The liberal viewpoint is that the government cannot create jobs. Recently I chaired two days of a conference on the new Minerals Act, with presentations by consultants, accountants and lawyers on the far-reaching implications of this landmark — not to say ambitious — law. I concluded that the liberal view is incorrect: the Act has created jobs — for consultants, researchers like myself, lawyers and accountants.
A presentation last week by Kecia Rust on the dysfunctional town- ship housing market provided an illuminating contrast. The Workings of Township Residential Property Markets research project has been widely misunderstood. It aims to help markets work better for the poor. It is not about entrepreneurs bonding their houses to finance businesses.
Rust believes the potential for ordinary black people to use the R68-billion tied up in property to better their lives is an opportunity for true empowerment. Residential property constitutes the capital of most whites, along with pension funds and indirect investment in the market, and family businesses.
Perhaps because the housing market study seems to support Hernando de Soto, darling of conservative think-tanks and bête noire of Jeremy Cronin, it has attracted suspicion. But it is more about giving people choice, increasing their property value through market forces, and tapping market forces to develop more residential property. If the township property market formerly earmarked for black people really worked, the owners would at least not have to sell their properties for a much lower price than they wanted.
Such is the distinction between consumers who have active choices rather than being passive recipients of delivery; between empowerment and patronage.
While the township housing study advocates the strengthening of the market and property rights, the Minerals and Petroleum Resources Development Act takes them away, nationalising all private ownership of mineral rights.
The conference heard that the Act may have some negative implications, especially for exploration, but for existing mines, things may not change much. Existing rights will be converted, including prospecting rights, and if you own mineral rights that are not being mined or prospected, you may apply for a licence to exploit. The principle is ”use it or lose it”, designed to prevent speculation and reverse the dominance of big mining houses.
The Minerals Act and the Mining Charter are essentially interventions to correct market failure, and for past racist intervention. Hence it is natural that the industry is the subject of onerous provisions in the charter. The African National Congress’s suspicion of the mining industry was palpable at the conference. Jacinto Rocha of the Department of Minerals and Energy spoke about empowerment deals that are ”designed to fail” not being acceptable. Which deals, I wonder? I don’t doubt the industry has its rogues, but any white company designing a black economic empowerment (BEE) deal to fail will ultimately fail itself.
Rocha stressed that the 26% target of equity or production ounces existed for ”minority protection” of black empowerment shareholders. And he warned against ”divide-and-rule” deals, where, for instance, 10 BEE parties have 2,6%, adding that the idea of ”broad-based” empowerment is being misinterpreted.
I found the tone of Rocha’s remarks oddly adversarial. Isn’t the charter supposed to be a negotiated document, rather than a top-down strategy? Where is the dispute-solving mechanism? Shouldn’t BEE be a cooperative rather than a punitive process? Is there so little trust? And that 26% voting bloc requirement may mean the same names crop up again and again in big deals, because only a few empowerment players can mobilise the required capital.
Rocha said the targets were simply a means to an end — deracialisation of the industry. He seemed to be asking industry to buy into the spirit of empowerment rather than obsess about meeting minimum targets. On the other hand, he talked about ”compliance”. I am certain that businesses that embrace the spirit of BEE and transformation stand to gain. But that doesn’t mean they can stop worrying about the letter. And equity transfers or ”deals” are visible because that is where the biggest range of risks lie if deals go awry.
So did we need the Act? Certainly, mining is dirty and dangerous and the industry bosses have a record of treating workers as less valuable than the ore mined. But some of the aims — such as asking mining companies to be involved in beneficiation — have been questioned even by those who overwhelmingly support the rest of the Act. And was it necessary to nationalise mineral rights, unintentionally raising interesting legal questions about expropriation of the property where the minerals reside?
Will the Act create a new class of new junior and small miners, as originally intended? Will it help change the colour of the industry? The charter has already spurred some big BEE deals. Will it cause investors to look elsewhere in Africa, where the regulatory regimes are less onerous?
All these questions will be answered in time. In the meanwhile, I look forward to the creation of a real market in the property of ordinary black people.
Reg Rumney is director of the BusinessMap Foundation