South Africa, nationalisation and Zambia

Posted on August 20, 2011


Produced for the Bulletin & Record (Zambia)

Zambia — and different versions of the Zambian experience — has become a prime topic in South Africa’s increasingly strident debate about the possible nationalisation of the country’s mineral resources and, in particular, a range of older gold mines. In July, the claimed pros and cons of Zambia’s experience with the state ownership of mines became a major focus of debate.

This followed statements made by Zambian government ministers at the Lusaka mining conference in June. These have become the rallying cry for a belated anti-nationalisation fightback by South Africa’s mining houses and big business. Constantly quoted is the declaration of Zambian mines minister Maxwell Mwale that his country’s experience with nationalisation was a failure that had cost the country dearly.

But South African trade union researchers have pointed out that Mwale did not spell out the problems Zambia faced in 1996 with debt, low copper prices and structural adjustment pressures from international institutions such as the World Bank. Their arguments also focus on the various tax and cheaper power incentives offered to mining companies in Zambia and these could have a certaon resonance among miners on the Copperbelt, especially with the copper price apparently heading toward $11,000 a tonne.

However, Mwale’s concentration on a single set of profit and loss figures spanning more than a decade has provided a ready battle cry. His comment that the Zambian government spent $1m a day to manage nationalised mines while the privatised mining sector last year generated more than $1m a day in taxes and royalties, is hailed in the South African business sector as the definitive opinion on what is referred to as the “N” word. And that word — nationalisation — is now back with a vengeance in the South African political vocabulary after an absence of 15 years.

It was put squarely on the agenda more than a year ago by the demagogic president of the governing ANC’s youth league (ANCYL), Julius Malema, who has called for outright state ownership or, at the least, majority state control of the country’s mines. But since nationalisation is not the policy of the governing ANC and since both its alliance partners, the trade union federation Cosatu and the Communist Party (SACP), initially dismissed Malema’s comments, business adopted a wait and see approach.

It was — and remains — widely agreed, both within the business sector and within Cosatu and the SACP, that Malema’s call has more to do with bailing out some recent gold mining entrepreneurs whose mines are reaching the end of their useful lives. There is also the question of payment for environmental rehabilitation and, especially, the cost of dealing with the growing problem of acid water drainage.

According to SACP general secretary Blade Nzimande, Malema’s call for nationalisation of the mines was in order to “benefit the capitalist class”. Nzimande maintains that his party is not opposed to all forms nationalisation; it depended on who was to benefit. This is a similar position to that adopted by Cosatu.

But Malema and the ANCYL kept banging the nationalisation drum, pointing to South Africa’s still massive mineral reserves and to the vague, founding policy document of the ANC, the Freedom Charter, adopted in 1955. The relevant clause of the charter states: “The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole.”

On the basis of this clause, nationalisation remained ANC policy when Nelson Mandela was released from prison in 1990. “Nationalisation is the policy of the ANC,” was one of his first statements as a free man. But the approach to this policy was soon amended to “it is not set in stone” and, by the end of 1993, after talks at the World Economic Forum in Davos, Switzerland, the “N” word disappeared at an official level. Along with it went the interventionist economic programme drafted by the ANC’s macro-economic research group (Merg).

But the Cosatu federation kept the nationalisation debate alive and the combined labour movement used the Merg proposals as the basis for an interventionist economic policy in 1996 labelled Social Equity and Job Creation. However, this was superceded only months later by a liberal economic outline entitled Growth Employment and Redistribution (Gear) that was unilaterally introduced by the ANC. The focus for the unions and the smallest alliance partner, the SACP, then shifted to the “P” word: privatisation.

Opposition by the unions to privatisation was to some degree successful, with “public/private partnerships” becoming the accepted compromise. And it was the Cosatu-affiliated municipal workers’ union, Samwu, that led the charge against the sell-off of state assets, especially water. In the process, the union accumulated a considerable amount of research material about the applications of both “N” and “P” word policies. Zambia was an obvious example.

Now that research has again come to the fore to counter former Anglo American executives such as Bobby Godsell and Michael Spicer, who have been repeating the statements of Mwale and the pledge by Zambian finance minister Situmbeko Musokotwane that there would never be a move to “re-nationalise” the mines of Zambia.

Union researchers maintain that the reiteration of bald statements by Mwale and Musokotwane fall into the same category of simplistic sloganising indulged in by Malema and the ANCYL. In a clear sign that the debate has now become very serious — the ANC has appointed an inquiry into the pros and cons of state ownership — the Zambian experience is being picked apart.

Given the ongoing global economic crisis and the fact that the South African government is feeling the financial pinch of welfare payments while sitting on an admitted “timebomb” of poverty and unemployment, it was probably inevitable that the debate would take a serious turn. After all, the best estimate today is that South Africa’s mineral reserves are worth, at present prices, more than $2.5 trillion.

Without even considering gold, South Africa contains the world’s largest reserves of platinum group metals (platinum, palladium, rhodium), of manganese and chrome as well as large reserves of minerals such as iron, zirconium, vanadium and titanium.

And, certainly for platinum and gold — as with copper and a range of other minerals — the commodity price boom seems to be continuing. Rising in line with this is the temptation among politicians to control what is seen as a cornucopia. But, as an official at the South African Chamber of Mines points out, this view of mines and mining fails to take account of investment needs or of the history of sometimes extreme price volatility on the commodities markets. “And that,” he notes, “is the real lesson to learn from the Zambian experience.”