Scielo RSS <![CDATA[Journal of the Southern African Institute of Mining and Metallurgy]]> vol. 113 num. 1 lang. es <![CDATA[SciELO Logo]]> <![CDATA[<b>Black Swans versus White Swans</b>]]> <![CDATA[<b>South African mining in the contemporary political–economic context</b>]]> <![CDATA[<b>Natural resources, nationalism, and nationalization</b>]]> <![CDATA[<b>Resource nationalism and the African National Congress</b>]]> This paper explains the politics of mine nationalization in contemporary South Africa. Nationalization and privatization typically occur in the oil, mineral resources, and state utilities sectors, and they tend to follow one another in a long-term cyclical pattern. The paper explains why the current international environment has encouraged demands for nationalization and other forms of 'resource nationalism' in the South African minerals sector. It goes on to describe how the resurgence of resource nationalism has been influenced by internal factional politics in the African National Congress. It concludes that nationalization is unlikely to be the outcome of current policy deliberations within the ANC. <![CDATA[<b>Nationalization</b>: <b>an analysis of the competing interests of capital, labour, and government</b>]]> Any study of the contentious subject of nationalization can ultimately be reduced to a sombre analysis of the simultaneous, and very different, interests of capital, labour, and government. Each of these interests attempts to maximize its objectives, subject to checks and balances provided, in an ideal system, by a country's executive government, legislature, and judiciary. Where even one of the three interests goes out of control, the consequences can be disastrous. The case histories show that when this occurs, the most common culprit is government, or its proxy, such as a dictator. At the other extreme, the case studies indicate that the optimum outcome occurs when capital, labour, and government are 'ring fenced' from each other: each enjoys its rights, but is also subject to duties. 'Conflicts of interest' between the three entities are ideally avoided to the maximum possible extent. The case studies include several salient instances from both the DRC (Gécamines, La Générale des Carrières et des Mines) and Zambia, along with Ghana and Chile. Further instances are examined in South Africa (gold), India (Coal of India), Brazil (Petrobras), Venezuela (Petróleos de Venezuela), Sweden(Luossavaara-Kiirunavaara Aktiebolag), Mauritania (Société Nationale Industrielle et Minière), Norway (Norsk Hydro), Botswana (Debswana), and Namibia (Namdeb). The article concludes broadly that South Africa's minerals sector is not ready for nationalization. <![CDATA[<b>Nationalizing South African mines</b>: <b>an economic assessment</b>]]> Nationalization is high on the policy agenda in South Africa. This paper considers the case for nationalizing the local mining sector from an evidence-based perspective, which is derived from theoretical considerations and related to the known features of the South African mining sector and economy. A strong case against nationalization emerges, which can be summarized as follows. The mining sector is competitive and therefore a poor candidate for public ownership. Furthermore, the resources sector does not dominate the South African economy nor does it create the risk of a decrease in the competitiveness of the industrial sector via the unintended adverse impact of an appreciating real exchange rate due to a commodity boom (Dutch Disease). Nationalizing the mining sector will cost the government more than it receives. This is not only a bad idea in itself, but it will limit the scope for distributive policies on the national budget. The contemporary international experience demonstrates the risks of fiscal imprudence. Finally, nationalizing the resources sector will undermine support for those very market-based institutions required to achieve a higher long-run growth trajectory. <![CDATA[<b>Making sense of transformation claims in the South African mining industry</b>]]> Much debate has ensued over the past few years on the speed of transformation in the mining industry. By transformation is meant the degree to which the industry has met the requirements of the Mining Charter. In response to this, the Department of Mineral Resources (DMR) commissioned a research study in 2009 to ascertain the degree of industry compliance. The mining industry in response made a presentation to the Minerals Portfolio Committee in Parliament in 2011, during which it released aggregated figures on industry compliance to the Mining Charter. The conclusions of both of the studies are widely divergent. It is argued in this paper that both processes are flawed. The government-sponsored research is empirically and methodologically weak and the results therefore have to be taken with a great degree of caution. The Chamber of Mines figures, on the other hand, while faithful to the reporting of the Chamber member companies, do not represent the entire span of the industry but only the larger mining companies. It is further argued that in order to ascertain a true reflection of the industry an independent audit be undertaken using recognized social scientific survey methods. <![CDATA[<b>Resource nationalism in the South African mineral sector</b>: <b>Sanity through stability</b>]]> Despite economic law and policy instruments with righteous intentions, the politics of resource nationalism could render these instruments unworkable. South Africa is a case in point. After the establishment of democracy, the country's outdated law and policy framework was replaced with a modern system, and in many respects an exemplary one. Converting the privately-owned mineral right system into a scheme of state custodianship allowed for several resource nationalism instruments, in addition to a resources royalty structure that first, compensates for the loss of a non-renewable resource; second, provides for optimal resource use through encouraging value addition to mineral production; and third, effectively targets economic rents. However, despite these improvements, the country went through a process of fierce debate on whether or not mines should be nationalized: the debate was fuelled by public anger with claims of political non-delivery. The result was considerable noise because of public unawareness of facts and distortion of the facts in political rhetoric. The purpose of this article is, first, to establish the status of resource nationalism in South Africa's mineral and fiscal frameworks; second, to give an opinion on the findings of the African National Congress's document on state intervention (Maximising the Developmental Impact of the People's Mineral Assets: State Intervention in the Minerals Sector (SIMS), 2012); and third, to fruitfully contribute to the fundamental discussion on how South Africans benefit from their mineral riches. The methodology is to start with explaining resource nationalism as an international issue for the extractive industries; then to offer an overview of existing resource nationalism instruments in South AfricaÂ-along with their effectiveness in attracting rents and investment. The major finding is that South Africa has resource nationalism firmly ingrained in its current suite of instruments. However, it is necessary to address the perceptions of bad governance, and above all, maintain the stability of the rules governing mineral development in South Africa. <![CDATA[<b>Considerations for the resource nationalism debate</b>: <b>a plausible way forward for mining taxation in South Africa</b>]]> This article is a continuation of a series of publications by the authors on the international debate on resource nationalism, with specific reference to South Africa. Previous outcomes have shown that mine nationalization is not a solution for South Africa, and that maintaining stability of the current mineral and tax regimes is fundamental. It will not be wise to replace existing law and policy instruments until there is a better understanding of the distinction between fact and public perception about the impact of the current system. The new scheme of state custodianship linked to a mining royalty that effectively targets economic rents provides for effective resource use. The methodology in this article is to consider how South Africa's mineral tax regime can be tweaked to achieve optimal management and benefit from mineral extraction and associated rents by avoiding changes feared by investors. The major finding is that the current suite of instruments can be considered a suitable platform for optimal management of resource rents. However, it will be necessary to first investigate ways of improving the mineral beneficiation intent of the royalty structure, and secondly investigate whether the mineral rent portion of the royalty formula can be ring-fenced for the purpose of establishing a sovereign wealth fund. <![CDATA[<b>Community management of mineral resources</b>: <b>the case of the Royal Bafokeng Nation</b>]]> This article uses the case of the Royal Bafokeng Nation to argue that royalties and dividends from mineral resources, if managed well, can provide direct benefits to the surrounding community even while the state collects its share of mining revenues through taxation. The key to this model is the effective management of the resource income flowing into community coffers. Where some of this income may fund urgent interventions in the community, a portion of the income can also be used to establish an intergenerational wealth fund to meet the needs of future generations. As a depleting resource, minerals like gold and platinum are not a sustainable source of income, and must be replaced over time by more regenerative income streams. These strategies and dynamics are manifest in the Royal Bafokeng Nation's status as both community and quasi-municipality, a labour hosting and a labour sending community, a mine operator and a mine owner. The Royal Bafokeng Nation also owns one of South Africa's largest community-based investment companies, which channels revenue derived from platinum deposits into a broad investment portfolio that in turn funds an aggressive social development program for 150,000 people living in twenty-nine rural villages.