Julius Malema, the outspoken president of the Youth League of South Africa’s ruling African National Congress (ANC), may have been suspended from the party for five years, but the clamour for nationalisation of the country’s mines, with which he is most associated, is unlikely to die down. This is because many senior and ordinary members of the ANC support the policy.
Almost two decades after the end of apartheid, South Africa still has stark inequalities and high levels of poverty and unemployment. These run along racial lines – with whites predominantly better off and most blacks struggling to make ends meet. Malema seems to have convinced some of South Africa’s disenchanted poor that nationalisation of the mines, banks and land – all mainly still in white hands – can provide an economic nirvana, creating jobs and opportunities for all.
The appeal of nationalisation is a clear consequence of the failure of ANC government policy in two areas: black economic empowerment (BEE), which was meant to give blacks a bigger say in the economy; and delivering public services to the poor.
In the aftermath of the global financial crisis, calls for more state control of key resources have become a global phenomenon. A recent report by PricewaterhouseCoopers noted that ‘resource nationalism’ is now spooking mining companies in countries as diverse as Australia, Canada, Brazil, Chile, the Democratic Republic of Congo, Guinea and Zimbabwe.
In the eyes of ordinary black South Africans, the mines are symbolic of the dispossession of black assets and the enrichment of whites during colonialism and apartheid, and they have also come to represent the country’s continuing economic power since the people won freedom in 1994.
Malema’s message to the Oppenheimers, the family that established De Beers and Anglo American, is: “Share that delicious piece of cake. Don’t eat it all alone!” Malema is less interested in the mechanics (the Oppenheimers have sold off most of their shares on the international market) than in his vaunted claim, “If we don’t do it [nationalisation], we’ll always stay poor.”
Since 1994, the mining industry has witnessed a lot of BEE deals. The companies lent would-be black buyers, many of them close to the ANC leadership, the money to purchase their stakes. But most of these deals have unravelled as the black part-owners were never going to be able to finance the debts through dividend payments alone. On top of all this, the 2008 global financial crisis hit all black investors hard.
Some of the indebted BEE mine entrepreneurs now hope their debts might be written off if companies are nationalised – they could end up both receiving compensation and being asked to run the companies after nationalisation. Many in the Black Management Forum, the Black Lawyers Association and the Association of Black Investment Professionals support nationalisation as a means of enhancing careers and providing new procurement opportunities. Others hope the mounting pressure alone might wring more concessions out of the companies.
ANC heavyweights like Winnie Madikizela-Mandela, Billy Masetlha (former head of the National Intelligence Agency) and Tony Yengeni (head of the ANC’s political education school) are also in favour. This is the same group that backed Jacob Zuma for the presidency at the ANC’s crucial Polokwane national elective conference in 2007.
But other ANC allies are on the fence. The South African Communist Party and the Congress of South African Trade Unions have argued for state intervention in the economy, but on a case-by-case basis with a mix of state-owned and private ownership in the mining sector. The position was outlined by the president of the National Union of Mineworkers, Senzeni Zokwana, who favours public-private partnerships between mining companies and the state, similar to those of Botswana and Namibia in the diamond-mining sector.
“You need a private operator because it brings know-how, skills as well as funds,” Zokwana has argued, warning that blanket nationalisation, as proposed by the ANC Youth League, could irrevocably damage the South African mining industry and result in thousands of job losses.
Zuma has privately told business leaders that nationalisation is neither ANC nor government policy. But as he has not said as much in public, there is still an awkward policy vacuum over the issue. Finance minister Pravin Gordhan and mines minister Susan Shabangu are against nationalisation, while ANC general secretary Gwede Mantashe favours a mixed economy.
Cyril Ramaphosa, a former general secretary of the ANC, and now a leading black businessman, explains the new enthusiasm for nationalisation in these words: “Much as we understand that poverty and unemployment are rooted in decades of economic injustice, so too must we accept that the frustration being witnessed today arises in part from our collective inability to sufficiently transform our economy. This inability has certainly sparked the call for the nationalisation of mines.”
South Africa already has a huge nationalised sector – one that is wasteful and often led by incompetent political appointees. New nationalised companies are likely to go the same way. A far better solution than nationalisation would be to make every sphere of government more effective, more honest and more accountable, governing in the interest of all rather than a small elite.
The private sector must also do more, beginning with constructively partnering government in priority sectors. One compromise solution is for South Africa to introduce an Australia-like royalty tax regime, with the proceeds – jointly managed by the private sector and government – going into training, skills transfer and empowerment of communities and employees rather than to politically connected individuals. The private sector could voluntarily implement such measures, following clearly agreed targets and timeframes.
