First published 3 August 2011.
[miningmx.com] — NO MATTER how optimistic you may be about the future of South Africa’s mining industry, the equivocating tone of the speech on nationalisation given on Tuesday by Minister of Mineral Resources Susan Shabangu has to be cause for concern.
As my colleague David McKay pointed out, this is the minister who previously told investors that nationalisation wouldn’t occur in her lifetime and that the issue wasn’t a feature of the ANC government’s agenda.
She’s clearly shifted ground and how some journalists’ reports on her speech could claim that Shabangu had moved to “debunk’ the debate is beyond me.
But there’s worse. Shabangu’s speech clearly indicated the ANC government does not like hearing criticism of nationalisation – no matter how justified that criticism may be.
How else do you take the following comments she made?
“Unfortunately and disappointingly, the response from the private sector and certain commentators to these calls is as follows; if the mines are nationalised ‘we will go all the way to the Constitutional Court’; foreign investors will not invest in South Africa; nationalisation is a bad idea; nationalisation has failed elsewhere, learn from Zambia; the State cannot run mines, look at Alexkor; as well as let’s have an economic CODESA.’
Every single one of those points she raised is absolutely valid – and correct as far as I am concerned – in the arguments against nationalisation and remedies open to the private sector.
As one of the “commentators” the minister is probably referring to, I can add a couple more points to her list. How about the State Diamond Trader and the damage it has done to the South African diamond cutting industry it was supposed to benefit?
Then, of course, how can we forget government’s refusal in 2000 to allow Eskom to build the next coal-fired power station which led to the power crisis the country now finds itself mired in?
The minister then admonished the private sector for actually daring to fight back.
She said: “As the minister responsible for mining I can only give the private sector one word of advice; please change the tone and content of your response; address the issues raised. Do not attack the messenger or allow the texture of your response to degenerate into personal and personality battles. Equally the same approach should be adopted by those in the Congress movement who are championing the opposite cause.”
What is the private sector supposed to do? Not point out the unmitigated disasters that have happened elsewhere in the world in countries which tried nationalisation?
Irony of the situation is that just about every South African mining industry executive I know has done his or her best to play down the debate and avoid being quoted on it until late last year when a few finally saw the real danger.
Reasons included the fear of having their businesses “victimised” by the department of mineral resources as well as an apparently deep-rooted belief that nationalisation of the mines simply cannot happen in South Africa.
The mining bosses reckon it’s unthinkable that such a fatally-flawed economic philosophy which has been proven time and again not to work could be foisted on the country.
Commentators like legal expert Hulme Scholes who warned that the danger is real, have not been taken seriously. An executive from one major gold producer dismissed his assessment as “alarmist”.
So just how “alarmist” does Scholes look now?
I have to give full credit to Anglo American CEO Cynthia Carroll for being the first to recognise the seriousness of the situation and being prepared to speak out firmly against it.
In her address to the Gordon Institute of Business Science last October she not only slammed nationalisation as a failed economic philosophy but told government what its real economic priorities should be.
That’s the provision of the necessary infrastructure – road, rail, ports, electricity, water – required to allow the private sector to grow, which creates jobs and wealth.
She commented: “Anglo American has had direct experience of nationalisation. Some 40 years ago the Zambian government nationalised the copper mines it owned in that country.
“The result was that decades of neglect of those mines followed. The private sector was invited back into the Zambian mining industry some 10 years ago and the industry is recovering but, even now, the copper mining industry there is producing at levels below those of 40 years ago.”
Carroll followed up on that in her address to this year’s Mining Indaba, warning that South Africa had to follow the rule of law.
She said: “Mining companies will not invest where they can’t plan for 30 or even 50 years into the future. The rule of law must be followed or we follow the path to ruin. A mining company will not invest where their assets are not secure.”
That’s telling it like it is and, despite Shabangu’s latest comments, I think more executives should follow Carroll’s lead in speaking out forcibly against nationalisation.
As for Shabangu, she went on and on about youth unemployment and pointed the finger at the mining industry for failing on socio-economic targets.
But has government really assessed the socio-economic disaster that would result from a collapse of the country’s mining sector following implementation of a policy of nationalisation?
