to Death

Before dismissing Susan Shabangu’s recent outburst – when she unleashed her unwarranted, vicious and, frankly, ill informed attack on mine owners and managers – as populist and Malema-ish, should consider her influence in the upper echelons of the ANC and government. Those dismissing her ranting as ill-informed vitriol are well advised to take note of the fact that the President and Bheki Cele’s favourite and general flavour-of-the-month, “Shoot-to kill” slogan was originally coined by the same Shabangu in her role as Deputy Minister of Police. Now, we all know that once a term is accepted and embraced by the alliance, it automatically elevates the creator to “struggle-hero” status and we know you do not mess with ANC icons.

The honourable Minister had the temerity to suggest that the mining industry does not do enough in the way of advancement of blacks. She accused the sector of falling short in skills training, this, despite the fact that the mining sector has been singled out as having done more than any other South African industry in the field of skills training and development. 

What the Minister conveniently forgot when calling for more black managers in operations is the small, but very critical, predicament that the schools, because of government’s lack of delivery, cannot supply sufficiently educated people to tertiary institutions for training in technical fields. The few engineers that do obtain degrees and diplomas are either white or get their qualifications at the behest of mine owners who walk the extra mile to ensure the success of their black students.

Once the students passed the degree or diploma course required to enter the industry, some, due to lack of motivation and a boycott culture, again instilled by the government of the day, having enrolled for industry examinations do not bother to turn up for the examination or perform abysmally because of a non-existant learning culture. The low quality od education are acknowledged widely throughout the government leadership with Shabangu and the Minister of Education probably the only leaders oblivious of the problem. The people singled out and chosen to lead the industry are producing the worst exam results the industry has seen – the leaders of the future, it seems, requires a lowering of standards, against which their success will be measured – entitlement before competence it seems. Possibly a good thing since it may reduce their chances of spotting their Ministers incompetence. 

Shabangu’s singling out of procurement and ownership – as the areas other than operations to be targeted – are perhaps more surprising than her crusade for faster transformation in operations management. The reality is that, as in training, the mining industry has done more than any other industries as far as black ownership is concerned. According to the Chamber of Mines, the industry handed more than R 200 Billion in value to black owners in the last seven years. The BEE efforts has been so successful, the honorable minister’s comrades in NUMSA are for the nationalisation of the wealth of the two most successful recipients of BEE handouts, Sexwale and Motsepe. 

The demand for more black power in procurement management seems even more mystifying to the uninformed observer, especially in the light of ESKOM’s spectacular failure, to a large extent, as a result of the transformed procurement function in that desperate organisation. 

Analysing the three areas singled out for accelerated and revolutionary transformation, one finds a golden thread running through it. The Golden Thread of empowerment for the selected few; Labour wanting more managers and less work for more money; the new ruling elite needing their fair entitlement to ownership whilst their cronies demand unhindered access to the huge spending power of the mining industry.   

By waving the review of the Mining Charter as a stick, to beat mine owners with, serves little purpose in encouraging investors to enter and or re-enter a key industry and major supplier of desperately needed employment. Contrary to the teachings of the ever popular, “Struggle Economics for Dummies – A South African View” by Julius Malema, threats do not entice investors to part with their money draw investment. Consequently, major global miners are leaving our shores in droves, scared of by government regulation, labour cost and labour relations. 

Shabangu whilst admitting the negative effect of the Minerals and Petroleum Resources Development Act of 2002 and the Mining Charter V 1, in the same breath, blames mining companies for not fighting the effects of the law with more dynamism. How far removed from reality is that? Does the minister suggest a man, working in the WTC on 9/11, could’ve saved his life by standing in the window, gesticulating wildly at the approaching aircraft, in a desperate attempt to aim the gargantuan missile at a higher level in the building – hoping that, if successful, it will leave him an opportunity to flee down the fire escape – before all hell brakes loose. 

The reality is that the South African mining contracted during the boom years whilst mining grew by 5% and more in most other countries. The contraction is attributable to government policy (BEE, AA and tenure of ownership), the LRA, unrealistically high wages. Mining in South Africa has become so expensive that Xstrata can now mine steam coal in the USA cheaper than in South Africa. Because of the present mining investment milieu, global miners like BHP Billiton, Rio Tinto and Barrick has stopped investment or at best have their investments pegged to sustain current operations. In many instances, the major miners have moved capacity elsewhere. The only remaining foreign investors are Toronto Securities Exchange gamblers and Canadian Minors investing in platinum. 

Given the Minister’s threatening demeanor, combined with the ascendancy of the unions and the ESKOM disaster looming large, we can expect the situation to worsen rapidly in the next five years with the ultimate collapse of the industry inevitable. 

The ill-informed views of Shabangu can be ascribed to incompetent, under-qualified and inexperienced officials in her department. Officials in the Deparment of Minerals are not unlike their incompetent peers in other departments, the main difference being Shabangu, who unlike her peers, prefer not to hold them accountable, probably not understanding what they do. I’m almost certain her DG must have informed her of the dismal performance of prospective managers in industry exams.   

Malema’ call for nationalisation, initially backed by Shabangu before making the familiar U-turn should not faze owners too much. Given the fading fortunes of the industry there will soon be very little to nationalise. Perhaps Shabangu believes her populist attitude will bring her glory in the gloomy future she perpetuates. 

Maybe the minister should stick to her knitting and join the free-for-all killing spree she mooted during her tenure as Deputy Minister of Police.

An(c) Economy of Lies

             

ANC party secretary-general Gwede Mantashe yesterday announced that the ANC national executive committee, which met at the weekend, has decided to refer the nationalisation debate to its economic transformation committee, which will then develop the party’s position on the matter.

 In three weeks, we saw this unfolding drama develop from a position of “No nationalisation of Mines to the current position.

Malema, at an ANC Youth League conference three weeks ago, called for the nationalisation of mines, invoking the requirements of the “Freedom Charter”. He was quickly backed by Vavi, Cosatu, Vavi and the SACP.

Gwede Mantashe, in his capacity as Secretary General of the ANC reacted, saying that; “Nationalisation of the Mines are not on the ANC agenda”. Susan Shabangu said a few days later that state owned mines are a possibility.

The youth league reiterates its demand for Nationalisation, again backed by Vavi and Cosatu.

Gwede Mantashe in his real skin as President of the SACP makes another one of his famous U-Turns and agrees to that Nationalisation should be considered. At the same time, Duarte tells the media that the ANC will have a national debate, one of those things we hear about but never participate.

Susan Shabangu, to confuse the market, says Nationalisation will not happen, whilst Zuma agrees with the idea of a “National debate”. On Sunday, ANC policy academic and MP, Professor Ben Turok assured all Sunday Times readers that there is no possibility of nationalisation of mines.

I am sure, as with the replacement of Mboweni with hard line Communist Gill Marcus, many commentators will call this a positive development. The only possible positive spin-off will be the closure of mining companies filled with BEE leeches and no economic right to exist

Does anybody know who is in charge? This is a very strange development in the light of the President’ Assurance that the country is not governed by trade unions. To me it seems the tail wags the dog, or is this “Rule by Confusion and Lies”.

Two weeks ago, that great proponent of truth from ANC ranks, Carl Niehaus referred to the science of lying as perfected by politicians the world over, a science in which our ANC and government do exceedingly well and can justly claim world leadership. Honest Carl proudly told us he never told lies as spokesperson for the ANC, he just used the “Science of Spin”. Was Carl perhaps “spinning a yarn?” I, for one, do not see the difference in blatant lies and spin. What I do know for certain, is that the ANC and its partners and therefore the government of the day is particularly adept at lying. Lenin’s doctrine, which is not out of place for an organisation with a strong communist influence, like the ANC, teaches; “Lies told of enough becomes the truth”. In the face of this double-speak a fitting and well-applied principle of Mr. Lenin’s teachings.

As for the owners and investors, they will not go the marginal mines; they are after the rich ones. For those who expect fair compensation, dream on, there is no money to compensate you for your investment. What will the owners and investors do? They will quietly move their money out and minimise risk.

The Commies are in Town

Two weeks ago, that great proponent of truth from ANC ranks, Carl Niehaus referred to the science of lying as perfected by politicians the world over, a science in which our ANC and government do exceedingly well and can justly claim world leadership. Honest Carl proudly told us he never told lies as spokesperson for the ANC, he just used the “Science of Spin”. Was Carl perhaps “spinning a yarn?” I, for one, do not see the difference in blatant lies and spin. What I do know for certain, is that the ANC and its partners and therefore the government of the day is particularly adept at lying. Lenin’s doctrine, which is not out of place for an organisation with a strong communist influence, like the ANC, teaches; “Lies told of enough becomes the truth”. A very appropriate and well-applied principle of Mr. Lenin.

This weekend saw the ANC using their consummate skill at lying, sorry… “Spin”, when they announced the replacement of Tito Mboweni and used all their collective propagandists to whitewash the mine nationalisation issue. Much was made by The President of Marcus’ previous spell with the bank and her competence. The prominence around the announcement was noticeable, and in it’s visibility, it was probably only exceeded by the announcement of the Zuma cabinet. The announcement was hardly cold and before the praise singers from COSATU and the SACP, strong critics of previous economic policy and monetary policy, were out in force dancing with joy.

The appointment of Gill Marcus and the continuing discussions around the nationalisation of mines is cause for concern. Marcus, being a high-ranking member of the SACP, will unlike Tito Mboweni, toe the party line and enforce the will of the left. The announcement of Mboweni’s sudden unavailability is, to be frank, suspicious and reeks of an engineered exit

Someone once told me that when looking at issues you should look through the bush and not at the bush. The latest incarnation of the South African economy being created by the Zuma regime is looking more and more like a monster with the potential to destroy everything that’s been built up through many years. What is alarming is the inability or unwillingness of commentators, economists and so-called experts to look through the bush. Well known, and often quoted, economist Dawie Roodt, on the appointment of Gill Marcus, said economic policy, and monetary policy in particular, is established and stable and not that simple to change. To Mr.Roodt, I have this to say; “Have a look at that hero of the remnants of Communist ideology the world over, Hugo Chavez, and tell me it is not simple to change economic policy”.

At the same time, the weekend newspapers published letters and columns by prominent ANC spokespersons and policy makers placating the market and calming the waves created by the “Nationalisation Debate” and the Presidents thundering silence on the issue, keeping in mind the President is a communist taught at the knee of staunch Stalinist Harry Gwala. In this regard, the letter by presidential spokesperson Vincent Magwenya tried to excuse the lack of a clear stance by the President referring to his support for a public debate, the President’s and ANC’s favourite cop-out. At the same time, Professor Ben Turok, who is nothing more than a starry-eyed academic, tried to convince us that nationalization can and will not happen.

Examining the facts, looking through the bush, so to speak, we see a different picture. The ANC leftwing set out to destroy the Scorpions, a mission accomplished. They have set out to change the management at the SABC, another target achieved in double-quick time. They launched a campaign against Trevor Manuel’s independence and now have him working under the close supervision and control of Collins Chabane, a Zuma faithful. Tito Mboweni, a particular thorn in the side of the left, neatly removed and replaced by one of their own. The reform of the judiciary has been targeted, the process to change, in the name of transformation, is well advanced under the guidance of another high-ranking Communist, Jeff Radebe.

What lies ahead? On nationalisation, a strong call from the left, by mouths of the Youth league, COSATU and The SACP, resulted in Gwede Mantashe, Secretary General of the ANC, stating emphatically that nationalisation is not on the ANC agenda. Soon afterwards, Gwede Mantashe, President of The SACP came out in strong support of the nationalization lobby, The Minister after telling the SABC that nationalization is in line with the freedom charter, later the week said nationalization is not on the cards. Whilst Shebang was placating the market, Jesse Duarte announced a national debate on the issue.

The next critical issue that will face us is destruction of the provincial tier of government, a critical step needed to eradicate the “counter-revolutionary” enemies and centralise power in Luthuli House. On the cards, is legislation that will have University Vice-Chancellors reporting to Blade Nzimandi, to expedite “Dumbing Down” and lowering of standards.  

The level of lies and deceit we are experiencing is concerning but not surprising given the morality of our politicians. The complicity of people who should inform us of the underlying threats facing us is scary. I wonder why many economists, employed by banks and other institutions, support the threats to a fee economy, through their silence, Could it be that their greed for short-term benefits exceeds the need for long-term economic prosperity and freedom. Perhaps they have seen the writing on the wall and are buying time, to move their assets. Sol Kerzner did set the example of how to play the positive role whilst moving his millions offshore in the mid-nineties.

Stealing Mines in South Africa

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.

The Graceful Flight of Money

It was reported in a recent study that South Africa was the third least attractive investment destination for international mining investors. The only African countries found to be less attractive than South Africa, was the DRC and Zimbabwe. Whereas environmental regulations and tax do deter investment in South Africa, the biggest deterrents remain 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.

The aforementioned deterrents are caused by actions perceived to be negative, risky and counter productive Investor perceptions are reinforced by statements politicians make and resultant expectations based on past performance. The impact of affirmative action and BBEEE coupled with the behaviour of the DME and labour in the area of safety and health is having an impact on perceptions and expectations. The delays in the promulgation of the land bill coupled to delays in expected amendments to the mining charter and promised changes in Royalty charges, does little to change perceptions. On the contrary, they serve to create more pessimism amongst investors. Promises, by politicians, to turn the Northern Cape into a mineral powered Utopia, by distributing more of the areas’ vast “mineral wealth” to the inhabitants, do not go unnoticed. Statements about radical changes in economic policy and the ascendancy of labour in the new ANC leadership do not add to investor’s confidence. Few statements by current and future leaders during the run-up to elections inspire confidence with investors. We know, from experience, that many things said during election campaigns are empty promises, populist rhetoric and mostly outright lies. However, with players the likes of Mantashe, Vavi and Nzimandi involved, this time around may be different and we can expect some vigour in implementing the populist promises.

Understanding potential investors and the way in which they express themselves, always politically correct with words wrapped in layers of cotton wool, so as not to offend, hurt and compromise future opportunities. This in mind, the problem as mentioned in the report, is probably understated. The people we are talking about here have never felt the need to criticise Robert Mugabe; they just make sure they fly under the radar. Tony Trahar and Neil Pretorius of DRD remains two of very few  miners who had the gall to openly attack government and government departments, on these issues, Trahar’s reward for his effort was to, be branded a racist sell-out by Thabo Mbeki. The lack of protestations from the mine owners and potential investors, coupled with the flight of capital from the mining sector, confirms that actions speak louder than words. People may consider the silence of the investors and decision makers to be tacit condonation, their actions when they withdraw investments and participation, often under the guise of economic pressure, indicates otherwise. Their intent is shown by their actions and it is only the naïve and stubborn that ignores BHP Billiton who, despite having some of their roots in this country, sold assets (Samancor Chrome and recently their interesting in Petmin) whilst limiting new investments. Other Tier 1 Miners limiting investment includes Lonmin, Barrick and Rio Tinto, whilst Anglo-Ashanti, Goldfields and Norilsk have escape strategies in place, or are in the process of setting up such strategies. The naïve may insist on believing that the sale of Anglo-Ashanti had nothing to do with getting rid of the South African operations and the management restructuring at Goldfields was done in the interest of corporate efficiency. Foreign investment in South Africa reduced to a trickle in 2008 with an effective outflow in the last quarter. The JSE, during the past week , has been almost devoid of any foreign players.

The realists, the investors that vote with their money, sees a new South Africa with a strongly left leaning government with a lot of power in the hands of the Unions. They see a government where left leaning leaders with a labour background, Vavi and Mantashe, holding sway over economic and fiscal policy decisions. The actions and anarchy shown in the latest SATAWU strike – amidst desperate economic conditions and the worst lay-offs in South African history – are indicative of what can be expected in future. They see a continuing stubborn adherence to AA  in it’s current form, despite the failures and irreparable harm done to the economy to date They see a place where they will operate with their rights, to the minerals they mine, held over their heads like a sword. They clearly, in their mind, hear the words of Vavi saying to Manuel; “we know where to squeeze you if you step out of line”. With the likes of Gwede Mantashe having declared the intent of the government to establish a State owed mining company, investors can see the nationalisation of their assets becoming a real possibility, this despite assurances to the contrary. 

The sad part of this is the fact that people do not speak out. This “quiet diplomacy” is doing the country irreparable harm. We must heed the words of Mamphela Rhampele when she urges us to speak out against what is wrong, even at the prospect of being called racist and “Counter-revolutionary”.