South Africa’s mineral wealth belongs to all her people

The mineral wealth of a country belongs to the people of that country, to dispose of and use as they choose. This is a widely accepted. Many groups go further, like the Freedom Charter, and argue that the mineral wealth belong to all people of a given country. South Africa is a mineral-rich country.  This is why some people are annoyed that the mineral wealth of South Africa should benefit only the few.

The ANC Youth League’s solution is nationalisation.  The form of nationalisation they seem to be proposing is a state-owned (parastatal) mining company or companies. Parastatals have a spectacularly poor record in South Africa.

A resource dividend would also allow the mining sector (which currently accounts for nearly 9% of GDP) to remain a profitable part of the South African economy, driving growth, paying taxes and creating jobs.

They regularly incur losses, experience large-scale corruption, are anything but efficient and struggle to retain skilled staff. It seems unlikely that a parastatal mining company is going to make a profit, thereby undermining all the arguments in favour of nationalisation. Even if the parastatal mining company is able to turn a profit, that profit will be sucked directly into the highly controlled, bureaucratic government system instead of being available as capital to stimulate economic growth.

But if it is accepted that the mineral wealth of the country belongs to all the people in the country, it follows that those people should be paid out for the right to use the minerals (through extraction, beneficiation and trade) to make a profit. There is an alternative: the Resource Dividend. This is not a new idea. Paul Segal argues that it is currently in place in several oil-producing countries in the Middle East, is being considered by Libya, Bolivia and Nigeria, appears to be on the cards in Iran and has been used for years in Alaska. In its simplest form, each adult in the country is paid a specific ‘dividend’ from the ‘rents’ paid by companies for the rights to conduct mining activities. How much is paid out depends on what companies pay, ideally a dynamic figure balancing the needs of the country with the demands of FDI and mining income expectations. The pay-out is not targeted at any specific group – because all the people of the country means all the people and accountability is increased because the system is so incredibly simple – ‘rents’ for mining are agreed, collected, divided and distributed. No complex formulae, no extended delivery delays.

A resource dividend would also allow the mining sector (which currently accounts for nearly 9% of GDP) to remain a profitable part of the South African economy, driving growth, paying taxes and creating jobs. Some may argue that policies must be pro-poor given SA’s appalling inequality. This is: the small amount paid out is unlikely to make much difference to rich families but will be a tradeable, bankable asset for the poor, which they can borrow against or use as a buffer against shocks like illness or retrenchment. An asset to which they would not otherwise be entitled.

The only fly in the ointment is that SA ID documents will need to be more secure, but this seems far more achievable than an efficient, profit-making parastatal mining agency. If South Africa is going to make collective mineral ownership of tangible benefit to all, forget nationalisation: a small annual payment will do nicely, thanks.

  • Anon

    The natural resource dividend is at its most convincing (which is still not very convincing) in the context of the natural resource curse, which South Africa has not yet succumbed to under a system which moderately protects private property rights.

    At the end of the day, we are (or should be) concerned with the trade-off between productive and allocative efficiency and in the interests of not exalting redistribution at the expense of our GDP, a better compromise might be to offer a class of shares for subscription by BEE candidates (ala MTN). Depending on how the offer of shares is structured, it would ideally allow the public to hold management accountable whilst leaving room for at least a degree of restribution.

  • Ben jual

    Internet is devil’s club house. Amen.

  • Concerned

    Who or which countries exactly own the south african minerals?