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17 Feb 2012 00:00
As debate rages over the ANC’s resource nationalism proposals, trade union Solidarity has hit out at the state in a new report, pleading the case for mine ownership to be left in private hands.
The ANC’s “State Intervention in Minerals Sector” report rejects nationalisation and proposes a model in which the state can reap more of the country’s estimated mineral wealth of $2.5-trillion through vehicles such as a super tax on profits, attaching pricing conditions to licences and using pension and union funds to buy greater stakes in listed companies with strategic feeder assets.
But Solidarity is concerned that nationalisation is being substituted for a state-led mixed economy, which President Jacob Zuma alluded to in his State of the Nation address last Thursday.
A mixed-economy model, inspired by growth in recent times in former communist countries such as China, undermines property rights, according to the union.
“We’re concerned that the ANC and president believe that such growth must be attributed to state intervention.”
Arguing against resource nationalism, the report, “The Benefits of the South African Mining Industry”, released on Thursday, details how the state and “the people” are already enjoying the spoils of the country’s mineral wealth.
Institutions such as pension and provident funds and insurers are already a major source of investment in mining companies. One estimate puts the ownership of mining shares by these institutions at R407-billion, or 42% of all listed mining shares.
The report concludes that, because about 6.5-million of the nine million people in formal employment provide for their retirement and much of this is through the institutional channels, “the mines are clearly owned in a very large part by the people”.
It seems strange for a labour union to defend mining companies, considering they are usually at odds over wage increases, benefits and working conditions. But, the union says, given the “turbulent times ahead ... we like the mines in private hands”.
But just how much wealth is created and redistributed by mining companies by share value appreciation and dividend pay outs to shareholders? And how much goes to the state?
The union report notes that the total amount of income, profit and capital gains tax paid by mining and quarrying companies amounted to R116-billion (5% or more of government expenditure) between 2006 to 2011. “This is enough to cover a whole year of what the treasury budgeted for items relating to basic education.”
The report states that between 2001 and 2011 shareholders would have received an annual return of 3.4% in dividend yields. Dividends alone would have resulted in an investor portfolio going up almost 40% (see graph).
The union bases its calculations on five large mining companies—Anglo American Platinum, AngloGold Ashanti, Harmony Gold, Exxaro Resources and Gold Fields. Over five and 10-year periods, share value appreciation (excluding dividends paid) would have produced an annualised return of 12.5% and 8.5%, respectively.
In revealing these returns, the point Solidarity is making is that sharing in this “profit redistribution” is open to anyone willing to buy a share. “And millions of South Africans do share in it, either through direct share ownership or through institutional share ownership,” the report states.
The report also cites employee share ownership programmes to illustrate that mining is benefiting “the people”. Take Kumba Iron Ore: in 2006, 3% of the shares in the Sishen Iron Ore Company were transferred to Envision, a broad-based employee participation scheme. When phase one of the scheme expired at the end of last year, 6 209 permanent staff were eligible for a cash payout of R576 045 each. This amounted to almost R2.7-billion.
“It’s clear from these schemes that mining companies are willing to share company profit not only with those who contribute capital, but also with those who contribute to labour,” the report states.
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