Analysis: Motlanthe's fancy footwork on state and mining
- Chris Gibbons
- 19 Apr 2012 (South Africa)
Deputy president Kgalema Motlanthe says more state intervention is needed in the mining industry. Not if government wants jobs, says CHRIS GIBBONS – although there may be more to this than meets the eye.
Motlanthe says the recent global financial crisis shows that more state intervention is needed in the mining industry. Speaking at a big mining bash in Johannesburg, he added that state involvement would secure socio-economic development for South Africans.
He produced no evidence for either of these assertions. In fact, I have not seen a clearer case of post hoc, ergo propter hoc in a very long time. First of all, the global financial crisis had state intervention itself as a root cause, when the Clinton administration, back in the 1990s, demanded America’s banks give housing loans to people who could not afford to repay them – the sub-prime loans. The banks’ response, quite logically, was to try to spread the risk around. They did this - unwisely, as we know with hindsight – by creating collateralised debt obligations (CDOs), the toxic instruments of near-financial mass destruction. None of this had anything to do with government intervention in mining anywhere in the US, or elsewhere on the planet.
But the second part of Motlanthe’s statement is even more preposterous. Imagine for a moment that the state somehow acquired every mine in this country. And let’s stretch the imagination even further and suggest it managed to run these mines competently at their current levels of profitability. Don’t forget that from these profits come the funds needed to reinvest in the mines, to keep them safe for workers and extend their working lives into the future. Only then could the deputy president take what was left and apply it to the socio-economic development of South Africans. A useful sum of money, to be sure. But to suggest that it would be enough to secure the socio-economic development of a nation with 16 million people already on social grants? For an intelligent politician to tell voters what amounts to a blatant lie puts him in the same camp as the likes of Julius Malema.
Take this one stage further. This week saw the government of Argentina step in to re-nationalise the YPF oil company. It has, in effect, stolen it from Spain’s Repsol, in much the same way that Zimbabwe is currently stealing mines, or parts of them, from companies like Implats. We know from the Zimbabwean kleptocracy that the beneficiaries are not the people of Zimbabwe, but the ruling elite and their cronies. It’s also evident from the Argentine example that its action has nothing to do with providing a better deal for the people of Argentina and everything to do with the plummeting approval ratings of President Christina Fernández de Kirchner.
But note the international reaction to Fernández’ decision. Commentators state bluntly that it has put paid to any increase at all in long-term foreign investment in Argentina for at least a generation. In other words, Argentina has a history of this kind of thing – and, oops, they’ve done it again.
Nor should we forget the warning issued on Tuesday to South Africa by the IMF and all those other downgrades from the likes of S&P, Moody’s and Fitch. South Africa will grow at a mere 2.7% – compared with 5.4% for the rest of Africa – as we struggle with weaker terms of trade and a decrease in business confidence. “Sluggish growth in South Africa may require some policy support,” the IMF says.
The government and its deputy president are looking hard in the opposite direction, casting about for anything but the real reason as to why we’re missing the economic boat, and why we missed it last time round as well. They’ve also been told about it again and again: the more anyone close to government talks about “state intervention” in a sector, particularly in mining, the less investors want to have anything to do with it. Or if they do, the higher the return they will demand for that investment.
For “state intervention”, you could substitute nationalisation, but it does not have to be as dramatic as that. Governments do not run big companies well – witness SAA, Transnet and Eskom. Investors know this and react accordingly. No, China will not do as a retort either. The Chinese government admits that many of its huge state-owned enterprises are not as efficient as they could be and are riddled with corruption.
Lest we forget, the Soviet Union ran spectacular economic growth rates by direct government intervention from the 1920s until the late 1970s, but even the forced redistribution of resources ran out of steam eventually. Historians have revealed many of the numbers were falsified in any event, and we know now that, except in the military sphere, there was almost no innovation in the Soviet economy. Economies need innovation to grow. How much innovation would there be in South African mining if Motlanthe had his way?
There is, of course, an alternative perspective, which says that our deputy president is an astute man, who knows all this and has taken it into account. His true purpose revolves around the large void appearing on our political stage, with the imminent demise of Julius Malema and the emasculation of his fellow travellers. Part of Malema’s success, no question, has been his ability to talk to the estimated 2-million to 3-million disaffected black youngsters who have little or no prospect of formal employment. Malema’s promise was to solve all of their woes by nationalising the mines. Now Malema is about to exit stage left, pursued not by a bear, but by the Hawks and SARS. So who will fill this void and take on the mantle of champion of the poor? Let’s not forget that Motlanthe took the trouble to appear on the same stage as young Julius in Tzaneen recently. Maybe he knew then what we all know now.
Politics has always involved delicate balancing acts. Could the ANC, via the deputy president, be attempting to placate both the international investment community and the unemployed youth? To you, over there on the right, may I state that nationalisation is not ANC policy, while to you, out there on the left, allow me to suggest it is?
It’s a tricky plot for the actors concerned. They should hope the audience doesn’t meet over drinks at half-time and compare notes. DM
Photo: Kgalema Motlanthe says the recent global financial crisis shows that more state intervention is needed in the mining industry. DAILY MAVERICK/Jordi Matas.
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