The recent launch of the state owned mining company, the African Exploration Mining and Finance Corporation (AEFMC) in South Africa, was met with stiff resistance by the foreign and minority commercial interests, who have traversed the geological terrain of that country for more than a century. Once the announcement was made, the vested interests expressed apprehension that the setting up of a state owned mining corporation could lead to further government actions, with nationalization as a possibility. Jacob Zuma has since issued several follow-up statements, dissociating his government from any plans towards a nationalization of the mining industry. He was quick, however, to insist that as a leading producer of metals such as gold, platinum, coal and other minerals, it is important that the role of the government transcends that of mere regulation of the industry to the more active participation in the form of extraction, processing and marketing.
To decipher the weight of President Zuma’s policy pronouncements, it is expedient to delve into a brief history of the politics of mining in South Africa. The mineral dense grounds of the area known as South Africa, today, can be directly blamed for the numerous ills that have befallen the indigenous Zulu, Xhosa, Khoi-San, Sotho, Ndebele, Venda and other ethnic groups whose ancestral remains have mingled with the precious commodity underneath the soil. With the discovery in the mid 19th century that a site northeast of Cape Town was rich in diamond deposits, thousands of Europeans rushed to the area in a desperate attempt to strike wealth. What followed was the British annexation of the entire area comprising the mining fields. Towards the later part of the 19th century, gold was discovered in Witwatersrand, leading to the famous South African Gold Rush, and the near complete destruction of the region by greedy Europeans. Gluttony and ravenousness led to much bickering among the foreign usurpers, leading to the Second Boer War in 1899, the end result of which was the concentration of the gold and diamond mines in the hands of few European entrepreneurs.
One hundred years later, not much has changed in the ownership of mines in South Africa. 94% of South Africa’s diamond mines are controlled by the De Beers Consolidated Mines Company. De Beers was founded in 1870 by the violent and brutal racist Cecil Rhodes, who is noted for the famous statement “I contend that we are the first race in the world, and that the more of the world we inhabit the better it is for the human race… If there be a God, I think that what he would like me to do is paint as much of the map of Africa British Red as possible…” Speaking of black mine laborers in 1893, he said “Nine-tenths of them will have to spend their lives in manual labor, and the sooner that is brought home to them, the better.” With fortune dripping with the blood of black laborers working in South African mines, Cecil Rhodes established Oxford University’s Rhodes Scholarship, which was marked only for the white male until the trustees were forced to change the terms of its administration in the 1970s. De Beers controls the seven largest diamond mines around South Africa till date.
Gold mining in South Africa, just as diamond mining remains almost exclusively in the hands of foreigners. More than 45% of the global gold reserves are held underneath the earth of Witwatersrand, and the nation’s mines are among the worlds deepest. Other minerals including platinum, chromium, vanadium, manganese, uranium, iron ore, and coal make up about 60% of South Africa’s commodity export. It is reported that South Africa holds the number one position – in terms of mining and volume of export – in platinum, manganese, vanadium and chromium.
The vast majority of these mines are owned by foreigners and minority white former apartheid apologists, these were the landlords who appropriated the mines to themselves during the early days of apartheid and consolidated ownership with their children. Up until the year 2010, several mines such as the Great Basin Gold’s Burnstone mine in Mpumalanga did not have a single local person as part of the management team. Examples of such abound.
The indigenous South African, today, represented by the majority government in power remains a negligible stakeholder in the industry that is the major driving force behind the economy of the country. Black owned South African companies are rare in a sector that directly employs over half a million people in nearly 700 mines.
Several government policies including the Black Economic Empowerment (BEE), the Public Finance Management Act (‘which provides that all minerals resources belong to all South Africans” and not only the white minority ),The Mineral Development Bill, to mention three have failed to concretely address the problem of the disenfranchisement of indigenous or majority South Africans in the ownership of the production process of minerals in South Africa.
Beyond mere ownership by dark skinned South Africans, the most important issue is that of tangible and quantifiable economic empowerment of the majority of South Africans. The matter at stake is not the substitution of an Afrikaans name with that of a Zulu, Xhosa or Sotho name as the BEE seems to have degenerated to. At stake is the pathetic situation of the majority of black South Africans who are landless, jobless, unemployed, or underemployed. Those able to make it to the lower or at most, mid management level are edged out from further advancement by the foreign or minority owners of the mines. In all of these, the post-Apartheid government of South Africa, has meekly kept to its inherited role of a mere regulator, letting the” boys play the field,” report their earnings and pay a token percentage as royalty to the state. Refusing to ruffle feathers or risk being accused of racism, the successive governments of Nelson Mandela and Thabo Mbeki let sleeping dogs die.
Jacob Zuma, determined to depart from the rhetoric of the past decided to establish a state-owned mining corporation. The major reason for this move is job creation and the need to empower black South Africans. According to Zuma, “the workers and the nation should get their fair share of the wealth generated (from mining) and secondly, (it is important that ) minerals mined are integrated into the rest of the economy through beneficia-tion before export”. The second part became necessary owing to the “export- first” policy of the mining companies who put profit before national interest. For instance, although a major producer of coal – about 90 percent of South Africa’s electricity is generated by coal – the country sometimes experiences several days of blackout because the mining companies would rather meet their export obligations than supply to ESKOM, the South African electricity company; this is among other similarly treasonable instances.
The mining companies unsurprisingly, have fiercely resisted the newly established state owned mining corporation in what the union describes as “the state being both a player and referee.” The group of mining companies expressed fears that the state formation of a mining company would edge out competition, and discourage increased foreign investments.
It is necessary, however, to weigh the actions of the South African government against the desperate needs of the majority of its citizens. According to Jacob Zuma’s statement at the launch of the AEMFC, “our state owned mining company will have to ensure that its business contributes to sustainable development and the upliftment of the local communities within which it operates. This means that we should balance the opportunities for growth and development with ensuring that the social, environmental and economic impacts of mining, both positive and negative, are managed in an open and accountable way.” In establishing the state-owned mining cooperation, the government put the people before profit. This is in stark contrast with the profit before people policies of the mining industrialists.
At the moment, a state-owned mining corporation seems to be the shortest means for the majority of the South African population to gain a foothold in the industry that has been controlled for more than a century by foreigners and the minority population. In this sector, the Keynesian economics of social liberalism is most definitely needed, as against the neoclassical economics, being advocated by the mining industry. Moreover, neoclassical economics as previously enforced on Africa by the West has lost much credibility owing to the recent turn of events in the economies of Western nations.
It must be noted, however, that the path state ownership in the mining industry, although seemingly viable, must be threaded with the utmost caution. The history of state owned extractive industry corporations in sub-Saharan Africa is fraught with corruption, embezzlement, mismanagement, apathy, and eventual collapse. Jacob Zuma and the ANC government must learn from history and avoid embarking on a project that is doomed to fail from the start.
First, the human resources upon which the new mining corporation will be founded, will go a long way in determining its success. For a start, Jacob Zuma and his government must refrain from using the positions within the corporation to payback party loyalists or to score cheap political points. Well educated, tried and tested entrepreneurs, successful private sector participants, resident or in the Diaspora, must be lured into the corporation. Experienced, committed and motivated bureaucrats and technocrats should be retained to ensure that due process is enshrined. Intellectuals who are afro-centric in their orientation should be recruited as consultants, and if possible, the government should look beyond South Africa to recruit from other African nations where there is abundance of the needed skills.
Most important, is the need to embark on specialized education for young South Africans in order to train and prepare them for future employment in the mining industry. Tailor made courses with global competitiveness must be established in select South African institutions to ensure the best quality manpower.
Aside from the technological and entrepreneurial aspect of the training, it is also necessary, and gravely so, that young South Africans be trained in citizenship education and in courses geared towards self confidence and national pride. There seems to be little or no emphasis at psychologically reversing the effects of apartheid on the blacks of South Africa, as most policies are aimed at structural adjustments of the polity. Unless the mental effects of apartheid are dealt with, through targeted counseling and formal, informal and non-formal education, South Africa would sooner than later end up as the rest of the blacks in sub-Saharan Africa and in the Americas, who are having difficulty in fully acknowledging and overcoming the psychological effects of slavery and colonialism on different generations.
Perhaps, South Africa if successful with its example will be able to salvage the rest of mineral producing sub-Saharan African from the clutches of the West and China. The global mining industry, despite the pretensions of the Extractive Mining Industry Transparency Initiative (EITI) is steeped in secrecy and intimidation of the governments of African countries, by those who own the brains and equipments for drilling, mining and processing. The case of the Democratic Republic of Congo stares us all constantly in the face, to mention one.
African governments have been constantly told that any mention of state participation in direct commercial ventures of extraction amounts to nationalization, but this is far from the truth. Why is the United States not allowing private oil drilling companies to explore it strategic crude reserves?
South Africa could show that the government is able to, according to Jacob Zuma, “build a strong mixed economy, where the state, private sector, co-operative and other forms of social ownership complement each other, to achieve shared and inclusive economic growth.” If the right steps are carefully taken, sub-Saharan Africa will sooner than later break the jinx of dependence on the West and China in the natural resource production and processing, leading it on the path to genuine independence.