President Thabo Mbeki should veto the Minerals Bill: it is a disaster for South Africa, Nepad and Africa

South African events cannot properly be discussed while ignoring how history has shaped the thinking of politicians and politically affiliated civil servants. We cannot expect normal politics from a society with such a distorted past. So judgmental commentators need to consider their own reactions in such circumstances. But it is one thing to understand why a political party follows a particular course, and quite another thing to ignore probable harmful consequences. Economically counter-productive policies are all the more undesirable in developing countries where they really hurt the poorest members of society. We just cannot afford to make any more mistakes. A really bad mistake, while the entire world is privatising, is to nationalise mineral rights.

Since 1994, the State President has given periodic assurances that nationalisation is no longer on government's agenda, and policy documents such as GEAR have affirmed state intentions to liberalise the economy and privatise state enterprises. So Minerals Bill proponents talk instead of "transferring custodianship of minerals to the state". Somehow they've convinced themselves that minerals are not property, so that they can ignore how our constitution protects property from expropriation without compensation. There's no money for the latter - they have to get the minerals for free or go without.

But dictionaries define property as something that is owned and nationalising as ¡§converting something into national property. This is exactly what the Minerals Bill intends to do to minerals now owned privately and valued as material assets in company books. Minerals are indisputably material things capable of being owned and actually owned worldwide by individuals, firms and states. They are the property of whoever owns them, whatever self-serving spin the Department of Minerals and Energy tries to put on its words.

Unfortunately, initially outraged mineral-owning companies have indicated grudging acceptance of the proposed confiscation. They lack government¡¦s guns. Shareholders seem to prefer quiet, non-confrontational pursuit of whatever profit the changing circumstances permit. So from most quarters we hear that the objectives of the Bill are supported.

What objectives? Destruction of wealth and jobs, massively reduced local and foreign investment, significantly reduced economic freedom, and crippled economic growth! Well, those are not the intended objectives - merely the predictable consequences.

Our mining industry is among the most efficient in the world. A major reason for this is private ownership of minerals, which has supported various beneficial practices such as:
„h mining only when owners consider economic conditions to be optimal for exploitation
„h raising large sums of money to invest in mining projects infeasible without permanent ownership
„h developing deep-mining methods which need huge investments and long turn-around times, unacceptable to investors if tenure were not totally secure
„h letting fierce competition persuade weaker and less efficient owners to sell out to stronger and more efficient owners
„h concentrating on mining, free of the insecurities of weak tenure, political prescription and the ever-present threat of bureaucratic interference
Such factors led to the creation of a great industry, the envy of the world. South Africa ranks first in the production of alumino-silicates, chrome ore, ferrochromium, gold, vanadium and vermiculite, and second or third in ferromanganese, fluorspar, manganese ore, platinum, titanium and zirconium. Then there is a long list of minerals produced in substantial quantities without putting us in the world's top three producers.

Do politicians and civil servants seriously think that by intervening they can improve on this proud and distinguished record? All the evidence points the other way, towards huge and lasting economic harm. Look at what is going on here! We are watching a group of ideologically driven bureaucrats hard at work to grab and regulate and redistribute a mighty industry. Replace the word ¡§land¡¨ with ¡§minerals¡¨ and we have another Zimbabwe on our hands. Only the previous owners of minerals have a tentative assurance that they will be allowed to hire back their property for 30 years ¡V a privilege not extended to former owners of Zimbabwean farms.

By implacably dismissing every reasoned objection, the bureaucrats have forced industrialists, journalists and lawyers into acquiescence. They have offered a string of astonishing statements. They have tried to convince us that minerals are not property - no compensation is needed when nationalising - "use it or lose it" is not unconstitutional - new uncertainties will not affect confidence and investment - international treaties including compensation for expropriation can be bypassed - royalties can simply be transferred to a state ignoring revenue losses to black families and traditional authorities - social and empowerment requirements will not reduce project viability - ministerial discretionary powers will not be abused - the need to reapply for existing rights is a mere formality - 30-year licenses are long enough - non-transferability of rights will have no effect - existing mining operations will not be disrupted - mining investments and expected returns will be secure - having the use of something for 5-30 years is owning it - and banks' unwillingness to finance projects without the security of owned assets will have no effect on mining. And rivers will start running uphill.

Our State President's Nepad project seeks to rehabilitate the whole African continent in the eyes of foreign investors. This means creating and sustaining a whole new confidence in sound and measured policies. It does not mean nationalising and destroying South Africa's major industry following the disastrous pattern of much of the world's failed socialist past.

Trade and Industry Minister Alec Erwin recently intervened too late to prevent a fatally flawed new Immigration Bill from passing. Now - before June 25th - we desperately need State President Thabo Mbeki's timely and forceful intervention. Not to improve the Minerals Bill - that is impossible - but to veto it entirely.

Author: Jim Harris is a freelance journalist. This article may be republished without prior consent but with acknowledgement. The patrons, council and members of the Foundation do not necessarily agree with the views expressed in the article.

FMF Feature Article\21 June 2002