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DA: Statement by Hendrik Schmidt, Democratic Alliance shadow minister of mining, on the lack of job creation in state-owned mines (30/09/2010)

30th September 2010


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Annual report of state-owned mine Alexkor shows state-owned mine has shed jobs for fifth successive year, while accumulated losses now stand at R275 million
Independent auditor's report raises ‘significant doubt' about Alexkor's ability to continue to exist, without urgent steps being taken
Annual report serves as yet further evidence that further state-ownership in the sector would have disastrous effect on employment in the sector

This morning, the annual report of Alexkor was tabled in Parliament. Being the annual report of South Africa's only state-owned mine, it is of manifest importance in the ongoing nationalisation debate in South Africa. And it provides perhaps the most powerful rebuttal yet, of calls for further state ownership in the sector - not just on the basis that state ownership is inefficient, or unproductive, or unprofitable, though it is all those things, but also, crucially, because it costs our economy jobs.

A great deal has been written and said about the loss-making record of Alexkor over the last decade. There is good reason for this - between 2005 and 2009, Alexkor failed to return a profit on a single occasion. This is despite being allocated R130-million in state financial assistance in 2008/09, and R168-million in the three years preceding that. Alexkor's first profit in five years, recorded in this year's report, was only occasioned by adjusted accounting practice in writing off liabilities - contributions to medical and pension benefits - towards its former employees. Alexkor's meagre 2010 profit will, in any case, be swallowed immediately by debt repayment on its massive accumulated losses - which now stand at R275-million.


Indeed, Alexkor's very survival as an entity appears to be at stake. In an independent audit report from auditing firm PWC, included in this year's annual report, auditors note that unless particular measures are taken urgently, "there is significant doubt about the ability of the company to continue to as a going concern in the longer term." To repeat, there is significant doubt right now about South Africa's only state-owned mining firm's ability to continue to exist.

Yet Alexkor's long term financial performance, woeful as it may be, is not in fact the most salient feature of this year's annual report. In fact, it is the parastatal's Human Resources and Social Development sub-report, included on page 13 of the document, that makes for the most compelling reading in the present environment of nationalisation-talk. On that page, Alexkor again records a decline in its total number of permanent employees. The state-owned mining company now employs just 105 people on a full time basis. This is down from 691 full-time positions in 2000.


It is the sixth year in a row that the state-owned mine has shed jobs.

At its National General Council last week, the ANC resolved to place the mine nationalisation debate on its agenda for its mid-2012 policy conference, and agreed in principle to the establishment of a new state mining company. And the basis of this decision, it seems, other than the crude self-interest of the tenderpreneurs in the ANC Youth League, is the notion that state-owned mines could create employment for South Africans in a way that the private sector has been unable to. Or at least, stave off job losses. As Enoch Godongwana, chairperson of the ANC's Economic Transformation Committee put it during the nationalisation debate: "With the kind of unemployment we have, it is quite critical for us to do something."

It is, of course, outmoded to even think in the first place that the state's role is to create jobs directly rather than facilitate an economic climate conducive to growth and job creation. What Alexkor's annual report helps to demonstrate is that even if one ignores this critical assumption, arguments for increased state-ownership still fail. State-ownership in the mining sector doesn't create employment, it destroys it. The only conclusion one can arrive at, after reviewing Alexkor's disastrous record, is that further state intervention in this sector needs to be avoided at all costs.



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