The ANC Is Burying South Africa’s Riches

South Africa’s future prosperity depends on ending its war on wealth creation. The mining sector does not need more charters, committees or ideological experiments. It needs freedom to operate...

Photo by suradeach saetang on Unsplash

For better or worse the mining industry built South Africa. Our endowment of resources made this an inevitability. South Africa is home to the world’s largest reserves of platinum-group metals, one of the largest reserves of manganese, major reserves of chromite, gold, vanadium, uranium and diamonds. And, not to be taken as lightly as it has recently, coal.

South Africa possesses an estimated $2.5 trillion in ore reserves. Wars have been fought over our gold. Diamonds paved and electrified the streets of Kimberly, while turning Cecil John Rhodes into a titan. Our uranium has influenced geopolitics. Our coal helped Eskom provide the cheapest electricity in the world.

Once upon a time, the mining industry used its influence to push for the nationalisation of electricity companies into Eskom (then Escom). It lobbied for cheap labour and helped craft the system of migratory, racialised labour that we still suffer from today.

It is by no means an innocent industry with a guiltless past. But it is also arguably the most important industry in South Africa; it is the very bedrock in which any industrialisation plan must be built upon. And by sabotaging and punishing the industry for its past, we don’t hurt just it. We punish all of South Africa and waver from achieving our true potential.

As of 2023 the mining sector contributed R444.2 billion (6.3%) GDP. It directly creates over 479,000 jobs and pays R85.5bn in corporate tax, R34.5 billion in taxes paid by its employees, R25.3 billion in royalties, and generates over R780 billion in export revenue. It is crucial to the livelihoods of the North West, Limpopo, Mpumalanga and the Northern Cape, where it makes up between 20 – 30% of provincial GDP.

In a country with 33.2% unemployment rate we cannot afford to be squandering employment opportunities. But more than that, the fact that South Africa is sitting on a quite literal gold mine is something that shouldn’t be squandered. Commodity booms have been the only thing keeping South Africa afloat; imagine if the mining sector wasn’t languishing due to intentional bad policy.

Despite already being a crucial sector, mining could be even more impressive. But right now, it languishes under constant uncertainty and bad policy.

BEE and the Mining Charter

Introduced in 2022 the Mining Charter placed the burden on mining companies to shift its ownership over to black shareholders, while also granting too much power to communities and organised labour. The regulations have presented a labyrinth of red tape and policy uncertainty, stripping mining companies of their own investment or any sort of certainty that a future investment will be theirs to enjoy.

Black Economic Empowerment (BEE) further erodes trust in the sector, as stringent race quotas in shareholding and management positions forces companies to hand out roles to well-connected elites with the smokescreen of racial equity.

BEE and the Mining Charter have already been identified as destroying the mining sector as a major employer.

Nationalisation and violent labour

On top of this, constant threats by radical political parties, and members of government, of nationalisation have eroded trust and led to uncertainty. There is no point purchasing land, mineral rights or developing a mine if it can just be taken away.

Organised labour has exploited the Mining Charter and the ludicrous notion of industry wide collective bargaining to push for higher and higher wages, damned the profitability of the industry. When demands are not met, or even sometimes when they are, violence is common. Marikana is remembered for the police killing protesters, but people forget that striking mineworkers murdered security guards and non-striking mineworkers.

If labour unions hadn’t been so empowered to intimidate companies with violent strike action, accompanied with ideological support of Marxist-leaning government officials and political parties, then Marikana wouldn’t have happened.

Electricity and logistical failure

Unreliable electricity and rising power costs have also continued to cut into the industry’s diminishing bottom line. There’s a reason the industry was so desperate to enforce cheap electricity back in the 1920s. Mining is an energy intensive industry, and Eskom’s inability to cheaply keep the lights on is costing jobs and tax revenue.

What is particularly ironic is that if Eskom could have kept its coal plants running, and built new plants in time, then the mining industry could be providing cheap coal to the entire economy – benefiting everyone.

On top of rolling blackouts and expensive electricity, mines struggle to even send their goods to port to be exported. State-owned Transnet has trashed local infrastructure, leading to a bottleneck of goods. Kumba reported a 10% sales loss in the first quarter of 2024 due to ports not being able to absorb their goods. Transnet’s incompetence has ensured that bulk exports can’t even make it to market – costing the country potential billions in lost revenue.

Backlogs and taxes

Not a single prospecting application was processed for the 2023/2024 financial year as of January 2024. This means no new mines were even able to start searching for more ore. Exploration and prospecting are how we discover new resources to benefit South Africans, but the government can’t even accomplish the simple job of ticking a box to allow this to happen.

And while the government incompetently refuses to allow the industry to grow, it seeks to impose new taxes on the industry. Such as the ill-fated chrome export tax, which punishes the industry for selling chrome abroad, while praying that the tax will be used for local manufacturing. A vain hope while Eskom and red tape prevent our manufacturing industry from getting off the ground.

Mining is our past and future

Due to government incompetence and policy, South Africa is awash with abandoned mines, a scourge of illegal miners, lag on opening new shafts, deterrence on exploration, and the complete destruction of our global competitiveness.

We have the resources to be one of the most metal and mineral rich countries in the world. We have companies with legacies going back a century and track records that rivalled countries.

If we want to profit from commodity booms, we need to ensure our mining industry flourishes. If we want to manufacture our own goods, then we need a prosperous mining industry to provide the materials.

How to save mining

To save mining the government needs to end policy uncertainty, cut the red-tape, and embrace the mining industry as a partner in economic growth, and not a relic of a bygone era that must be resented and exploited.

End threats of nationalisation and guarantee property and mineral rights. Tear up the Mining Charter and BEE in their entirety.

Privatise electricity and stop this fixation on green energy, allowing the coal industry to provide cheap energy once again.

Privatise railways and ports and allow the construction and expansion of private ports to absorb exports.

And end industry wide collective bargaining. Labour disputes should be between the employees and their employer. Trade unions holding an entire industry to ransom should not be something we abide.

South Africa’s future prosperity depends on ending its war on wealth creation. The mining sector does not need more charters, committees or ideological experiments. It needs freedom to operate, clarity of property rights, and reliable infrastructure. Every ton of ore left unmined, and every shaft left unopened is a job lost and a community impoverished. If the ANC truly cares about transformation, it must stop sabotaging the very industry that can lift millions out of poverty.

Nicholas Woode-Smith is the managing editor of the Rational Standard and a senior associate of the Free Market Foundation. He writes in his personal capacity.