Must-Read Article on South Africa’s Mineral Wealth
Andile Mngxitama wrote a thought provoking article on mineral rights in South Africa, in last week’s Weekender. The article is a wake up call, highlighting the failure of post-1994 democratic governments to follow through on the promise of the Freedom Charter (read it here), that “The People Shall Share in the Country’s Wealth!”
The Freedom Charter states unequivocally that “The mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole.”
While the nationalization of banks and monopoly industry could reasonably be argued to be counterproductive, ensuring that local communities- if not the nation as a whole- share in the wealth generated from mining the mineral wealth beneath their feet, was reasonable, moral, and achievable.
Mngxitama paints a bleak picture of an ANC government which passed fundamentally unfair legislation (the Mineral and Petroleum Resources Development Act of 2002) which institutionalizes disposession of community land and mineral wealth by mining companies. He argues that “the African National Congress (ANC) gave away the nation’s wealth on the cheap for a share of the spoils for a connected few.”
If Mngxitama’s observations are correct impoverished communities exists in an area with the world’s largest known reserves of extremely valuable platinum group metals.
The article is disturbing, but is necessary reading if we are to overstand why inequality and institutionalized poverty and underdevelopment exists alongside vast mineral wealth.
The issue of communities that are based in mineral rich areas remains a very difficult issue when it comes to matters of development and economic strategy. Personally, I do not agree with the strategies that have been adopted by the likes of oil rich countries like Venezuela under Hugo Chavez. While I respect the intention, much of the execution has not done much in terms of improving the lives of the people in these countries. The same goes for most Arab countries.
It is unforgivable what the ANC has done by collaborating with mining companies and lying under the disguise of transformation. Poverty stricken/Diamond rich places like the Northern Cape are exemplary in that regard. I am not surprised that the ANC government would do such to the poor communities; Black Economic Empowerement is a blatant reflection of such actions.
What South Africa needs however, is not the agenda of free “petro-dollars” such as the ones implemented by Hugo Chavez in Venezuela as they are inflationary, not developmental and are above all, very highly geared to the functions and movements of the economic cycle and therefore unsustainable. South Africa needs to build a frame work that will enable its people to benefit from the vast mineral wealth regardless of what is happening globally or in different sectors. Instead of giving equity to mining communities, companies should be forced to educate, train and employ people that work in the communities. I stress education and training in order to avoid situations like those of Detroit and the car sector where at the death of the industry, communities are left without jobs and without hope.
Furthermore, beneficiation remains a very important part of any mining community because as we have seen, countries like Nigeria have vasts amount of oil and yet remain net importers because they are ill equipped to refine the oil domestically. The issue of beneficiation in South Africa needs to be enforced. Companies will always try to get an easy way out of the countries that they invest in. Governments worldwide are afraid to push companies to change because they fear that they may lose investments. Well, in the case of mining companies I dont see why this should be the fact as they are here because of the minerals to begin with and if they refuse to comply- where else are they going to find vast platinum reserves? We need to stop bending over backwards for these companies and start forcing them to comply with the country needs.
Finally, the idea presented often times by the ANC president, Jacob Zuma to nationalise mines is a crazy idea. In all the state owned entities that we have in this country, not even a single one is operating successfully. If the company is not running losses it is running backlogs and operating inefficiently. Inefficiency is not good for development. We need to have a government that will hold the companies accountable and we need, in turn, to demand accountability from government.
Thanks for the comment, La Morocha, but I don’t think training communities is the whole answer. I think the answer is Beneficiation, jobs, training, PLUS equity along the lines of what Royal Bafokeng has.
I think we need to move away from the concept of Equity ownership as being the answer to our economic solutions. Equity requires education, it requires an understanding of the structure that are put in place as most equity deals are done under SPV’s which normally require third party funding. In SA, a lot of empowerment deals have gone under water. Recently we saw the deal with Tokyo’s Sexwale’s Batho Bonke and ABSA also joining the list. Also, what kind of ownership will these people have? pref shares? common shares? will they be involved in the decision making of the company? will they be residual beneficients of dividend pay-outs? I honestly do not think that equity should even be considered. I believe that we should put in structures that enable people to gain equity, with ease, but i do not think that we should base our economic empowerment on share ownership. Our people need infrastructure, education and means that will enable them to be succesful regardless of stock market movements. http://www.businessday.co.za/articles/companies.aspx?ID=BD4A972026