Nationalisation talk refuses to die

Allan Seccombe | Thu, 03 Sep 2009 16:47
[miningmx.com] -- Talk of nationalisation of South African mines cropped up yet again, showing no sign of dying down and going away.

In a front-page lead story in the Business Day, the chairman of the mineral resources portfolio committee, Fred Gona, is reported to have said the only way to avert nationalisation was by creating a successful state-owned mining company.

Mines minister Susan Shabangu said in Perth, Australia, on Thursday the thinking behind the state-owned mining company was to create security around the supply for coal and uranium.

“Obviously, these mining operations must be done competitively and efficiently. We must have the right skills and the right management. The proposed state mines cannot be run on the basis of a lack of competition,” she said.

The debate on nationalisation flared up around the middle of this year, with comments from the notoriously attention-seeking leader of the African National Congress (ANC) Youth League, Julius Malema, demanding the country’s mines be nationalised.

The call was soon backed by Zwelinzima Vavi, the general-secretary of South Africa’s largest trade union federation and ally of the ruling ANC, the Congress of South African Trade Unions (Cosatu).

The ANC and its members in government moved to allay investor fears, with the party’s leadership saying it was right to debate such an issue, but not overtly backing the strident calls. Those in government played down the calls, saying nationalisation wasn’t going to happen.

Now the debate has flared up again. Gona told departmental officials that nationalisation had to be retained as an option in case the state-owned mining company was not successful, Business Day reported.

He is reported to have urged the formation and operation of the state mining company to be expedited to “quieten calls for the nationalisation of the mines”.

Mark Cutifani, chief executive of AngloGold Ashanti, South Africa’s largest gold company and the third-largest globally, said he is supportive of the creation of a state-owned mining company but urged cool heads on nationalisation.

While welcoming any debate on nationalisation and wanting to be involved in that discussion, Cutifani said: “I’ve worked on six continents. I’ve worked across the world in the mining industry. There are 180-odd countries in the world. Not one has a nationalised mining industry that is making a contribution to society. Not one.”

Speaking to Miningmx in August, Cutifani said the critical point to bear in mind if South Africa nationalised mines would be the funding of those operations, which would suck money out of social programmes.

“That would be a very damaging decision for South Africa. Poverty is what we have to focus on together and how we build strong industries and institutions. To have to take money out of those areas and direct them into the industry which needs investment would be a terrible outcome for South Africa.”

Gona is reported to have said that unless inequalities and deprivation in South Africa were addressed there could be a “serious rebellion” against the state and this would make what happened in Zimbabwe look like a “Sunday picnic.”

Nick Holland, chief executive of the world’s fourth-largest gold mining company, Gold Fields, dismissed talk of nationalisation out of hand.

“It’s a damp squib, simple as that. It’s off the table. I’ve spoken to the (mines) minister and she said ‘not in our life time’,” Holland told Miningmx in mid-August.

“The government knows that is the kiss of death for any foreign investment. The minute you nationalise you will lose all investment and capital. There’s just no way of running these assets,” he said. “People who talk of nationalisation talk more from an emotional perspective than a rational perspective.”

Holland also raised the point of how the mines would be funded under government control when the state already has its hands full with more pressing needs. An option of seizing the mines and then listing them would also fail because investors would have already been badly burnt.

“The pragmatists in the government realise that we are part of the global world and we need foreign direct investment. We can’t operate this country in a vacuum. I wouldn’t put any store by it. It doesn’t make sense,” he said.

Gona is reported to have laid into how much the industry has been transformed from its historically white-owned and white-run roots. A report due in October will show the level of transformation in the mining industry.

Gona said transformation was almost non-existent, with parties involved in equity ownership deals mired in debt, not having seen a cent from their holdings in some mining companies. The management posts filled by black people were perceived to be window dressing because they have no real control, he said.

Holland said “The government wants transformation in the industry and so do we. I don’t need a big stick to be used against us to transform because it’s logical your company has to reflect the demographics of the country if you want to be sustainable.”