Feasibility of Nationalising the South African Mining Sector

Topics: Nationalization, South Africa, Public ownership Pages: 7 (2212 words) Published: February 26, 2013
Feasibility of nationalising the Countries Mining sector
The purpose of this essay was to examine the benefits and shortfalls of nationalising mines in South Africa, as well as why it should or should not be done. This was gone about researching what many South Africans opinions are and what they believe would help the country more in the long run. It was concluded that the nationalisation of mines is too costly for the country and that the negatives outweigh the positives and thus it should not be done. Abstract

Word Count: 1841

The mining industry forms the foundation of South Africa’s economy. Currently South Africa is the biggest producer of platinum in the world and one of the top producers of gold. Julius Malema, the leader of the African National Congress Youth League (ANCYL) was at the forefront of having a detailed perspective on the nationalisation of mines in South Africa at the beginning of 2010. Malema believes the nationalisation of mines will solve all economic disparities in South Africa. There are many South Africans who agree or disagree with this idea. The following discussion will provide answers to why it should be done and who benefits or why it should not be done and what the shortcomings are and the costs that the country will incur if it were to be done as well as examples of nationalisation in other countries (Roberts, 2011). Discussion

Nationalisation is the operation of transferring ownership from the private sector to the public sector. According to the minister of finance, Mr Pravin Gordhan stated on the March 14, 2011 that nationalisation of South Africa's mines and other economic assets are not government policy. “Nationalisation of mines means the democratic government's ownership and control of Mining activities, including exploration, extraction, production, processing, trading and beneficiation of Mineral Resources in South Africa”(ANCYL, 2010). Therefore this would mean that no mines would be publicly owned but they would be owned by the state. It has been sixteen years since apartheid and the white minority of 10% of the population owns 80% of the country’s economic wealth. The Freedom Charter is a document that expresses the economic, social and political will of South Africans and according to the document, the mineral wealth of South Africa belongs to the people as a nation. “It is against this background upon which a concrete position on the nationalisation of Mines is formulated in order to guide the ANC in the transfer of mineral wealth beneath the soil to the ownership and benefit of the people as a whole” (ANCYL, 2010). If the state owns the mines it would allow them to manage the economy by controlling the important industries. They could also invest a larger amount of money and make their services more efficient. Nationalisation of the mines does not mean all sectors are in the hands of the country’s citizens and that they will benefit from all the sectors. It does not yet say anywhere what the ratio (between state owned and privately owned) of the division will be when nationalisations occurs, if it does. Therefore people shouldn’t think that the state will automatically have over half or a larger percentage. An important factor is whether nationalisation will be with or without compensation. It would almost be impossible to nationalise with compensation as the government currently doesn’t have the figure of about R 2-trillion which is how much it would cost to purchase the mines. But on the other hand, expropriation without compensation would cause a collapse of the Johannesburg Stock Exchange (JSE). This would bring down provident and pension funds at the same time. A large number of servants and citizens would be without their retirement investments as well (ANCYL, 2010). Therefore this poses a big problem already. Some people might think why the mines should be nationalised. Below are three reasons. 1. “Nationalisation to...
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