/ 2 June 2016

Mining is in decline and SA must find renewable options

‘itwelf koma five’: Strike action in Marikana by mineworkers over pay increases. Some earned as little as R4?500
‘itwelf koma five’: Strike action in Marikana by mineworkers over pay increases. Some earned as little as R4?500

For many years now, even during the economic “boom” years of the Mbeki administration with its promises of trickle-down prosperity, mining has increasingly contributed less and less to the nation’s gross domestic product (yet, if United Nations Conference on Trade and Development reports are to be believed, mining has received the bulk of foreign direct investment, even with a 74% drop in total FDI between 2014 and 2015). 

Between 2005 and 2015 mining (and quarrying, as it is classified in South African Reserve Bank reports) decreased by an average of 0.35% annually, continuing a steady trend downwards. It’s a trend whose origins can be traced back as far as 1993 when mining made the lion’s share of contributions to GDP at levels close to 20% before reaching 12% in 2015. 

For nearly 150 years, the men (and lately, women) of this country have toiled underground, at great risk to their lives, to dig up ore of varying composition and quality. Gold, our most prized element — holding, as we do, the world’s largest known reserves — comes out in such poor quality ore that one tonne of earth must be excavated to yield a mere 5.6 grams of gold.  That alone should have been enough to divert resources towards unlocking the secret of the philosopher’s stone, were it not for the notion of “cheap labour” that we have become most famous for over these past few centuries. 

Today we have the curious situation where, as noted in a tweet by mining and labour analyst Mamokgethi Molopyane, “those who actually do physical work to create the wealth of this country earn less than R5?000 on average”.

On August 16 2012, 34 miners were ruthlessly gunned down by members of the South African Police Services’ Public Order Policing unit. Their crime: demanding an across-the-board minimum monthly salary of R12 500 — “twelve comma five”, like the big bag of sugar or flour or mealie meal that gets many low-income families through the month. 

READ MORE: Marikana: A massacre by any other name

You would have to be blind to the everyday reality of thousands of households that depend on incomes as meagre as the R4?500 a month that some mineworkers were reported to be earning at the time — for some, unchanged since the 1980s — to miss the poignant and poetic symbolism contained in demanding “itwelf koma five”. 

Even after the tragic event, even after the international outrage and national mourning that followed and continues even to this day, those miners are yet to realise their dream of earning what was then slightly less than the national average for the year. 

Every time there is any protest that seeks social justice involving anything to do with money, the reflex reaction from those appointed to mind the gates to the bountiful wealth of this country is to blame the economy for not being efficient enough to produce equitable outcomes — as though they themselves aren’t active agents in the working of Adam Smith’s “invisible hand”. For mineworkers on the platinum belt, the excuse was the financial meltdown of 2008 and the sluggish global recovery. 

Thomas Piketty, seemingly playing devil’s advocate and referring directly to the tragedy at Marikana, argued in Capital in the 21st Century that perhaps the best way to proceed would be full disclosure on the financial state of the mines, using the example of Rhenish capitalism as a lesson in how to reconcile competing interests in industry (profit maximising versus maximising the price for which individuals trade leisure for labour, according to the neoclassical model). 

But full disclosure is not something one can trust South African mining houses with, as evidenced by the tasking of the Davis tax committee by the National Assembly to look into transfer pricing. For the uninitiated, transfer pricing is the act of moving profits from the operational organisation to a separate but related organisation, usually one registered in a tax haven, to avoid (and evade) taxes in the land where the profits were first earned. 

The committee, comprising some of South Africa’s sharpest economic and legal minds and including experts on inequality such as Ingrid Woolard, has gone on record to cite the many difficulties they face in determining when such pricing is avoidance (which is legal) and when it is evasion (which is illegal). 

Such difficulties also include capacity shortages in the state revenue agency to investigate and bring offenders to justice. What chance then do mineworkers have — many of whom are barely literate — against such sophisticated obfuscation that confounds even those who profess to be experts in their field?

On March 22, Sikhosiphi Bazooka Rhadebe was murdered in his home. He was the chair of the Amadiba Crisis Committee; his death was part of a long fight against the awarding of rights to a foreign multinational to mine the pristine sands of Xolobeni on the Wild Coast of the Eastern Cape.  

READ MORE: Wild Coast Amadiba mining opponent ‘assassinated’

It is not known who killed Bazooka, or who planned his assassination. What is known is a large Australian mining company, Mineral Commodities (MRC), wants the titanium that lies in those dunes. Politics of the stomach have given rise to a local conflict. Chief Lunga Baleni is believed to be in the pocket of MRC and the Amadiba Crisis Committee opposes the mining. Some believe the mine will bring jobs and others wish to retain control of the land and the opportunities it provides. 

Mining is on the decline and, as observed by Molopyane in another tweet, South Africa needs to prepare for life after mining. It should have started preparing for such a reality when mining first lost its place to financial services with regards to contribution to GDP nearly a decade ago. 

Currently in third place (if we disregard government services), there doesn’t seem to be any hope of a resurgence, especially considering that mining by definition deals in nonrenewable resources. 

The only way in which mining could re-emerge as the champion of economic growth is through the discovery of new mineral deposits such as those at Xolobeni. But the idea that the people living in the area — a community that faces great upheaval should mining go ahead, including the disruption of burial grounds — should serve only as a source of cheap labour to mine the wealth of the land of their ancestors to expatriate to the asset portfolios of foreigners is beyond insulting. 

A combination of Rhenish capitalism, co-operative mining and public-private partnerships where “the community” retains equity on mining operations and merely pays fees (regulated by government to ensure fairness) to the mining houses and related operators for the management and operations of the mine seems to me to be the best option. 

From this South Africa may follow the path of nations such as Norway and Saudi Arabia, which have built up vast sovereign funds from their natural resource endowments and can now move into a future that is not threatened by the declining reserves of nonrenewables.

Fumbatha May is a data scientist and socioeconomic development consultant working in the renewable energy sector.