Had the South African mining industry been nationalised, the South African government would have been accountable for the R67-billion post-meltdown deficit that the industry suffered in 2009, outgoing Chamber of Mines of South Africa president Sipho Nkosi points out.

Nkosi, who was replaced after serving three terms by incoming president Dr Xolani Mkhwanazi at the Chamber's 120th annual general meeting in Johannesburg on Tuesday, cautions those in South Africa who are advocating nationalisation that the cyclical nature of the mining business presents a wide range of attendant risks.

"One needs to look no further than the economic and financial realities of the South African mining sector in 2009 to appreciate the pitfalls," Nkosi adds.

The total income of the mining sector in 2009 was R332 billion, down 9% on 2008, and the industry ended up with a R67-billion deficit, he discloses.

Though the industry's total expenditure, excluding dividends, taxes and capital expenditure, was R312-billion, implying an unimpressive gross surplus of R20-billion over the figure of R332-billion, which includes interest and dividend income as well as profits made on the disposal of mining company assets, with the addition of capital expenditure, taxes and dividends, total expenditure in 2009 amounted to R399 billion, which represents a R67-billion deficit.

The mining industry had to cover that deficit itself by making use of retained earnings, but the State would have had to do so if some within the ruling African National Congress (ANC) had got their way.

While it is obviously not true to suggest that deficits like the 2009 deficit happen every year, Nkosi says that iit does illustrate the potential demands that can be made on taxpayers when mines are being managed and operated by the State and not by the private sector.

"There's always going to be a limit to the amount of taxpayers' money that the fiscus can provide to offset the deficits incurred by nationalised business sectors.

Nationalisation is an antiquated and discredited practice. It has never been an enduring, successful system anywhere and it has impoverished many countries, several of them in Africa," Nkosi, who is also the CEO of the JSE-listed coal-mining company Exxaro, says.

With President Jacob Zuma and other political leaders, including Mineral Resources Minister Susan Shabangu, having asserted that nationalisation is not a government policy objective, the issue now resides in the ANC's national executive committee, where it will receive detailed attention during the next two years.

"Should the need arise, the Chamber will participate vigorously and constructively in any public debate that may take place," he says.

Besides Mkhwanazi, who is BHP Billiton South Africa chairperson, other new office bearers are vice-presidents Mark Cutifani, who is CEO of AngloGold Ashanti, and Neville Nicolau, CEO of Anglo Platinum.

During his term of office, Mkhwanazi sintends to continue to strengthen the relationship between the Department of Mineral Resources and the Chamber and to work with the government towards the establishment of a "water-tight" licensing process.

"Mining should still be the mainstay of South Africa's economic development and wealth. South Africa is by far the most endowed country and we need to fix infrastructure, transform and improve competitiveness. Most of all we need to dig and to support growth," Mkhwanazi tells Mining Weekly Online.