EffKay
Well-Known Member
OK so this is a bit of a long read but something like this deserves a comprehensive answer.
The entire notion of state owned and operated and centrally planned economy (i.e. nationalisation) in SA is doomed to failure for many many many reasons.
Even China the most communist country(politically) to date tried, for close to 50 years, to make this idea work and they put all their resources into it but to no avail and it remains a FAILED ECONOMIC THEORY!
China eventually reverted to a market economy (not a free market but a market economy none the less) which transformed them from starving failed state to economic superpower.
They call this the "Chinese Economic Miracle" and it was as simple as the State giving up in trying to run the entire economy and giving that work to the population who are the economy.
Read up on the Chinese Economic Miracle and especially the "Before" part which would describe exactly what a nationalised economy actually does and why it fails.
I shall touch upon merely two of these and only concerning the mining industry but of course these would have the same / similar effects on other industries if they were nationalised.
1) Free Markets.
2) Investment outside of South Africa.
1) Free Markets
In the first instance of Free Markets, let's look at some numbers which are:
The revenues of TWO mining corporations being BHP Billton(USD48.193 Billion) and AlcorMittal(USD78.03Billion) = USD126Billion (give or take a penny or so)
[src: Wikipedia pages on Revenue for 2010]
.vs.
South Africa Total Value of Mineral Sales = ZAR27.635Billion (USD3.947Billion)
Maybe let's be optimistic and take the 1year average of the 3 year total from 2004 which represents a peak or best case scenario.
South Africa Total Value of Mineral Sales 3 year total (2004) = ZAR168.752Billion(USD24.107Billion) / 3 = ZAR56.250Billion(USD8.035Billion)
[src: http://www.statssa.gov.za/keyindicators/keyindicators.asp]
Right so the two largest mining corporates in the world have more revenue between them then the ENTIRE MINING INDUSTRY in South Africa.
and that's REVENUE... by the way. Heck between just these two, they have more revenue than the GDP output of South Africa's entire Industrial sector!
This means if the Mining Industry locally were nationalised, the SA Goverment would be in direct competition with not only these two but with the entire world's worth of mining companies.
And these giants can provide minerals, metals and materials globally to anyone far less than South Africa would be able to. Making it economic suicide to try and compete with these and the rest.
So then why is it that we mine minerals in this country if not to sell them? (ever stop and think about that for a little bit?)
It's to provide local manufacturing industries with the Raw Materials needed to make the things they do and if we cannot source these from overseas companies (let's say we have something called Sanctions placed upon us) then we would need to do it ourselves but at a huge cost since there would be no other alternative.
Free Markets (the ability to buy and sell commodities on the global marketplace) is working really well for our industries.
Now think what it would mean if the local mining industry was nationalised.
This would imply that the minerals, metals and materials being mined and extracted locally would need to compete in the marketplace with that from overseas and hence would need to be a lot cheaper in order to convince industries to buy them. This would immediately put a ceiling on prices and revenue and lower the profits from mining overnight.
Then it may not be apparent but since the Mines are owned and operated by government, they are run and paid from government money which is called Taxes.
So then it is so that the Minerals, Metals and Materials are in fact already paid for by the taxes that the rest of the economy has paid in and are thus the de-facto property of all taxpayers.
Which means local manufacturing industries, that have paid their taxes, would have a right to the raw materials for free OR at cost or below that.
And if that is NOT the case and they are CHARGED for it, then any further payment to the state owned mines would represent an extra payment to the government or another type of Taxation on the local population. Of course those who run local manufacturing concerns would notice eventually and perhaps decide that they already pay their fair share in taxes and thus not buy any of these minerals, metals and materials from the state owned mining sector.
Leading to a further significant drop in revenues and of course no matching reduction in expenses and costs to the state to keep these mines running as they are now politically charged enterprises where lay-offs and job losses can lead to losing the next elections. So these un-viable and expensive operations would then be funded from....
Your Taxes, hard at work: They work harder than you do.
2) Investment outside of South Africa.
This is much simpler (I know you're tired) and it hinges around Sovereignity of a country.
Let's imagine that the mining industry in SA was state owned.
So then how would a state owned mining company manage to secure mineral rights in other foreign countries?
Would some other country grant a foreign government (or a foreign power) mineral rights to their minerals?
That would be the equivalent of the first government bending over and tattooing "Hurt my sphincter... REAL GOOD!" on their butt cheeks.
It would give to a foreign power the right to do what they want to the land, including setting up a "small" base from which to possible invade.
Of course no country will grant mineral rights to a foreign power as the risk is incalculably high, unless invaded and conquered.
Which is another kettle of fish ...
So then how would the state owned local mining industry expand in order to grow in order to compete with the globalised mining houses if it cannot expand beyond our borders?
The short answer is it cannot expand or grow and would shrink and shrink and eventually collapse and dissappear (see point 1 above).
Now the ONLY viable state owned mining industries are those that concern themselves with OIL!
Which is a completely different thing as it's a monopoly trade on a globally critical resource.
Which makes state ownership of oil extraction and mining more logical since it's a mechanism for the state to express foreign power by denying enemy states the oil they need to operate.
Now does South Africa have any minerals which cannot be found elsewhere on the globe?
We do have the rarest thing of all: The belief that the state owned centralised economy will work.
The entire notion of state owned and operated and centrally planned economy (i.e. nationalisation) in SA is doomed to failure for many many many reasons.
Even China the most communist country(politically) to date tried, for close to 50 years, to make this idea work and they put all their resources into it but to no avail and it remains a FAILED ECONOMIC THEORY!
China eventually reverted to a market economy (not a free market but a market economy none the less) which transformed them from starving failed state to economic superpower.
They call this the "Chinese Economic Miracle" and it was as simple as the State giving up in trying to run the entire economy and giving that work to the population who are the economy.
Read up on the Chinese Economic Miracle and especially the "Before" part which would describe exactly what a nationalised economy actually does and why it fails.
I shall touch upon merely two of these and only concerning the mining industry but of course these would have the same / similar effects on other industries if they were nationalised.
1) Free Markets.
2) Investment outside of South Africa.
1) Free Markets
In the first instance of Free Markets, let's look at some numbers which are:
The revenues of TWO mining corporations being BHP Billton(USD48.193 Billion) and AlcorMittal(USD78.03Billion) = USD126Billion (give or take a penny or so)
[src: Wikipedia pages on Revenue for 2010]
.vs.
South Africa Total Value of Mineral Sales = ZAR27.635Billion (USD3.947Billion)
Maybe let's be optimistic and take the 1year average of the 3 year total from 2004 which represents a peak or best case scenario.
South Africa Total Value of Mineral Sales 3 year total (2004) = ZAR168.752Billion(USD24.107Billion) / 3 = ZAR56.250Billion(USD8.035Billion)
[src: http://www.statssa.gov.za/keyindicators/keyindicators.asp]
Right so the two largest mining corporates in the world have more revenue between them then the ENTIRE MINING INDUSTRY in South Africa.
and that's REVENUE... by the way. Heck between just these two, they have more revenue than the GDP output of South Africa's entire Industrial sector!
This means if the Mining Industry locally were nationalised, the SA Goverment would be in direct competition with not only these two but with the entire world's worth of mining companies.
And these giants can provide minerals, metals and materials globally to anyone far less than South Africa would be able to. Making it economic suicide to try and compete with these and the rest.
So then why is it that we mine minerals in this country if not to sell them? (ever stop and think about that for a little bit?)
It's to provide local manufacturing industries with the Raw Materials needed to make the things they do and if we cannot source these from overseas companies (let's say we have something called Sanctions placed upon us) then we would need to do it ourselves but at a huge cost since there would be no other alternative.
Free Markets (the ability to buy and sell commodities on the global marketplace) is working really well for our industries.
Now think what it would mean if the local mining industry was nationalised.
This would imply that the minerals, metals and materials being mined and extracted locally would need to compete in the marketplace with that from overseas and hence would need to be a lot cheaper in order to convince industries to buy them. This would immediately put a ceiling on prices and revenue and lower the profits from mining overnight.
Then it may not be apparent but since the Mines are owned and operated by government, they are run and paid from government money which is called Taxes.
So then it is so that the Minerals, Metals and Materials are in fact already paid for by the taxes that the rest of the economy has paid in and are thus the de-facto property of all taxpayers.
Which means local manufacturing industries, that have paid their taxes, would have a right to the raw materials for free OR at cost or below that.
And if that is NOT the case and they are CHARGED for it, then any further payment to the state owned mines would represent an extra payment to the government or another type of Taxation on the local population. Of course those who run local manufacturing concerns would notice eventually and perhaps decide that they already pay their fair share in taxes and thus not buy any of these minerals, metals and materials from the state owned mining sector.
Leading to a further significant drop in revenues and of course no matching reduction in expenses and costs to the state to keep these mines running as they are now politically charged enterprises where lay-offs and job losses can lead to losing the next elections. So these un-viable and expensive operations would then be funded from....
Your Taxes, hard at work: They work harder than you do.
2) Investment outside of South Africa.
This is much simpler (I know you're tired) and it hinges around Sovereignity of a country.
Let's imagine that the mining industry in SA was state owned.
So then how would a state owned mining company manage to secure mineral rights in other foreign countries?
Would some other country grant a foreign government (or a foreign power) mineral rights to their minerals?
That would be the equivalent of the first government bending over and tattooing "Hurt my sphincter... REAL GOOD!" on their butt cheeks.
It would give to a foreign power the right to do what they want to the land, including setting up a "small" base from which to possible invade.
Of course no country will grant mineral rights to a foreign power as the risk is incalculably high, unless invaded and conquered.
Which is another kettle of fish ...
So then how would the state owned local mining industry expand in order to grow in order to compete with the globalised mining houses if it cannot expand beyond our borders?
The short answer is it cannot expand or grow and would shrink and shrink and eventually collapse and dissappear (see point 1 above).
Now the ONLY viable state owned mining industries are those that concern themselves with OIL!
Which is a completely different thing as it's a monopoly trade on a globally critical resource.
Which makes state ownership of oil extraction and mining more logical since it's a mechanism for the state to express foreign power by denying enemy states the oil they need to operate.
Now does South Africa have any minerals which cannot be found elsewhere on the globe?
We do have the rarest thing of all: The belief that the state owned centralised economy will work.
