Nationalisation: Chapter 1 executive summary

The main reason for the ANC Youth League (ANCYL) wanting to nationalise mines (followed by banks, big business generally, and much else) is its view that (a) nationalisation is required by the Freedom Charter and (b) the Freedom Charter is binding ANC policy. 

Secondary reasons are advanced, but not accompanied by a clear causal nexus between nationalisation and intended benefits. They rely on unsubstantiated assertions regarding the expected efficacy of nationalisation, whereas economic theory and empirical evidence suggests (a) that nationalisation is likely to be ineffective or counter-productive, and (b) that there are proven alternatives.

Stated obectives are:

1. Implementing the Freedom Charter.

2. Increased fiscal capacity.

3. Better working conditions.

4. Industrialisation and job creation.

5. National sovereignty.

6. Transformation of the “accumulation path”.

7. Transformation of “spatial development patterns”.

The ANCYL proposal is more far-reaching, ambitious and ideologically radical than has been apparent from media coverage. A great deal more than mines is to be nationalised: banks, ‘strategic’ industries (essentially all big business), secondary and tertiary beneficiation industries, aspects of trade (especially international trade), financial institutions, energy (electricity, petroleum, gas), property development (new towns, cities and development areas), etc.

Assumptions – The ANCYL proposal acknowledges that the relevant words (“the mineral wealth … banks and monopoly industry shall be transferred to the people as a whole”) may not mean nationalisation, and presents arguments to the effect that they do. Although the argument is elaborate and documented, it is ahistoric in that it overlooks core aspects of the historical context, particularly: 

– The author of that clause in the Freedom Charter, Ben Turok, says it has never meant or implied nationalisation. 

– The words “the people as a whole” have never been a recognised synonym for “government”. The terms are, in certain contexts, juxtaposed (as in the idea that democracy is a system whereby governments are not manifestations of “the people” but are subject to “the will of the people”).

– The vexed question of why, if intended, the word “nationalise” was studiously avoided in the Freedom Charter despite nationalisation at the time being commonplace and popular (the policy of, inter alia, the national socialist apartheid regime, of all other socialistic governments, of most nominally capitalistic governments, and of virtually all prominent intellectuals). The word “privatisation” did not exist until three decades later. 

– The world’s negative experience with nationalisation during subsequent decades (which, when it manifested itself, became the decisive factor that persuaded Mandela and other ANC luminaries to replace nationalisation with privatisation, albeit cautiously and in limited contexts).

What “the people as a whole” means – The evidence suggests that it can safely be assumed that the phrase on which the ANCYL relies does not imply nationalisation.  Free market liberalism envisages ownership of wealth by the people as a whole (directly and through market institutions). Mandela said at the time that the Freedom Charter was not a “blueprint for a socialist state” and that dispossession of white “mining kings” and “land barons” would, instead of leading to socialism, “open … fields for … a prosperous non-European bourgeois class” where “for the first time … the non-European bourgeoisie will have the opportunity to own in their own name … mills and factories … and private enterprise will boom and flourish as never before” (author’s emphasis). Blade Nzimande (SACP General Secretary) sees no inconsistency between the Freedom Charter and Minister Susan Shabangu’s statement that “We are definitely not going to nationalise mines.” His view is that the Charter and related documents (NRT, NDR, Morogoro Declaration, Green Book, etc) envisage a “capitalist system”.

Ends and means – The Freedom Charter, like subsequent ANC documents (RDP, GEAR, AsgiSA, et al), is about means, not ends – policy objectives not specific policies – leaving questions of how best to achieve those ends to democratic contestation. In rare cases where government as a means is intended, the Charter says so unambiguously (as in “the aged, the orphans, the disabled and the sick shall be cared for by the state”). Such welfare happens to characterise all capitalistic economies where welfare is one of the compromises made by all economic liberals (except pure libertarians). Government welfare in capitalistic countries far exceeds what governments provide in non-market economies. This is in addition to (a) generous private charity and philanthropy, and (b) for-profit welfare, both of which are more affordable to more people in market economies. Typically, countries with more nationalisation beg for “aid” from countries with less.

Fiscal capacity – The ANCYL assumes that nationalisation will increase the state’s “fiscal capacity” without saying why. Economist Dawie Roodt suggests that nationalisation will make things worse for the government. He points out that around 50% of mining profits already accrue to government (through direct and indirect taxes), which is achieved (a) without diverting a cent from more pressing social needs and (b) at zero risk. Conversely, owners (private and, more commonly, government) often incur losses. The ANCYL implies that nationalised shares will be bought (nationalisation, not confiscation), but provides no estimate of (a) what this will cost the fiscus, (b) which government budgets should be sacrificed to that end, (c) the cost to the country of foreign exchange diverted to acquiring foreign-owned shares, or (d) the implications for international anti-nationalisation treaties. 

Better working conditions – There is no motivation for the idea that nationalised mines are likely to have better working conditions than private mines. The world’s experience suggests the opposite, which explains, in part, why mine workers migrate (often risking and losing their lives) in only one direction: from countries with nationalised mines to ones where they are privately owned. 

Industrialise and create more jobs – It is assumed, without explanation, that nationalisation would promote industrialisation and employment, whereas the opposite has been the world’s experience. The document discusses nationalisation of resources and nationalisation of mines as if they are synonymous. Its authors appear not to know that the former has already happened and that it failed to achieve their objectives, and that there is no reason to expect the latter to succeed where the former has failed.

Safeguard sovereignty – There is ambivalence about foreign investment: on the one hand it is presumed to compromise sovereignty (without saying why this should be so); on the other it is assumed that nationalisation will (for unstated reasons) attract foreign investment. Since government is envisaged as being responsible for the plethora of secondary and tertiary industries suggested, it is unclear in what foreigners might be investing, or why they might want to invest in a nationalising country. 

Transform the accumulation path – What is meant by “accumulation path”, except to the extent that it appears in the context of antiquated Marxist terminology, is that South Africa is a case of “CST” (which presumably means “Colonialism of a Special Type”) with “total dependence on … mining-energy-finance monopoly capital”. Nationalisation will somehow “provide a viable case and space for economic diversification”. In this section the ANCYL discloses its full agenda of comprehensive nationalisation (government “control and ownership of the strategic sectors of the … economy”).

Transform South Africa’s unequal spatial development patterns – That “26 locations represent the engines of the South African economy, home to 77% of all people living under minimum living level in the country, 84% of the total population and generating 95% of the national Gross Value Added (GVA)” is presumed to be self-evidently reprehensible and in need of “transformation”. The suggested alternative is extreme social engineering with apartheid-like relocation of many South Africans to new cities, towns and development areas (with the people employed in countless new and unfamiliar industries), funded by government from no disclosed source. 

Patronage – Given the overwhelming evidence against nationalisation, one of the most common questions is “why?”. The official reasons are supported by little or no motivation, which raises the obvious possibility that proponents of nationalisation may have undisclosed vested interests. Protagonists of policies are usually enriched by the “empires” they create. They, along with supporters, friends and family, tend to gain substantial wealth, power, influence and status at the expense of “the people as a whole”. Given the extreme degree of arbitrary power, wealth and patronage the proposal envisages, there will be patronage opportunities and other benefits not just for advocates of nationalisation, but many others, including owners of ailing mines.