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Umsebenzi Online

Volume 8, No. 20, 18 November 2009

In this Issue:

Red Alert

Should we nationalise the mines?

Jeremy Cronin

In recent months, ANC Youth League president, cde Julius Malema has called for the nationalisation of the mines. The mainstream media have predictably latched onto cde Malema's nationalisation call with delight. They hope to ridicule the demand and goad senior ANC and government leaders into banishing any thought of nationalisation, once and for all, finish and klaar.

Cde Malema hasn't always helped his case with off-the-wall sound-bites. The impression of a policy being made on the hoof, individualistically, is re-inforced by the fact that we are yet to see any serious attempt at a collective policy document on this matter from the ANCYL.

This is a great pity. The question of the ownership and control of our major natural resources and means of production is, indeed, a serious matter. The idea of public ownership should not be reduced to an empty slogan. Nor is it, as some other comrades appear to believe, an embarrassing secret from a bygone era, best left hidden away in our family cupboard.

The people shall share in the country's wealth!

The basis for Malema's argument rests on the inspiring clause in the Freedom Charter: "The People Shall Share In The Country's Wealth!" It asserts that: "The national wealth of our country, the heritage of all South Africans, shall be restored to the people; The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole…"

Some comrades have tried to argue against Malema on the grounds that the Freedom Charter nowhere actually uses the word "nationalisation". This is literally true, but frankly it's not a very convincing argument. As Malema himself puts it: "They are talking English, not politics." Anyone who has the remotest acquaintance with the mid-1950s, the period in which the Freedom Charter was formulated and adopted, would realise that it was the heyday of nationalisation - not just in post-war Eastern Europe and China, but also throughout most of Western Europe, Latin America, and newly de-colonised countries like India and Egypt. (It was also a period, by the way, in which the apartheid regime was consolidating an extensive state-owned sector). The framers of the Freedom Charter were almost certainly thinking of some kind of nationalisation as a MEANS to ensuring ownership by "the people as a whole".

The people (not the government) shall govern!

But if it is misleading to de-contextualise the Charter from its history, it is also misleading to de-contextualise some sentences in the Charter from the Charter's overall thrust. In particular, it is critical to connect all other clauses of the Freedom Charter to the very first clause: "The People Shall Govern!" This first clause is very instructive when we consider the subsequent economic clause. The people shall govern clause refers to four inter-related dimensions of popular democracy:

  • electoral democracy, the right of all to vote (and to stand for election);
  • administrative democracy - the democratisation of the state apparatus;
  • constitutional democracy - equal rights for all, "regardless of race, colour or sex"; and
  • (absolutely central to everything else) participatory democracy through the consolidation of organs of popular power - or what the Freedom Charter refers to as "democratic organs of self-government".

Note, the Freedom Charter doesn't say: "The government shall govern". It says: "The PEOPLE shall govern". Of course, both a progressive government and a progressive ruling party (or parties) are important, but they are means (not ends) to the popular democracy envisaged in the Charter.

Which is why, when the Freedom Charter speaks of transferring the commanding heights of the economy to the ownership of the people as a whole, it is not confining itself to what is often just a narrow bureaucratic take-over by the state apparatus and a ruling party's "deployees". And this is why the SACP also prefers in general to refer to "socialisation" rather than "nationalisation".

State ownership is a legal form, but the mere fact of state-ownership doesn't tell us what kind of state we are dealing with. Hitler's Nazi Germany, Mussolini's fascist Italy, and Verwoerd's apartheid South Africa all had extensive state ownership of key sectors of the economy.

So much for background. But what are the actual merits of calling for the nationalisation of the mines in SA in the year 2009?

The mineral wealth beneath the soil…but what about the fat cats sitting on top of the soil?

Many comrades have responded to Malema by arguing that the "Mineral and Petroleum Resources Development Act" (2002) has already implemented the Charter's call for "the mineral wealth beneath the soil" to be "transferred to the ownership of the people as a whole." Indeed, this important and progressive legislation explicitly states that "South Africa's mineral and petroleum resources belong to the nation and that the State is the custodian thereof." In terms of this Act, private (or public) entities can be given a right to mine by government, but this right may not exceed 30 years. In other words, it is the "nation" (with the state as custodian) and not the mining companies that have legal ownership of the mineral resources beneath our soil.

This legislation (along with attempts to consolidate existing state holdings in the mining sector into a state-owned mining house) provide us with greater strategic leverage over the sector than we had before.

But clearly it cannot just be a case of what lies beneath the soil. What about all of those massive mining corporate entities sitting on TOP of our soil (many of them now with principal listings and mining operations off-shore)? Are they not among the monopoly industries the Freedom Charter had in mind?

Legal ownership…but what about strategic control?

This brings us to the next important distinction that we need to make. Legal ownership is only one part of the story. There is also the critical matter of effective strategic control over resources and over the production, beneficiation, logistics, marketing and investment processes inevitably linked to such control.

In this regard, cde Malema (and other Youth Leaguers) have argued that if we nationalise the mines we will be able to ensure that we beneficiate rather than simply being a primary commodity exporter. Here they are touching on something that is profoundly important. Even after 1994 we have continued to be locked into the same century-long, semi-colonial growth path that reproduces racialised inequality and underdevelopment. It is a growth path in which SA serves as a semi-peripheral exporter largely of primary commodities within the global capitalist market. It is a role that exposes us to many vulnerabilities, as witnessed in the current global meltdown, and it creates severe distortions in our domestic economy and society.

The beneficiation story

But while touching on this matter in passing, cde Malema is not able to carry his argument forward in a systematic way. In the first place, it is important to note that in some respects SA is already involved in very considerable mineral beneficiation. Eskom turns a significant proportion of our coal production into electricity. SASOL's global leading-edge technology beneficiates coal into oil and other petro-chemical by-products. SASOL, in fact, provides for some 35% of all our domestic petrol needs. Our coal into energy is also further (and problematically) beneficiated into aluminium at two major smelter plants at Richards Bay. Some of our iron-ore is beneficiated into steel by major corporations, including the former Iscor and now privatised multi-national Arcelor Mittal.

In these cases, the problem is not the lack of beneficiation but the kind of beneficiation. In the case of aluminium smelter plants, for instance, they are huge electricity gobblers, and the bauxite used for the production of aluminium is not even mined here, but shipped over from Australia. Basically, the aluminium transnational corporations came here to plug into our cheap electricity grid (and they have been given twenty-year electricity deals, way below what we pay for our own electricity). We are literally exporting at a loss South African electricity congealed into aluminium bars at a time when we are facing major electricity shortages. Our coal-fired power stations are major carbon emitters and consumers of increasingly scarce water resources. These pose grave challenges of sustainability for us as a country. The pricing of beneficiated products on our local market is also a major problem - steel producers are under investigation for price collusion, and SASOL is notorious for undermining local downstream producers (and therefore job creation) with its price distorting monopoly behaviour.

Once we unpack the mineral beneficiation story in this way, we start to uncover the many systemic realities in our economy that lock us into a semi-colonial status within the world economy. It is these (and other) systemic realities that continue to reproduce crisis levels of unemployment and racial inequality. And it is these systemic realities, therefore, that need transformation, and they go to the heart of the possibility and necessity of a patriotic, multi-class, democratic and, yes cde Malema, even non-racial struggle to transform our country. It is a struggle that, of course, will be driven by the workers and poor, and by the aspirations and capacities of the black majority. In other words, this is the heart of today's national democratic struggle.

An analysis of the systemic realities that are reproducing under-development in our country, must surely lead us to call for greater use of renewable energy sources, for the phasing out of aluminium smelters, and for the re-nationalisation of SASOL. But it is not clear how the extensive nationalisation of the mines would contribute at this point to the transformation of our perverted accumulation path. In fact, if the state actually owned extensive coal mining interests, for instance, we might be tempted to avoid looking at renewable energy sources in the name of keeping some ailing state-owned Coalkom profitable for the share-holder.

Beneficiation or bling?

I suspect that cde Malema and others are missing this bigger systemic picture because when they speak of mineral beneficiation they are thinking of bling…sorry, jewellery. There are, indeed, various initiatives to promote the local jewellery sector and these initiatives should certainly be supported.

But the idea that SA will grow into a major jewellery power-house to rival centuries-old artisanal traditions (and markets) in India or Amsterdam, simply because some of the precious minerals happen to be mined here, is, I am sad to say, a pipe-dream.

Besides, it is not clear why nationalising a diamond mine will, for instance, necessarily give us a better competitive edge in the jewellery market.

Nationalisation or capitalist friendly bale-out?

There are further issues that require closer analysis. Some of us have already cautioned that nationalising mining houses in the current global and national recession might have the unintended consequence of simply baling out indebted private capital, especially BEE mining interests. At the beginning of this year, government estimated that some 80% of BEE deals were "under the water" as a result of the global recession. BEE mining shares were particularly hard hit as a result of the sharp fall in commodity prices on the world market. And while there has been something of a recovery for some commodities, the robustness of the recovery remains very uncertain.

But many (not all) of our mining sectors are also faltering because of other factors besides the recession. Electricity is estimated to be between 10% and 15% of mining operation costs. Cheap electricity and the way the grid has been historically structured in SA has had much to do with the dominance of mining monopolies in our economy. With impending, multi-year electricity price hikes, even if Eskom doesn't (and it musn't) get anything like its 45% hike, the viability of many of our mines will be severely impacted.

Then there is the sobering fact that mining is about non-renewable natural resources. Many of our gold mines in particular are increasingly depleted and unviable. Some reach costly depths of four kilometres below the surface. Recently the global gold price has bounced back, but it is telling that, unlike in the past, our gold output actually dropped by some 9% in the same period. Our gold mines are simply no longer able to respond dynamically to gold price rises.

What about expropriation without compensation?

The argument that nationalising the mines might unintentionally serve to bale out failing capitalists assumes, of course, that nationalising the mines would involve significant monetary compensation. So what about straightforward expropriation without compensation? Contrary to what is often asserted, the Property Clause in the Bill of Rights actually sanctions expropriation "for a public purpose or in the public interest". But the Bill of Rights still requires the payment of compensation for expropriation, at a price either agreed to by both parties or determined by a court.

Again, contrary to what is often said, this compensation does not have to be narrowly market-based. The Bill of Rights lists other realities that should also be factored in, including "the history of the acquisition and use of the property" and "the extent of direct state investment and subsidy in the acquisition …of the property."

Speaking as a Marxist (not a constitutional lawyer), I think an excellent case could be made that the new democratic state, acting on behalf of the people of SA, owes the mining houses absolutely nothing. The "history of the acquisition and use of their property" includes genocidal wars of dispossession that carved out labour reserves for the mines, and the massive deployment of state violence in the Anglo-Boer War that was directed at securing an imperial grip on SA's gold-fields. The "history of the use of their property" includes hundreds of thousands of mine-worker deaths and injuries, and the wholesale destruction of the environment including the pollution of our ground-water. The extent of "direct state investment and subsidy" includes using billions of rands of public money on the building of rail-lines and ports, electricity power-stations and an infrastructure grid to serve the mining houses' narrow profit-maximising interests. It is the mining corporations that owe the people of SA trillions of rands in compensation, not the other way round.

But would the Constitutional Court see things in this way?

However, before we get too tangled up in legal arguments, and spend millions of rands on legal counsel, let's go back to the core issue. How, if at all, would the extensive nationalisation of the mines advance the national democratic struggle in 2009?

It would land the state with the burden of managing down many mining sectors in decline. It would further burden the state with the responsibility for dealing with the massive (and historically ignored) cost of "externalities" - the grievous destruction that a century of robber-baron mining has inflicted on our environment. In the current conjuncture, nationalising the mining sector at this point would also probably unintentionally bale-out private capital, in a sector that is facing many challenges of sustainability. The problems of liquidity and indebtedness for BEE mining share-holders are particularly acute.

Moreover, extensive state ownership of the mining sector would on its own not change any of the underlying systemic problems in our broader economy. And unless it was part of a much more fundamental transformation of our current accumulation path, it would also not change the semi-peripheral status of SA in the global economy - it might even worsen this status. In all probability it would also result in the state having to fork out billions of rands in compensation at a time when we have other key priorities that, precisely, have a better chance of contributing to a fundamental transformation of our current problematic accumulation trajectory.

Forward to the realisation of the Freedom Charter's ideals!

Our scepticism about the value at this point of extensive state nationalisation of the mines must, however, absolutely not be misunderstood to be a scepticism about the clarion call in the Freedom Charter for the wealth of our country to become COMMON wealth, the property of ALL South Africans. But how do we move towards the realisation of that goal? The SACP's Central Committee discussion document for our Special National Congress, ("Building Working Class Hegemony on the Terrain of a National Democratic Struggle") attempts to answer precisely that question. We invite cde Malema and anyone else who is passionate about fundamental transformation to engage us in the debate.