Feasibility of Nationalising the South African Mining Sector Essay

IntroductionThe mining industry forms the foundation of south Africas preservation. Currently sulphur Africa is the biggest producer of platinum in the initiation and unitary of the top producers of gold. Julius Malema, the leader of the Afri back end National Congress young person League (ANCYL) was at the forefront of having a detailed perspective on the communization of mines in sulphur Africa at the beginning of 2010. Malema believes the communization of mines go forth solve all(prenominal) economic disparities in southerly Africa. There be many south-central Africans who agree or disagree with this idea. The following sermon lead provide answers to wherefore it should be done and who earns or why it should non be done and what the shortcomings be and the bells that the demesne result incur if it were to be done as wellhead as examples of field of studyisation in other countries (Roberts, 2011).Discussion nationalization is the operation of transferring possession from the mysterious bea to the public sector. According to the minister of finance, Mr Pravin Gordhan dry comed on the work on 14, 2011 that nationalisation of siemens Africas mines and other economic assets are non g everywherenment policy. communization of mines means the democratic g overnments ownership and operate of digging activities, including exploration, barection, production, processing, trading and beneficiation of Mineral Resources in to the south Africa(ANCYL, 2010). Therefore this would mean that no mines would be publicly owned except they would be owned by the state. It has been sixteen years since apartheid and the white minority of 10% of the population owns 80% of the countrys economic riches.The freedom Charter is a document that expresses the economic, social and political result of South Africans and according to the document, the mineral wealth of South Africa be colossals to the pot as a nation. It is against this cover versio nground upon which a concrete position on the nationalisation of Mines is speculate in order to guide the ANC in the transfer of mineral wealth beneath the soil to the ownership and benefit of the people as a whole (ANCYL, 2010). If the state owns the mines it would allow them to manage the economy by irresponsible the important industries. They could likewise invest a larger amount of silver and make their services more(prenominal) efficient.Nationalisation of the mines does not mean all sectors are in the hands of the countrys citizens and that they forget benefit from all the sectors. It does not yet say anywhere what the ratio (between state owned and privately owned) of the division ordain be when nationalisations occurs, if it does. Therefore people shouldnt think that the state will automatically have over half or a larger percentage. An important factor is whether nationalisation will be with or without compensation. It would almost be impossible to change with compe nsation as the government currently doesnt have the witness of about R 2-trillion which is how much it would cost to purchase the mines. But on the other hand, expropriation without compensation would cause a collapse of the Johannesburg Stock substitution (JSE). This would bring down provident and pension funds at the corresponding time. A large number of servants and citizens would be without their retirement investments as well (ANCYL, 2010). Therefore this poses a big problem already. Some people world power think why the mines should be modifyd. Below are three reasons.1. Nationalisation to increase the States fiscal capacity and better the operative conditions (ANCYL, 2010). It states that the money received from taxes is not enough to help each and every single South African citizen, which it is not. Education, healthcare, safety and security and housing will not be provided to the masses if the government is not in control of the important sectors. There have been othe r success stories, such as in Botswana where nationalising the mines provided mineworkers with a safer working environment and higher wages. 2. Nationalise to industrialize and Create more jobs (ANCYL, 2010). More jobs will be created and industrial investors will be attracted to add to education, expertise and the economy. 3. Nationalisation to transform South Africas unequal spatial development patterns (ANCYL, 2010). This means the areas that will be rivet on will be ones which will be sustainable in the future as well as effective. Smaller areas that have neer been mined before could be targeted as it will provide more jobs in these areas which rarely see economic activity (ANCYL, 2010).Malema believes that everybody in South Africa has the right to the wealth that is produced and that the state should own the larger part of the mines. South Africa is divided as we speak. Weve got two economies in one country, two nations in one country, and it is nationalisation that will uni te us (Andrew, 2011). He also believes many jobs will be created once the mines are nationalised. Patrice Motsepe, a South African businessman, states that he would back Malemas decision as long as it is in the best interests of South Africa. The ANCYL believes South Africas minerals, water, land and marine resources should be used to maximise growth of South Africas economy and not purely for profit (Shivambu, 2010).If the mines are nationalised, new economic centres will be developed, new industrial development zones will be established, jobs will be created as the mines owned and controlled by the state will increase topical anesthetic beneficiation and industrialisation of the available mineral resources, and local economies will be developed (Shivambu, 2010). General Secretary of Congress of South African Trade Union (COSATU), Zwelinzima Vavi says that Nationalisation can bolster our economy and it will always ensure development (Beukes, 2011). He said that the nationalisation of the mines will make available money to all the people of the country, not only those who are currently working in the private sector (current mine owners) (Beukes, 2011). One of the ANCYLs argument is that nationalisation was a aim found in the Freedom Charter and that South African citizens should handle the mineral wealth of the nation between each and every one (Achary, 2010).Thus there are valid reasons for the mines to be nationalised but the major(ip) concern is the cost that the country would incur to make nationalisation happen.Nationalisation is an unaffordable, premature and frankly unnecessary suggestion, which has already undermined market stability (Time, 2009). It would cost South Africa R1.4 to R2 trillion to nationalise the mines which seems silly if you think South Africa has the ordinal biggest mining industry in the world. This figure does not include extra resultning costs as well as the costs that go with running loss-running mines. This shows it is a b ig part of the economy and would be hoodlum to be nationalised. This figure is the same as trebling South Africas national debt over a single night, which is un corporealistic (Time, 2009). The turn on the briery issue heated up with business executives and analysts warning that nationalisation would suffering the economy (Isa, 2011). Many say it is a disaster and has been for every country who has tried to pull it off. Susan Shabangu said consideration of the step was misguided, as the real issue was to address poverty, unemployment, and inequality (Isa, 2011).This shows that the debates that are ongoing will monish foreign investments. The ANC do realise that its close to impossible to nationalise the mines and come off on the right foot but are currently looking at models of how it could be implemented effectively (Isa, 2011). The nationalisation of mines has also been seen as a ploy to try and save calamitous Economic Empowerment (which has been in endow in South Africa fo r a while, but has not achieved what it hoped to) and not focusing on the amount of execrable in the country as well as the amount of lazy workers (Business Day, 2011). The market value of South African mines (listed) is almost 850 billion rand which is supra a third of the countrys total Gross national Product (GDP). Therefore the government should be more concerned over matters such as the education level and the health of the countries people.Zambia nationalised the shit mines, which supplied 90% of its exports, in the early 1970s. It ended up hiring back the multinational pig bed companies to manage them (News24, 2010). Zambia is the worlds 11th largest producer of copper. The mines were nationalised in 1969 and at this time were export about 700 000 tonnes of copper per annum. By the year 2000, exporting figures had constantly decreased to 225 000 tonnes. The result of the decline was partly because of a lose of investments as well as mismanagement of the mines. Zambia h as neither the capital nor the skills to run the mines by itself (Time, 1969). Other factors were the drop in the price of copper, a want of skills among the citizens in Zambia and they were unable to raise capital. They lacked a strong plan with which to back up their initial aim (Time, 1969).Restrictions were placed on exports and imports which resulted in step in rates rising and therefore gains from exports reduced. Zambia also failed to save earnings when the copper price was high and thus when the price fell, they suffered immensely. Even though the location is not exactly the same, it does show that to nationalise mines a lot of debate needs to occur as well as research and patently the country needs the required funds to make sure it can be made possible. South Africa does not have these funds at the moment and thus would not be able to nationalise the mines unless they are willing to operate with huge debts which is unfeasible (Osei-Hwedie, 2003).ConclusionNationalisati on is an unaffordable, untimely and frankly unnecessary suggestion, which has already undermined market stability (George, 2009). This statement sums up the idea of nationalisation of mines in South Africa. It obviously has its advantages such as giving higher wages and creating more jobs but it is clearly straightforward that the positives are outweighed by the negatives. With so many jobs in South Africas mining sector at stake, it is irresponsible to talk about placing this chance upon sector of the economy in the hands of government people. The country does not have nearly enough funds for this project to take place and thus in my mess should not take place in even in the near future (Marais, 2010).Reference ListACHARY, N. (2010). 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