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Introduction
The National Union of Metalworkers of South Africa (NUMSA)
welcomes this opportunity to present its submission on the
issue of a State Owned Mining Company and trusts that this
engagement with the Portfolio Committee will assist in bringing
the various constituencies together in a debate that has
sparked all sorts of emotions as soon as the word
“nationalization” is mentioned. This form of engagement also
signals a shift on the part of government to provide a platform
to stakeholders to raise questions related to the collective
ownership of our country’s resources and how best these may
be procured to the benefit of our fragile economy.
Government Development Indicators at a glance[1]
Real GDP
-
R1251bn
$144bn
Real GDP per capita
-
R26 695
$3075
2008
3.1%
2010 (1st Q)
4.6% [Stats SA]
Indicator
GDP
Goal
growth of 6% pa
Population
-
48 687 000
Employment
-
Employment as at Jan 2009 =
13.6 m
Goal: Increase employment by
2014 numerical target = 16m
Unemployment
-
23.6% June 2009 [narrow definition]
32.5% June 2009 [broad definition]
Income Inequality -
[1]
0.679% (2008) [Gini-Coefficient / Stats SA
IES]
Office of the Presidency National Planning South Africa Development Indicators 3 rd edition
Background to the debate
Already covered in previous presentations:
1.
2.
3.
SAMDA – has referred to the regulatory framework and historical
development of the mining industry in SA
NUM has already touched on the skewed nature of ownership in our
economy, as well as the current levels of state involvement and
employee participation in the mining sector through investments and
shareholding.
Calls to Nationalize:
The Freedom Charter (1955)
The national wealth of our country, the heritage of all South Africans, shall be
restored to the people; the mineral wealth beneath the soil, the banks and
monopoly industry shall be transferred to the ownership of the people as a whole
…
Polokwane Resolutions – Economic Transformation
The Polokwane Resolutions[1] on Economic Transformation makes several
references on the need for a developmental state to address the following:
1.6 A developmental state must ensure that our national resource endowments,
including land, water, minerals and marine resources are exploited to
effectively maximise the growth, development and employment potential
embedded in such national assets, and not purely for profit maximisation.
1.7 Strengthening the role of state-owned enterprises and ensuring that, whilst
remaining financially viable, SOEs, agencies and utilities - as well as
companies in which the state has significant shareholding - respond to a
clearly defined public mandate and act in terms of our overarching industrial
policy and economic transformation objectives.
[1] ANC 52nd National Conference 2007 Resolutions http://www.anc.org.za/ancdocs/history/conf/conference52/resolutions.pdf
2.3 Transforming the structures of production and ownership, including
through:
Anti-monopoly and anti-concentration policy aimed at creating competitive
markets, broadening ownership and participation by our people, addressing
monopoly pricing and other forms of rent-seeking and anti-competitive
behaviour and overcoming barriers to entry that inhibit the growth of small
enterprises, including strategies to increase competition by promoting the
emergence of new players in both South Africa and the SADC region.
Many of our monopolies are based on the nation's natural resources and we
must find ways and means to intervene, including through state custody of
these resources on behalf of the people and regulation to ensure
competitive pricing of inputs for our downstream manufacturing sector.
Furthermore, the small size and relative isolation of our economy leads to
monopolies in certain sectors which could be overcome by increasing
regional economic integration with Southern Africa and the continent as a
whole.
Arcelor-Mittal – Kumba Dispute
For NUMSA there are a number of compelling
reasons that favour the nationalization of the
mines. The recent dispute between ArcelorMittal and Kumba Iron Ore provides the basis
for one such reason. Given the strategic
importance of iron ore and the steel mining
industry in the country, NUMSA has
repeatedly called on the state to reclaim
Arcelor-Mittal (formerly Iscor) and to act
decisively in the current dispute between
Arcelor-Mittal and Kumba Iron Ore
NUMSA STATEMENT ON ARCELOR-MITTAL AND KUMBA DISPUTE
The National Union of Metalworkers of South Africa (Numsa) notes the
raging steel price war between ArcelorMittal and Kumba Iron Ore (mainly
owned by Anglo American), which has been referred to mediation with the
possibility of saving 4000 jobs that are now threatened.
… Already our economy has suffered as a result of the privatization of Iscor
(now ArcelorMittal), by the high cost of steel which is crippling domestic
manufacturing, and by the outflow of profits to the firms' headquarters in
Luxembourg and London. This dispute is another sign of the failure by our
economy's managers, to transform the colonial character of our resource
base. We recall the Freedom Charter, which mandated that the minerals
beneath the soil and monopoly capital be transferred to the hands of our
people as a whole …
With the Freedom Charter guiding us, we reiterate our call for the
nationalization of ArcelorMittal, so that the ‘people shall share in the
country's wealth'. Ongoing bickering by ArcelorMittal and Kumba provides
our peoples' government, led by the revolutionary African National Congress
(ANC), the rationale to take over ArcelorMittal. Along with many in the ANC
and Alliance, we believe that the nationalization of strategic components of
our economy will enable our government to deal decisively with the inherent
underdevelopment and structural challenges of our economy, and transcend
the period of pre-history dominated by capitalism and greed.
Many of the country’s leading commercial newspapers also reacted strongly to the dispute:
Donnelly Mail & Guardian Online July 16 2010
Kumba, Arcelor-Mittal stand-off heats up[1]
The ongoing contractual dispute between steel giant ArcelorMittal and iron-ore
supplier Kumba Iron Ore has descended into all-out war, with South Africa's
steel industry, and the thousands it employs, standing in the firing line.
Writing for Business Day, Sampson (2010)[2] said:
The government should recognise that separating Iscor from its iron-ore
deposits was a big mistake — as was its sale to a foreign competitor with
conflicting interests.
Likewise, Creamer (2010)[3] in his article saw the dispute “as a real opportunity for the
State” to intervene:
But, surely, there is also sufficient room for government to seek to influence the
outcome in the national interest. Alternatively, only narrow share-holder
interests will be served.
•
•
[1] Donnelly, L 2010. “Kumba, Arcelor-Mittal stand-off heats up”. Mail & Guardian Online, July 16 2010 http://www.mg.co.za/article/2010-07-16-kumba-arcelormittal-standoff-heats-up
[2] Sampson, M 2010. “Try Vertical Integration – Saldhana Steel and Exports may be saved for the moment”. Business Day, 26 July 2010
http://www.businessday.co.za/articles/Content.aspx?id=115968
[3] Creamer, T 2010. “State should seize iron-ore initiative and move debate into developmental realm”. Polity, 12 March 2010 http://www.polity.org.za/article/state-should-seize-iron-oreinitiative-and-move-debate-into-developmental-realm-2010-03-12
Article by Ingi Salgado (Business Report, Tuesday August
17 2010)
“Arcelor Mittal fails to get serious about
sustainability”
- Article says that the report lacks detail – only provides a
list of stakeholders but very little about engagement
-
“While Arcelor Mittal SA has been busy talking to the politically
connected individuals in its BEE deal, it seems to have bypassed other
people – such as those who breathe in the same smog of the Vaal
Triangle even as they live in squalor on the doorstep of the group’s
Vanderbijlpark plant. These people strike me as being more
appropriate recipients of a BEE deal”
•
For some time now Arcelor-Mittal has benefited from hefty steel prices (Import Parity
Pricing) and as Creamer (2010)[1] argues the steel monopoly continues to maximize
profits under a new price “benchmarked model”[2] that is fundamentally the same as
Import Parity Pricing (IPP):
… there has been little noticeable difference between prices set under IPP and
the benchmarked model.
•
•
•
•
•
Then there is the issue of beneficiation. According to Maree et al. (2008: 2)[3] South
Africa is “well endowed with metals” with abundant reserves in platinum group metals
& manganese – 80%, Chrome – 70%, gold and vanadium – 40%. In addition the
country produces iron ore and coal. However, the writers have strong views on the
use of IPP, arguing that IPP impedes “growth and employment creation by the
downstream sectors”. (Maree et al. 2008: 7)[4] For Maree et al. (2008: 1)[5]
beneficiation can only be successful if “value is added at every stage of
production”.
[1] Ibid.
[2] According to Creamer (2010) the new model “sets domestic selling prices after an analysis of domestic selling prices in four markets (the US, Germany, Brazil and China) and then
adjusting these to its expectations for the South African currency for the forthcoming month.
[3] Maree, J, Lundall, P and Godfrey, S (2008) ‘The Dynamics and Skills Requirements of the Metals Beneficiation Sector’. Paper presented at the XIV SASA Congress, University of
Stellenbosch, Stellenbosch, 7-10 July 2008
[4] Ibid. p7
[5] Ibid. p1
Article by Zavareh Rustomjee (Business Day, Friday 13
August 2010)
“Kumba-Mittal Saga shows up real threats to SA’s growth”
- “Beneficiation policy … not defined as an objective of the
act”
- Minerals policy must become an “active and integral
instrument of industrial policy”
Venezuela
• We need to take lessons from some of our Latin American comrades
and the economic transformation of Venezuela has invaluable
lessons for us here at home. According to Lander and Navarrete
(2007: 12-13)[1] Venezuelan Constitutional provisions guarantee
amongst others:
… it defines clear and central state responsibilities in trade policy
and the defence of national industries (article 301), reserves oil
activity and other strategic activity for the state (article 302),
and assigns the state a governing role in the development of
sustainable farming and food security (article
305)(Constitution, 1999).
• The guarantees that the text grants economic and social rights, in
particular health, education and social security, are equally
significant …
[1] Lander, E and Navarrete, P 2007. The Economic Policy of the Latin American Left in Government.
Havens Center Rosa Luxemburg Stiftung Transnational Institute. Amsterdam, Drukkerij
Raddraaier B.V.
• The “Bolivarian Alternative Agenda” (Chavez 1996
cited in Lander and Navarrete 2007: 11)[1] illustrates
the mixed nature (public/private) of Venezuela’s new
economic model underpinned by Chavez’s vision of
“participatory democracy” (2007: 12):
it seeks a “humanist self-managing and competitive”
economic model that is summarised by the phrase
“as much market as possible and as much state as
necessary.”
[1] Lander, E and Navarrete, P 2007. The Economic Policy of the Latin American Left in Government. Havens
Center/Rosa Luxemburg Stiftung/ Transnational Institute. Amsterdam, Drukkerij Raddraaier B.V.
[Source: Lander & Navarrete, 2007: p11]
Call to Nationalize: Summing up the debate
•
•
•
Thus far it is difficult to pin the debate on any one position that supports
nationalization or for that matter on any one position that is antinationalization. However, with reference to the Arcelor-Mittal – Kumba
dispute Creamer (2010)[1] agrees that the dispute provides an ideal
opportunity for the state to intervene and as Creamer himself puts it “ …
government should seize the initiative and move the debate away from the
domain of shareholder value and into the realm of national development”.
Both the ANCYL and NUM have provided the stimulus for nationalization
and appropriately targeted the mines as a starting point. Likewise NUMSA
believes that there is an urgent need to nationalize our mines and key
sectors of our economy. While the form and content of nationalization might
vary (some believe that public-private partnerships provides a catalyst for
nationalization), others have argued that nationalization isn’t simply a case
of state control, but that the underlying principle is one of social and
collective ownership in which the state plays a leading role.
The state would have to take cognizance of the fact that calls for
nationalization would also require a complete overhaul of our macroeconomic policies and that we would need to revisit sectors that have been
privatized under the Growth, Employment and Redistribution (GEAR) policy
of 1996. Nothing short of a radical departure from GEAR can facilitate a shift
to nationalization and in this context we call on the state to replace ‘case by
case privatization’ with ‘case by case nationalization’.
[1] Creamer, T 2010. “State should seize iron-ore initiative and move debate into developmental realm”. Polity, 12 March 2010 http://www.polity.org.za/article/state-should-seize-iron-oreinitiative-and-move-debate-into-developmental-realm-2010-03-12
• Conservative journalists have ridiculed our
calls for nationalization: Writing for the Mail
& Guardian Online, Johnson (2009)[2]
argues that renewed calls for nationalization
emanating from the ANCYL and Castro
Ngobese of the Young Communists is a
non-starter:
For a start, where would one find the money to buy them? Anything
less than full compensation would start a panic among the foreign
investors on whom South Africa depends. And where would one find
the necessary human skills to run and manage them? And the
prodigious sums required to sink new shafts?
[2] Johnson, RW 2009. “Will SA reclaim its mines?” Mail & Guardian Online, July 14 2009 http://www.mg.co.za/article/200907-14-will-south-africa-reclaim-its-mines
• However, as NUMSA we believe that
with the right sort of political will we
can overcome these difficulties. True,
there has to be more engagement on
the form and content on nationalization,
including the constraints imposed by
the negotiated settlement of 1994.
Compensation might be the burning
issue but we do not believe that our
country’s developmental agenda should
be held to ransom by foreign investors.
Thank You