Resource-Cursed South Africa Suffers More Mining Massacres

The undermining of the African economy and society by minerals tycoons never ceases. When times were good and the commodity super-cycle raised prices to all-time highs from 2002-11, the natural resources boom could have been channelled into benefits for the citizenry, perhaps through a sovereign wealth fund or nationalised mines.

But pro-corporate policy prevailed and instead of circulating the wealth, most major mining houses are headquartered overseas and export their profits. The continent suffered a net negative outflow of wealth (‘adjusted net saving’), according to even the pro-extraction-and-export World Bank. Depletion of so-called ‘natural capital’ (i.e. ripping minerals from the soil) left the continent’s producers poorer, especially during the 2000s boom that was misnamed ‘Africa Rising’.

In the resource-cursed country I know best, South Africa, the depletion of this natural capital in a typical year outweighs the additions of ‘produced capital’ and ‘human capital’, the Bank admits, leaving our compatriots an average $245 poorer each (in this expanded measure) than they started the year. Yet the economic irrationality of mining under these circumstances goes unmentioned, because of overwhelming business babble about ‘job creation,’ ‘export earnings’, ‘new downstream and upstream businesses,’ ‘infrastructure to access remote mining areas’, and ‘economic development.’ 

Those days are now over. The justifications fall apart on closer examination, especially given how vulnerable South Africa is to the whimsical world economy and to the terrible pressure of men like Business Day editor Peter Bruce, local capital’s loudest voice. He insisted in 2012, i.e. after minerals prices started to crash, that the government must help corporations “mine more and faster and ship what we mine cheaper and faster.” The country’s two biggest infrastructure projects, estimated to cost $25 billion each, will do exactly that: more coal stripped from eastern South Africa and shipped through Richards Bay (one of the world’s largest coal export sites), plus a port-petrochemical expansion in Durban.

Critics of ‘extractivism’ – i.e., of the mindless, self-destructive route Bruce advocates – usually point out the vast political, social and ecological costs of the industry, but the implications of the commodity price crash should be foremost in mind. 

To illustrate, last week marked the third anniversary of the worst post-apartheid violence by state against society: 34 striking Lonmin platinum mineworkers killed in two locations at Marikana two hours west of Johannesburg on August 16, 2012. London-based Lonmin resisted paying a living wage of $1000/month to its main rock-drillers and instead of opening up negotiations, its 9% local shareholder Cyril Ramaphosa (now the country’s deputy president) emailed the police minister on August 15 to demand action against the ‘dastardly criminal’ strikers.

In 65 sites in South Africa and across the world last Sunday, there were commemorative events. Citizens and international allies expressed anger about the continuing toxic power relations unveiled at Marikana. Although an official commission presented its findings in March, implicating top police officials, there has been no punishment of the murderers.

Today, the murder of tens of thousands of jobs is underway and in spite of the expected populist rhetoric from ruling party leadership, no one in power appears prepared to actually halt the guilty parties:

Anglo American Corporation – for more than a century, SA’s biggest firm and today the world’s fifth largest mining house – announced on July 24 that more than a third of its 150 000 jobs would be terminated, as its share price hit the lowest level since 2003 and as first-half 2015 losses rose to $1.9 billion. “Quite frankly we didn’t expect the commodity price rout to be so dramatic,” CEO Mark Cutifani confessed.

Glencore, the world’s largest commodity trader, admitted on August 20 that due to the commodity price crash, its annual revenues fell by a quarter, to $86 billion; it declared an $820 million loss for January-June 2015; and its share price hit a record low. Not far from Marikana, in Brits, Glencore announced one of its main platinum mines would close, and one of its main coal mines was closed so hurriedly that the state mining minister felt compelled to suspend the parent firm’s license. (Glencore is the new name of the firm that US tax fugitive Mark Rich used to bust United Nations oil sanctions to supply apartheid South Africa.) Two months ago Glencore sold its stake in the world’s third main platinum mine, Lonmin.

Lonmin was labeled ‘the unacceptable face of capitalism’ by British Prime Minister Edwin Heath (a conservative) in 1973 because of the way that Tiny Rowland looted Africa and bribed its leaders. On July 24 Lonmin also announced 6000 job cuts as several mineshaft closures, as its share price hit a record low, having lost 70% over the past year. Since May alone, the platinum price has fallen 14%.

The shares of the main gold firms listed on the Joburg Stock Exchange have fallen 73% from a 2002 peak.

Next are the downstream mineral smelters and metal works, now crashing just as fast as the miners. The Arcellor Mittal iron and steel firm is owned by an Indian but based in tax haven Luxemburg, and is today worth just 5% of its 2008 stock market valuation. According to the National Union of Metalworkers of South Africa (Numsa), “Arcelor Mittal is considering the closure of their plant in Vereeniging; and other major companies such as Evraz Highveld Steel in Mpumalanga and Scaw Metals Group are intending to retrench thousands of workers.” Complained metalworker leader Irvin Jim, “The country’s political alliance with China is becoming problematic for our economy and workers in particular. The dumping of steel by the Chinese in our country is destroying jobs, so we need government’s intervention” in the form of protective tariffs.

Emergency measures are going to be needed, and if that means protectionism to defend the major steel corporations against China’s boomeranging exports of base metals, a fair deal would involve more power for workers at the point of production in exchange. It appears that Employee Share Ownership gimmicks on offer. However, what with the ruling party’s hatred of the metalworkers union – Africa’s largest – because of its recent breakaway left project, a genuine pro-worker arrangement is unlikely. So jobs will be lost permanently at a time the unemployment rate exceeds 35%. 

In this extremely difficult period, it also makes sense for critics of mining and smelting to wage a long-haul battle for an economy not subject to world market whims and multinational corporate exploitation. A more visionary approach is required, one piece of which should be a genuine full-cost accounting of mining aimed at fusing the interests of mineworkers, communities (and local small businesses), environmentalists and democrats. 

This would show that since mining is a net drain on the economy, state resources should instead be allocated to a full employment programme aiming to meet basic needs. One place to start is eliminating the huge subsidies to high-carbon smelting and mining, such as billions of dollars in ultra-cheap electricity that go to the world’s largest mining company, BHP Billiton, and others in the Energy Intensive Users Group. These remain unjustifiable at a a time of electricity shortages (and blackouts) and concern over South Africa’s extremely high climate change liability.

One countervailing campaign, ‘Million Climate Jobs’, suggests that smelting jobs be converted to welding a new generation of wind and tidal turbines, and home-based solar installations. As for policy, a small step in a more sustainable direction was taken in 2012 when South Africa and nine other African countries endorsed the Gaborone Declaration. Because of “the limitations that GDP has as a measure of well-being and sustainable growth,” the Declaration commits to “integrating the value of natural capital into national accounting and corporate planning,” which if actually done would immediately negate the mining industry’s economic arguments.

Furthermore, the Declaration argues, signatories should be “transitioning agriculture, extractive industries, fisheries and other natural capital uses to practices that promote sustainable employment, food security, sustainable energy and the protection of natural capital.” Such a transition is vital for local economic protection and global climate change mitigation. 

Needless to say, a government under the thumb of men like Ramaphosa won’t take seriously this pledge, which was signed by the weak environment minister, Edna Molewa. The capture of the new democratic rulers of South Africa by mining  did not lead to better wealth distribution, unlike in Venezuela after the 2002 battle over PDVSA oil. But it has ensured class-struggle showdowns like Marikana, three years ago, will move now from the point of production to economy policy contestation.


Patrick Bond is a political economist at Wits University in Johannesburg and also directs the Centre for Civil Society at the University of KwaZulu-Natal.

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