Feasibility of Nationalising the South African Mining Sector Essay

IntroductionThe mining manufacture forms the foundation of southmost Africas frugality. originally long southwestern Africa is the biggest producer of platinum in the gentlemans gentleman and one of the outdo producers of gold. Julius Malema, the leader of the African National Congress Youth League (ANCYL) was at the forefront of having a detailed perspective on the nationalization of mines in southward Africa at the beginning of 2010. Malema believes the nationalization of mines leave alone solve altogether economic disparities in South Africa. at that place argon many South Africans who agree or disagree with this idea. The following discussion go out volunteer answers to wherefore it should be done and who benefits or why it should non be done and what the shortcomings are and the hails that the terra firma will incur if it were to be done as swell as extype Ales of nationalisation in former(a) countries (Roberts, 2011).Discussion nationalisation is the operat ion of transferring ownership from the private area to the domain sector. According to the minister of finance, Mr Pravin Gordhan subjectd on the March 14, 2011 that nationalisation of South Africas mines and other economic assets are not government policy. nationalisation of mines call ups the democratic governments ownership and control of excavation activities, including exploration, extraction, production, processing, trading and beneficiation of mineral Resources in South Africa(ANCYL, 2010). thereof this would mean that no mines would be publicly have but they would be owned by the state. It has been sixteen years since apartheid and the white minority of 10% of the common riches owns 80% of the countrys economic wealth.The Freedom Charter is a document that expresses the economic, social and political will of South Africans and according to the document, the mineral wealth of South Africa belongs to the people as a nation. It is against this background upon which a c oncrete position on the nationalisation of Mines is formulated in advanced society to guide the ANC in the transfer of mineral wealth beneath the land 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 controlling the important industries. They could too invest a monumentalr amount of money and take aim their function more efficient.Nationalisation of the mines does not mean all sectors are in the hands of the countrys citizens and that they will benefit from all the sectors. It does not yet say anywhere what the ratio (between state owned and privately owned) of the division will be when nationalisations snuff its, if it does. Therefore people shouldnt see that the state will automatically have over half or a larger percentage. An important factor is whether nationalisation will be with or without requital. It would almost be impossible to nationalise with compensation as the gover nment currently doesnt have the grade of about R 2- one million million million 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 Exchange (JSE). This would bring voltaic pile provident and pension funds at the same 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 might think why the mines should be nationalised. Below are three reasons.1. Nationalisation to increase the expresss fiscal capacity and better the working conditions (ANCYL, 2010). It states that the money certain 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 other success s tories, such as in Botswana where nationalising the mines provided mineworkers with a safer working environment and higher(prenominal) wages. 2. Nationalise to Industrialise and Create more jobs (ANCYL, 2010). More jobs will be created and industrial investors will be attracted to adjoin to education, expertise and the economy. 3. Nationalisation to transform South Africas unequal spacial development patterns (ANCYL, 2010). This means the areas that will be focused on will be ones which will be sustainable in the future as well as effective. Smaller areas that have never 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 fall in 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 sell Union (COSATU), Zwelinzima Vavi says that Nationalisation can bolster our economy and it will evermore ensure development (Beukes, 2011). He said that the n ationalisation 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). angiotensin-converting enzyme of the ANCYLs argument is that nationalisation was a demand found in the Freedom Charter and that South African citizens should share 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 concern is the cost that the country would incur to make nationalisation happen.Nationalisation is an unaffordable, untimely and frankly gratuitous 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 fifth biggest mining industry in the world. This figure does not include extra running cost as well as the costs that go with running loss-runnin g mines. This shows it is a big part of the economy and would be tough to be nationalised. This figure is the same as trebling South Africas national debt over a single night, which is unrealistic (Time, 2009). The debate on the thorny issue heated up with business executives and analysts warning that nationalisation would damage the economy (Isa, 2011). umpteen say it is a disaster and has been for every country who has tried to clear it despatch. Susan Shabangu said consideration of the step was misguided, as the real issue was to mention poverty, unemployment, and inequality (Isa, 2011).This shows that the debates that are ongoing will deter 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 look 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 Black Economic mandate (which has been in place i n South Africa for a while, but has not achieved what it hoped to) and not focusing on the amount of poor in the country as well as the amount of unemployed workers (Business Day, 2011). The market take account of South African mines (listed) is almost 850 billion rand which is above a troika of the countrys total Gross Domestic 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 copper mines, which supplied 90% of its exports, in the other(a) 1970s. It ended up hiring back the multinational copper 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 trade about 700 000 tonnes of copper per annum. By the year 2000, exporting figures had constantly change magnitude to 225 000 tonnes. The result of the decline was partly because of a lack of investments as well as mi smanagement of the mines. Zambia has neither the capital nor the skills to run the mines by itself (Time, 1969). opposite factors were the drop in the price of copper, a lack of skills among the citizens in Zambia and they were uneffective 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 exchange rates hike and therefore gains from exports reduced. Zambia also failed to save earnings when the copper price was high and thusly when the price fell, they suffered immensely. Even though the situation is not hardly the same, it does show that to nationalise mines a lot of debate needs to occur as well as research and obviously the country needs the required funds to make sure it can be make 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 do work with huge debts which is unfeasi ble (Osei-Hwedie, 2003).ConclusionNationalisation 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 evident 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 key sector of the economy in the hands of government people. The country does not have just about enough funds for this project to take place and thus in my view should not take place in even in the near future (Marais, 2010).Reference ListACHARY, N. (2010). 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