The government can’t simply buy the mining industry. That would ruin the state. A price of R2 trillion has been circulating as a rough estimate. This amounts to more than three times the entire state budget that is three years of total state expenditures. The only economically viable option is to take over the mining industry without compensation, at least to the big stockholders.
The power of money
But such a measure cannot be undertaken without a head-on confrontation with corporate capital and the owners of large financial assets. Nationalisation of the mines would unleash wild reactions from the financial industry and a subsequent flood of indignation from the gated rich communities of the country. The power of money would come into active play, as was already seen in 2002. At that time, the politics of state-owned mineral rights was introduced. Already the rumour about what was about to happen resulted in a more than R100 million sell-off of mining stocks. Such a massive sell-off always provokes a sharp fall in the value of the Rand as capital flows out of the country.
A massive, ‘voting no with their money’ can lead to the Reserve Bank running out of foreign currency. Imports of goods could then be threatened, as virtually all imports are paid for in foreign currencies. Any controversial decision taken by a government – such as holding a referendum on the nationalisation – can be subverted by those who control large sums of money. This is one of the reasons why socialists and other progressive forces favour capital controls.
Already, allowing the listing of South African mining companies abroad has increased the obstacles for nationalising the mines. Yes, wasn’t the very signalling of precisely this an important purpose of the government’s retreat in the matter?
Zambia vs Venezuela: nationalisation’s different outcomes
Nationalisation under one-party dictatorship has ended in failures. The Zambian copper mines were nationalised in 1968 by the Kenneth Kaunda regime. From 1975 copper prices declined sharply. In the 1990s creditors as well as the World Bank, in the face of massive state losses, pressurised for privatisation of the indebted industry. Anglo American bought back parts of the industry at a bargain price in 1999/2000. They bailed out again two years later, after siphoning off large profits. Today, a number of Chinese companies run Zambia’s mines as ordinary capitalist industries.
Venezuela’s giant oil industry and many other key industries have been nationalised over ten years (telecommunications, energy, cement). This has sometimes been donewith compensation, sometimes without, or with drawn-out conflicts over that issue. The socialist government operates with a democratic mandate earned in several elections, but in a hostile capitalist environment. The oil industry was nationalised in 1999 in response to a strike organised by big business aiming to topple the government. There followed a direct take-over at the production sites by engineers and workers. Profits are now used to deliver social services and to support other sectors. The oil profits have become public property. The need to sustain oil production remains. The problems are immense. But the money earned from oil is not any longer amassing as private fortunes for half a dozen oil families.
As in South Africa, state corruption is widespread in Venezuela and a constant cause for great popular anger. But the nationalisation of the oil industry has not ended in failure.
The Venezuelan government follows a strategy of confronting the ruling class. On this point, the strategy of the ANC government is the opposite. This makes a world of difference. The ANC in power strives to extend the ruling class by inviting all skin colours to join its ranks, also within mining. This was one explicit key motive for the nationalisation of the mineral rights some years ago.
Would nationalisation of the mines lead to many mining engineers and technological experts leaving the country? This, one must argue, depends on what atmosphere is created by a debate about it, and what hopes and expectations a complete shift in economic policy would create in South Africa.