Maravi

(ANC) Perspective on nationalization of mines

COMMENT - At least people are actively thinking and debating mining nationalisation in South Africa. From the ANC's website:

Perspective on nationalization of mines
National Union of Mineworkers (NUM)

Introduction

The ANCYL released a discussion document on Nationalization of the Mines (Umrabulo no. 33). The document in the first sections deals with research, political and ideological conceptions - with this portion of the document the Union is of the view that there is no need to engage with facts and ideological perspectives that are known and acceptable. What should be engaged with are the sections "Why Mines should be nationalized" and "What is to be done".

In the debate, the ANCYL managed to bring back to the discussions and focus of the movement the question of nationalization and the need to have the Freedom Charter as central to the economic policies of the ANC and government. The document however has the following weaknesses:

1. Blackmailing those who differ with the approach or the debate;
2. Ignoring both legislative and policy frameworks dealing with this debate; and
3. Tactically linking the debate to have mines nationalized and nominations or support for elections in the 2012 ANC Centenary Conference.

The ANC released its Economic discussion paper for the National General Council,
September 2010. In the section, "Some Debates- the balance of power and ownership", the questions raised by the discussion document are relevant but with the following weaknesses: (a) The ANC can't be silent on whether mines should be nationalized or not, its position should not be represented by questions but it should be clear on its preference; and (b) whilst correct to look at failed nationalized mines, the ANC should also have an interest where nationalized mines were not a failure.

The National Union of Mineworkers Central Committee held on 13-14 May 2010 resolved that NUM must develop its own position, consult relevant stakeholders and publish its own position. This NUM position should be based on the following:

1. Nationalization in a mixed economy;
2. Nationalization as not inherently progressive, but also private ownership as not inherently efficient; and
3. Different approaches to nationalization and the proposed approach preferred by NUM.

The ANCYL call and the Freedom Charter (1955)

In its discussion paper, the ANCYL uses the Freedom Charter as the base for the nationalization of mines, in particular the clause that states:
"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; all other industry and trade shall be controlled to assist the well-being of the people; all people shall have equal rights to trade where they choose, to manufacture and to enter all trades crafts and Professions".

This quote from the Freedom Charter is correct, but it should not be used in isolation from the Minerals Petroleum Resources and Development Act (MPRDA). This Act is very clear and progressive on the implementation of this clause of the Freedom Charter in the mining sector. For example, the Act stipulates, under the heading -"Custodianship of nation' mineral and petroleum resources" the following:

1. "Mineral and petroleum resources are the common heritage of all the people of South Africa and the State is the custodian thereof for the benefit of all South Africans,
2. As the custodian of the nation' mineral and petroleum resources- the state, may:
3. Grant, issue, refuse, control, administer and manager any reconnaissance permission, prospecting right, permission to remove, mining right, mining permit, retention permit, technical co-operation permit, reconnaissance permit, exploration right and production right; and
4. In consultation with the Minister of Finance, determine and levy, any fee or consideration payable in terms of any relevant Act of Parliament.
5. The Minister must ensure the sustainable development of South Africa' mineral and petroleum resources within a framework of National Environmental Policy, norms and standards while promoting economic and social development."

The NUM Central Committee resolved that the intension of the legislation (MPRDA) quoted above section is indeed in conformity with the Freedom Charter call for the mines to be nationalized. It should be remembered that the Freedom Charter clause is calling for "the mineral wealth beneath the soil" to be nationalized. The Act should therefore be taken as a guide in debating the issue of nationalizing mines.

The SACP' Road to South African Freedom (1962)

The Road to South African Freedom, under the section 'Economic Development' states "the Party will press for the strengthening of the state sector of the economy, particularly in the fields of heavy industry, machine tool, building and fuel production. It will seek to place control of the vital sectors of the economy in the hands of the national democratic state to correct historic injustices, by demanding the nationalization of mining industry, banking and monopoly industrial establishments, thus also laying the foundation for the advance to socialism. At the same time, the state should protect the interests of private business where these are not incompatible with the public interest. It should offer assistance, by way of state loans, to non-monopolist producers, in return for state share in their undertaking, thus paving the way for gradual and peaceful transition to socialism".

ANCYL on "why mines should be nationalized"

The ANCYL in the section of its document dealing with "Why Mines should be nationalized" puts forward the following as motivation:

1. Nationalization to increase state fiscal capacity and better the working conditions
2. Nationalization as the basis for industrialization
3. Nationalization as a means to safeguard sovereignty
4. Nationalization as a basis to transform the accumulation path in the South African economy
5. Nationalization to transform South Africa' uneven spatial development patterns.

The NUM appreciates the ideological basis of the above motivations by the ANCYL, but believes they will weaken the ANCYL position if they are debated in detail. This is because the majority of these motivations are in actual fact contained in the MPRDA and the Mining charter and they remain relevant whether the mines are nationalized or not.

The NUM Central Committee resolved that, all the past NUM resolutions were based on the ideological understanding of the above position. The NUM' position on the nationalization of mines should have ideological clarity and that the issue of the class interest to be addressed by nationalization should not be the last word on the debate.

Below, are the sections in the Minerals, Petroleum and Resources Development Act, 2002 that deal with the above motivations:

"Definition
Transforming such industries so as to assist in, provide for, initiate or facilitate -

1. The ownership, participation in or the benefiting from existing or future mining, prospecting, exploration or production operations;
2. The participation in or control of management of such operations;
3. The development of management, scientific, engineering or other skills of historically disadvantaged persons;
4. The involvement of or participation in the procurement chains of operations;
5. The ownership of and participating in the beneficiation of the proceeds of the operations or other upstream or downstream value chains in such industries;
6. The socio-economic development of communities immediately hosting, affected by the supplying of labour to the operations; and

Objects of the Act:

1. Recognize the internationally accepted right of the State to exercise sovereignty overall the mineral and petroleum resources within the Republic;
2. Give effect to the principle of the State' custodianship of the nation' mineral and petroleum resources;
3. Promote equitable access to the nation' mineral and petroleum resources to all the people of South Africa;
4. Substantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nation' mineral and petroleum resources;
5. Promote economic growth and mineral and petroleum resources development in the Republic;
6. Promote employment and advance the social and economic welfare of all South Africans
7. Provide for security of tenure in respect of prospecting, exploration, mining and production operations:
8. Give effect to section 24 of the Constitution by ensuring that the nation' mineral and petroleum resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development; and
9. Ensure that holders of mining and production rights contribute towards the socio-economic development of the areas in which they are operating."

Comparative check on ANCYL and NUM positions

(a) On the state mining company

The ANCYL argues "the South African government should officially establish a State Owned Mining Company, which will under its control bring the currently state owned Alexkor, State Diamond Trader and all state shares in mining activities, SASOL and Provincial Agencies. The State Mining Company will amongst others be responsible for the ownership and control of the mineral resources; the maximisation of the nation' economic gain from the mineral resources, socio-economic development, maintenance of strong safety and environmental standards as well as the deliberate development of mineral resources."

The NUM 13th National Congress Resolution, held in May 2009 acknowledged the adoption and implementation of the Mineral and Petroleum Resources Development Act (MPRDA), reverting mineral rights to the state as the custodian of our mineral wealth and land. In this regard Congress mandated the NEC to engage government on the strategy and legislation for the state owned company in mining. The NUM further resolved to call for improved beneficiation of minerals and measures to regulate and stimulate the fabrication of raw materials into finished and semi-finished products.

NUM' position is therefore that (i) there must be an urgent and dedicated audit on the ownership and conditions of service in the mining industry; (ii) the state must audit and quantify its investment within the mining industry; (iii) no sale of any government stake within the mining industry pending the final decision on which option will our country adopt; and (iv) the ministry of mineral resources develops draft legislation towards establishment of the state mining company. Furthermore, the Constitution says "no provision of this section (Property Clause) may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of section 36(1)".

The Minerals and Petroleum Resources Development Act compels applicants for mining rights to have not less than 30% equity ownership and control by historically disadvantaged individuals. Whilst not eroding the initial intention, the MPRDA should be amended to say the applicants and corporations applying for mining in South Africa should be in partnership with the state-owned mining company, wherein the state owns not less than 60% of the shares and right of determination.

The amended Act should apply to new mining licenses and all those who seek to renew their licenses. In order to have a clearer regulatory framework on this principle, the South African government should place a moratorium on the issuing of licenses until the Act has been amended.

Thus, both the NUM and ANCYL positions on the state mining company reflect commonalities, with only the difference on the renewal of mining licenses and the envisaged percentage share on ownership.

b) The Expropriation model

Section 25 of the Republic of South Africa Constitution (referred to as the Property Clause) protects private property, but also calls on the State to "take reasonable legislative and other measures, within its available resources, to foster conditions, which enable citizens to gain access to land on an equitable basis". This is within the basis of a subsection that says "property may be expropriated only in terms of law."

South Africa needs an Expropriation Law that will address expropriation irrespective of the economic sector. It is unfortunate that we currently do not have such due to parliament toeing the big business line. Both the ANCYL and NUM must engage the ANC on the need to have the Expropriation Bill through Parliament. This process will then address all the challenges on expropriation irrespective of the sector.

Amendments to the MPRDA are also long overdue, and even government is considering making some proposed amendments, so we should prepare ourselves and work on the areas where we would prefer amendments. The Department of Minerals Resources has already started with proposed amendments and NUM will develop its own submissions when this process is open for public comments on the following areas:

1. Inclusion of a section dealing with a state mining company or new separate

legislation in this regard; and

1. Role clarification and reduced bureaucratic process between the departments of Minerals Resources, Water Affairs and Environment on different plans submitted with the application for mining rights.

The process to amend the Act should be an open and democratic process involving all stakeholders and should happen immediately after the ANC has officially resolved on the perspective in its 53rd National Conference in 2012. The ANC National General Council in September 2010 should give concrete guidelines on how certain processes should unfold.

The amended MPRDA should not undermine legislations regulating the Minerals and Petroleum Industry in South Africa, but should decidedly be directed towards total alteration of property relations in South Africa. The other legislations that should be upheld include the Section 24 of the Constitution, which calls for the nation`s mineral and petroleum resources to be developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development.

The principle that the "mineral and petroleum resources are the common heritage of all the people of South Africa and [that] the state is the custodian thereof for the benefit of all South Africans" should underpin all legislations about the country`s mineral resources.

Other sections to be amended:

1. Section 23 (1) (c): dealing with financing plan and confirmed or available funding to avoid the repetition of the Aurora situation.
2. Section 23 (1) (e): on Social Labour Plans, it should be mandatory that the majority union signs with the employer before submission to DMR and that non-signing of the majority union should result on the Plan not being approved.
3. Section 26: on Mineral Beneficiation to be re-worked as whole in accordance with the beneficiation strategy as suggested.

The ANC National General Council (NGC), September 2010 should discuss nationalization as an economic option for both the ANC and government economic development policies. When resolved and accepted the issue of the sector should be based on the socio-economic context and linked to IPAP2, the New Growth Path, the basis to build capacity for the developmental state and for the role of the state in the productive economy.

The NGC should resolve that the government be instructed to decommodify basic services like education, health, water, electricity, sanitation and public transport (such as the subsidy programme for taxi').

Nationalization of mines: NUM view

The ANC NGC discussion paper for the NGC raises the following: "We need to ensure that proposals become more specific about (a) who would end up owning the assets; (b) who would manage them, and with what purpose; (c) w hat would be the costs to the fiscus and the economy; and (d) what would be the risks of failure as well as the benefits of success".

NUM' view is that there are different models of nationalization and that the choice is always informed by the needs of the affected governments, looking at some of the known models below, it can be divided into full-scale nationalization or strategic funds/equity by government:

Recent examples of nationalization


Examples of strategic funds/strategic equity

Venezuela: oil
Bolivia: Natural Gas
SA: mineral rights to the state


Botswana and De beers
Chile
Norway

NUM does not support a blanket/wholesale nationalization but prefers the model on "strategic fund/strategic equity". The proposed state mining company should be the government vehicle in the mining industry, but it should focus and invest only on the following strategic minerals:

1. Energy minerals: platinum, coal and uranium
2. Infrastructure Minerals: ion ore and manganese

Below is an illustration of this approach:

An illustration on one mineral per category

Platinum: South Africa is said to have 88% of the world reserve on Platinum group metals (PGM), with the development and implementation of beneficiation strategy and mining strategy. South Africa could move away from being an assembly point for some component parts of motorcars and be both assembly and manufacturer of those component parts and also jet engines.


Ion ore: With the development and implementation of Beneficiation strategy and Mining strategy, we should nationalise both Ion Ore mines and Accerlo Mittal Steel and the results would be that the price of steel locally could be mitigated and cushioned. Just taking the contribution of steel in the building industry, the role of both iron ore and steel will not be under estimated.

The Nationalization model preferred by the Union (NUM) is on the basis that the
Mining Charter on the section, "Ownership of Business Entity" has the following areas: "a majority shareholding position, i.e. 50% + 1 share; joint ventures or partnerships (25% equity plus one share); and broad-based ownership (such as HDSA, dedicated mining unit trusts or employee share ownership schemes)"

It is further our believe that the proceeds from the State Mining Company (including royalties and taxes) be ring-fenced for education (20%), health (20%), rural development (20%) and re-investment in the State Mining Company (40%) - legislation in this regard must be therefore be developed.

The mining industry as a whole - NUM' view

On the transformation of the mining industry as a whole, the NUM suggests the following process:

1. The NGC mandates Cabinet to finalize the Mineral Beneficiation Strategy and that this strategy be included in the IPAP2.
2. As per the agreement between organized business, labour and government on the Mining Summit 2010 and current public hearings in Parliament - the NGC should call on government to work towards establishment of the State Mining Company (consolidate all current government investments across all spheres)
3. The Minister of Labour to legislate minimum wages for the mining industry (including mining contractors and small scale mining).
4. Parliament should develop a comprehensive mining strategy (15-20 years: reviewed after every 5years) for South Africa. The Planning Commission, DMR, organized labour and organized business should play an active role.
5. Parliament (through COGTA and DMR) should develop a common approach on community or traditional authority ownership in the mining industry, which will include accountability, the role of the community and the role of the state.
6. That government should increase its capacity for investment and responsibility for exploration; both the budget and capacity of the Council on Geosciences should be improved.
7. Invest in capacity and technology to detect seismic possibilities with exact workplace and exact time and date - this will allow evacuation to be informed and pro-active.
8. Consideration should be given to minerals that do not fall within the energy and infrastructure category to be addressed through a windfall tax (to include Sasol), Mineral Beneficiation Strategy and then include both mandatory ESOPS (10% of annual turnover) and Community Investment (10% of annual turnover).

Conclusion

The debate on nationalization remains critical but the approach should be more on need for responsive economic policies on the current challenges facing the working class and the poor. It should also focus on the transformation of the historic apartheid and colonial approach to mining and mineral resources transformed in line with the MPRDA and the Mining Charter. The contribution of the mining industry to labour sending areas and mining towns/communities as stipulated in the mining charter remains one of the areas for the state (DMR) to focus during this phase of the Mining Charter. NUM as the majority trade union in the mining sector must ensure that this debate is also completed through a focus on improving working conditions and conditions of service of mineworkers through the promulgation of minimum wages and the establishment of the compulsory bargaining council for the sector.

The progressive force on the left should engage on this discussion on the basis of nationalization as the building block for socialism and that state capitalism should not be confused with nationalization. This debate must at its centre place the class character and class content of nationalization.

References

Freedom Charter (as adopted at the Congress of the People, Kliptown, 26 June 1955)
South African Communist Party (1962) Road to South African Freedom, a clandestine edition. It is not dated, but is known to have been written in 1962.
Mining Charter (Government Gazette Notice 1639 of 2004 Number: 26661) Act No. 28 of 2002: Mineral and Petroleum Resources Development Act, 2002
NUM Resolutions as adopted at NUM Central Committee held on the 13 & 14 May 2010.
ANCYL On Nationalization of the Mines, a discussion paper, written by the ANCYL, February 2010, www.anc.org.za/youth
All articles on Nationalization of Mines debate published in Umrabulo 33, 2nd Quarter 2010.
ANC Economic Transformation Document, NGC 2010 on www.anc.org.za

Labels: ANC, ANC YOUTH LEAGUE, FREEDOM CHARTER, MINING, NATIONALISATION

posted by MrK @ 3:22 PM