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Mining, EWC and wealth extraction – the unexplored possibilities

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Mining, EWC and wealth extraction – the unexplored possibilities

1st October 2018

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South Africa’s land politics – and particularly the contentious drive towards Expropriation without Compensation (EWC) – is ultimately not about land, but property, and the discretion with which the state can intervene in privately owned holdings.

While the policy debate around EWC has homed in on farming, agriculture is far from alone in facing this threat.

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And thus the import of former President Jacob Zuma’s recent comments: ‘We should nationalise the land, we should nationalise the banks, we should nationalise the mines. We should nationalise the monopoly industry.’

It is fair to say that he is speaking for a constituency of some size and importance. It is also fair to say that, whatever its initial orientation and justification, EWC cannot but significantly expand the discretion of the state to intrude into private property ownership. It is likely to be emerge as an open-ended policy.

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And, in practice, the mining industry may find that EWC ultimately emerges as a particular strategic issue.

It is well to recall that the origins of the current policy trajectory did not start with land. It’s true enough that disparate voices have protested the constitution’s protection of property rights since it was adopted. Some MPs warned darkly that such protections were mere sunset provisions that were inevitably to be scrapped. But the real momentum began to build when Julius Malema and his associates – then at the head of the ANC Youth League – began to agitate for the nationalisation of the country’s mines.

Mining remains a totemic industry in South Africa. In common with agriculture, it attracts volumes of animosity for the abuses imputed to it. It also carries a great deal of symbolic baggage, as a signifier of colonial- and apartheid-era dispossession, and the inequalities that persist today. In its current form, it is economically rapacious and morally repugnant. The industry is something that has been unjustly alienated from the country’s people. In the ideologically loaded language of its proponents, the mining industry is the epitome of ‘white monopoly capital’.

‘Your mines continue to kill our people’, declared Malema at a demonstration at the then Chamber of Mines in 2015, ‘Your mines continue to exploit our people. Your mines continue to pay peanuts to our people.’

More than this, South Africa’s mining industry is a major economic asset, comprising a little over 7% of the country’s GDP in 2017. PWC’s review of the industry, SA Mine, put the value of total assets owned by the industry in that year at some R691 billion, with revenues of some R371 billion. Potentially, there is a great deal more, as the value of South Africa’s mineral deposits have been estimated at US$2.5 trillion.

By any reckoning, this is a tempting prize. For those seeking a firm hand for the state on South Africa’s future, it is especially so – whether the intention is to drive a state-centric economic mode, to pursue a push to socialism or simply to engineer a situation in which those favoured with political connections are able to profit from them. The ongoing controversy about state capture strongly warns of the dangers when the latter is at play.

Indeed, Given Sigauqwe – discussing the prospect of yet another encroachment on private property, namely, the nationalisation of banks – observed in the Mail and Guardian last year: ‘Access to the economy has become collateral for forging patrimonial bonds making patronage a political tool that allows not only for the centralisation of power but also excessive abuse of it. Nationalisation would therefore leave people at the mercy of a government that has already proven to be self- serving and intent on growing personal wealth.’

Government encroachment into the mining space has already gnawed at property rights. The White Paper on a Minerals and Mining Policy for South Africa (released in 1998) indicated an intention to nationalise mineral rights. This was effectively achieved through the Mineral and Petroleum Resources Development Act of 2002. And in a much remarked on Constitutional Court case (Agri South Africa v Minister for Minerals and Energy) it was held that this did not constitute expropriation – although from the point of view of those forfeiting their property, the distinction is largely academic. But, the court held, since it was not viewed legally and constitutionally as expropriation, no compensation could be demanded.

Meanwhile, contestation over the Mining Charter has revolved significantly around demands for the ceding of ownership – a low-key form of expropriation itself.

As we at the Institute of Race Relations have argued previously, a critical concern around EWC is the lack of a firm limiting principle. There is no certainty as to how it will be used in the long run. Given the existing socio-political and policy background, and the precedents that have been set, mining would be a particularly vulnerable target.

Indeed, recent developments seem to show a link between EWC and mining. This revolves around the leaked list of properties selected for expropriation (whose authenticity has been denied by government, but which we have good reason to believe is genuine). It has been noted that a number of these properties sit atop mineral deposits. Speculation is that Akkerland Boerdery in Limpopo, for example, was being sought after in order to access its coal reserves (coal miners having previously made offers on the property), while Golden Valley near Magaliesburg has also apparently been eyed for mining purposes. Straws in the wind perhaps … but revealing ones.

That the state might seek to creep EWC beyond land is less a risk than a natural progression. The implications of this need to be picked up by business – believing, or hoping, that this is a problem for farmers alone is short-sighted. Such complacency could prove very costly.

Written by Terence Corrigan, project manager at the Institute of Race Relations (IRR), a think tank that promotes political and economic freedom. If you agree with what you have just read then click here or SMS your name to 32823.

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