Should Our Mines Be Nationalised?

In 2009 the ANCYL president, Julius Malema, made some strong statements about the possible nationalism of the South African mines. Naturally there have been many opposing views surrounding this issue amongst our nation`s politics and economists. In this essay I am going to discuss the arguments FOR and AGAINST the nationalism of our mines (from an economist`s point of view) as well as the effect this has on our nation`s output using the IS/LM framework. In conclusion, I will explain which side of the argument I support and I will discuss the factors which have influenced my opinion on the matter.

Firstly, I am going to present some of the main arguments FOR the nationalisation of our mines. Julius Malema`s biggest argument as to why our mines should be nationalised concerns the redistribution of wealth. Malema believes that the private ownership of the South African mines is causing the rich to grow richer and the poor to become poorer and that state ownership of the mines will result in a much larger focus on equality and that the poorer communities will benefit (SABC news, 2009).

The next supporting argument is that nationalisation of our mines will increase mineworkers` safety and protection of mineworkers` rights as the state will set this as a top priority whereas privately owned companies are profit-driven and pay less attention to these matters. Furthermore, the environmental costs of mining should be greatly reduced if the state were to take control which will prevent the economy from suffering due to expensive environmental clean-ups (Packard, 2004).

The third argument supporting nationalisation is an interesting one. Many sceptics argue that nationalisation will have a negative effect on efficiency in the mining industry, however, the UK`s coal industry during the late 1940s showed a drastic improvement in the workers` efficiency and managed to lower the national unemployment rate through government intervention. It is therefore possible that nationalisation will have a positive effect on the efficiency in the mining industry as well as lowering the unemployment rate if the state can manage the mines effectively (Jones, 2010).

Now I will highlight a few of the arguments AGAINST nationalisation of our mines. Firstly, state intervention is expected by many to cause a large decrease in efficiency due to our government not having enough experience to manage the mines effectively. If the mining industry becomes completely controlled by the state it would have to become competitive with profit-driven mining firms which is a big ask (The Times, 2010).

Another very important argument opposing nationalisation is that investors are very sensitive to any state intervention and are likely to invest elsewhere if there is a transfer of ownership of the mines. This could have extremely negative effects as the mining industry has already taken a huge knock due to the recession and consequences could include a further increase in unemployment and loss of income (SABC news, 2009).

Lastly, there is an argument that although mining companies have been heavily criticised for causing environmental and social problems, many of the large companies such as Anglo American have been giving huge amounts of money towards social development and the environment which is possibly benefitting the people more than the government would be able to. The government would also have to pay enormous subsidies to the mining industry for maintenance and equipment which would greatly limit the amount they could give back to the people (Brown, date unknown).

I have decided to argue against nationalisation. The first issue is unemployment; will nationalisation of our mines improve the unemployment rate? I believe that it will not – if the mining industry had to be monopolised it could become complacent like the other monopolies in this country such as Telkom, Eskom and SASOL and miss out on key opportunities for expansion and job creation (Mqolomba, 2010).

The second issue is efficiency in the mining industry – I believe that nationalisation of our mines will cause efficiency in the mining industry to decrease drastically as the state does not have the experience in running mines and with a lack of competition comes a lack of efficiency.

The issue of equality is a large concern in the mining debate. I believe that this issue can be resolved by government implementing stricter controls on the mining firms and by promoting social development and responsible waste removal to protect the environment. I think that many of the big mining firms are starting to realise their social responsibilities and are giving back to the poorer communities, for example - Anglo American as mentioned earlier.

The next issue is investment; I think it is clear that investors are not happy with the idea of nationalisation of our mines and to ensure continued investment in our mining industry our mines must remain free of state control.

What about long-term sustainability? I believe that the privately owned mining firms have the knowledge, resources and experience to keep our mines running through the hard economic times that the world is experiencing at the moment and state ownership at this stage could be disastrous with no evidence that long-term sustainability of our mines can be achieved.

In conclusion, I think it is fair to say that there are improvements that need to be made in terms of equality and social responsibility in the South African mining industry which the state must do their best to facilitate but I think our mines will be better off if they stay under the control of the firms who have been in this business for decades.

References

Sapa (2010) ”No Nationalisation of Mines” (Online) www.timeslive.co.za [26/04/10]

Jones, Jim (2010) “The Devil in Nationalisation” (Online) www.timeslive.co.za [26/04/10]

Sapa (2009) “Nationalisation Not Ideal for SA: Analyst” (Online) www.sabcnews.com [26/04/10]

Sapa (2009) “Nationalisation of Mines Could Scare off Investors” (Online) www.sabcnews.com [26/04/10]

Packard, Gabriel (2004) “SA Union Slams Mines of Death” New York Amsterdam News, Vol. 9, No. 5 (pg 7) (Online) web.ebscohost.com/ehost/detail [26/04/10]

Pichulik, Max (2010) “Impact Investing and the Nationalising of SA`s Mines” (Online) www.social-enterprise.co.za [26/04/10]

Brown, Ann (unknown) “Nationalisation of SA Mines and the Non-Profit Sector? Or While Nero Fiddles, Rome Burns” (Online) www.saifundraising.org.za [26/04/10]

Mqolomba, Zukiswa (2010) “Nationalising Mines a Just Cause But...” (Online) www.thoughtleader.co.za [28/04/10]