Opinionista Jeff Rudin 21 July 2014

Buying economic and political support – for R300 billion

Only a few weeks ago, South Africa was on the verge of an economic disaster, held to ransom by the preposterous wage demands of the striking platinum miners. The mining companies were insistent that meeting the workers’ (initial) demands threatened their very survival. Economists waded in with warnings about chasing away foreign investors, on the simple assumption that such an outcome would self-evidently be seen as a ‘bad thing’. The government echoed all these claims and warnings. But Mike Cohen’s report, ‘26% Black Stake in Mines or Else’, in the Business Report of 16 July, opens the window to a rather different picture.

The platinum companies never publicly quantified the total cost of meeting a basic entry level wage of R12,500 per month. However, from information they made available during the course of the protracted negotiations with the trade union, AMCU, it can safely be said that the cost was well below R2 billion a year.

According to Mike Cohen’s report, mining companies have already paid R300 billion to the tiny number of black mine owners created by the Mining Charter of 2004 within the broader framework of BEE. R300 billion would cover the cost of paying miners something approaching a living wage for at least the next 150 years!

Equally striking about this statistic is that the mine owners, the economists and the politicians, who were so vocal in attacking the 70,000 greedy and selfish striking workers whom they further condemned for being economically illiterate in making their supposedly outrageous demands, are remarkably silent about the cost of a cool R300 billion. Could this silence be, in part, because the mines are still suitability profitable; a profitability that consequently continues to attract foreign investors whose sole requirement is their own profit maximisation?

Despite its enormous size, R300 billion is evidently still not enough for the tiny number of millionaires who use the untransformed poverty of most South Africans as the ‘racial’ basis for their own, exclusive and highly lucrative transformation. The Mining Charter requires 26% of all mining assets to be owned by blacks by the end of this year.

There is raging controversy about the extent to which this requirement is being met. The mine companies say they have already complied; black mine owners, supported by the government, say this is still very far from correct. The mine companies complain it can’t be right for the shares they provide at a discount under BEE to then be sold at a profit and, to make matters worse, have the shares that are sold deducted from the company’s 26% obligations. The Minister of Mineral Resources, Ngoako Ramatlhodi, is unmoved. He is threatening to forfeit the coveted license to mine from any company that fails to meet its 26% obligation no matter how many times black beneficiaries sell their shares and come back for more because the lucrative selling of their shares has reduced the companies’ level of compliance with the required 26% black ownership. Rigid enforcement of the Mining Charter is evidently an exception in a country notorious for its failure to implement its own policies.

The Deputy Minister of Mineral Resources, Godfrey Oliphant, adds a further twist to this tale. Cohen quotes him saying that “26% must remain in the hands of indigenous people”. This creates uncertainty. The people formerly known as African have now appropriated the name ‘black’. Where, then, does this leave those currently considered not to be black enough? The Indian ‘race’ group are clearly not indigenous. But what about the ‘coloureds’? Indeed, the only genuinely indigenous people for much of what is now South Africa are the descendants of the Khoi and the San – and I suspect that very few of them figure amongst the privileged few who have been made very rich thanks to the Mining Charter.

What can safely be predicted in the midst of these confusions and conflicts is that the mining companies will pay whatever it costs to comply with the Charter. This is because the cost, regardless of its size, is cheap. It not only secures the permanent protection of the (effective) private ownership of South Africa’s enormously rich mineral resources but, more fundamentally, safeguards capitalism itself.

Despite secondary quarrels over the precise division of the wealth of South Africa, black and white mine owners are as one when it comes to advancing their shared interests. This is why, for instance, President Zuma, in his recent State of the Nation Address, committed the government to both fracking and nuclear energy, notwithstanding the various statutory consultations about both that are still to take place before any decision is made.

People shocked by this commitment say it is irrational because renewable energy is both considerably cheaper and quicker to bring on tap. They point to the fact that a mere 1% of South Africa’s land surface that is suitable for renewable energy could produce almost as much energy as Eskom’s current total energy capacity. They similarly point to the recently commissioned Jeffreys Bay Wind Farm, Africa’s largest, which was completed within a short three years and on budget. And they are right to do so; what they miss is that President Zuma’s commitments are the perfect rationale for capital for, in Minister Ramatlhodi’s words, “the [capitalist] economy revolves around mining”.

The attraction of nuclear and fracking is precisely that it costs so much more than renewable energy and that the cost invariably is even greater than originally quoted. South African companies have some R500 billion sitting idle because of no suitably profitable investment opportunities. This is dwarfed by the $2.8 trillion in cash (R136.5248 trillion!) that US companies are sitting on. This cash surplus helps to fund the current worldwide equity bubble that is now beginning to worry some economists. This is the surplus behind the JSE repeatedly breaking its highest index levels at the same time that the ‘real’ economy is in real trouble.

Although Minister Lindiwe Sisulu had housing in mind when she recently declared that South Africa was to be “Africa’s top building site”, nuclear and fracking construction will give real meaning to her boast. What is additionally guaranteed is that both nuclear and fracking will be sold to the unemployed as a huge job opportunity. What will also be guaranteed is that the mostly temporary workers will be underpaid and that, if they were to dare to ask for anything better than starvation wages, they will be accused of asking for the impossible; of ignoring that ‘we’ can’t afford to pay them any more and that they should be grateful for what they have amidst mass unemployment. DM

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