Tim Cohen
24 November 2009
column
Johannesburg — WHAT does one make of the bizarre argument between the South African Communist Party's (SACP's) deputy general secretary, Jeremy Cronin, and the African National Congress Youth League's leader, Julius Malema, about nationalisation?
Malema implicitly attacks Cronin in racial terms saying: "We also do not need the permission of white political messiahs to think." Yet, Cronin also indulges in some below-the-belt blows, saying: "I suspect that comrade Malema and others are missing this bigger systemic picture because, when they speak of mineral beneficiation, they are thinking of bling ... sorry, jewellery." Yet all these jibes get in the way of the protagonists' arguments, which are essentially hopeless cauldrons of jumbled ideas.
A good example is their contrary positions on beneficiation. The league justifies nationalisation on the basis that so much of South African mineral wealth is not beneficiated. As anyone with the most superficial knowledge of the platinum industry will know, a substantial proportion of SA's mineral wealth is in fact highly beneficiated. Much of the rest cannot be beneficiated or cannot be beneficiated successfully on a commercial basis. But this does not appear to trouble the league since, from its point of view, obviously the only thing stopping the government from ordering beneficiation is the fact the mines are not nationalised (I know, it's illogical).
Cronin reaches for common sense when he notes that "the idea that SA will grow into a major jewellery powerhouse to rival centuries-old artisanal traditions (and markets) in India or Amsterdam ... simply because some of the precious minerals happen to be mined here, is, I am sad to say, a pipe dream".
But the core of Cronin's opposition to the nationalisation of the mines is simply that the mining industry is in such a poor state the government might end up having to support the businesses. He still calls for Sasol and ArcelorMittal to be nationalised .
Neither Malema nor Cronin bother with trying to understand why nationalisation has failed almost everywhere it has been tried. Nor do they appear to notice that government-owned entities in SA are in crisis, with six parastatals now without CEOs.
It is sometimes argued that the Zuma administration has not in fact shifted left, it just seems like it because these kinds of debates are now tolerated, when they would not have been under Thabo Mbeki . This is an entirely fallacious argument . These squabbles may or may not result in mines being nationalised, but what they do achieve is an atmosphere in which privatisation is such a swear word that it never comes close to being on the agenda.
Sasha Naryshkine of Vestact has raised an interesting comparison in relation to Eskom. Eskom has a nominal capacity of 43037 megawatt hours. Compare this to Brazil's Eletrobras, which has a capacity almost exactly the same, and provides 60% of Brazil's power, compared with Eskom's almost total monopoly. Naryshkine points out that Eletrobras has had its problems too, such as seven CEOs since 2001. Still, the company looks financially respectable and has a gearing of 33% or so. But the interesting difference is the company is 49% publicly owned, and has a market capitalisation of 535bn.
Eskom says it needs about R300bn for its expansion programme. Whatever its woes, Eskom is still one of the world's top 13 utilities by generation capacity and in the top 10 electricity suppliers by sales.
Using Eletrobras, which is listed in Brazil and in New York, as a comparison, selling a mere 20% of Eskom could solve its financial problems instantly. It could finance its expansion cheaply through an equity sale, and we would not have to deal with higher interest rates, nor would we have to endure 45% tariff increases every year for the next three years.
However, this option has apparently not even been considered because the nationalisation debate makes it politically impossible to breathe a word about a totally conventional option.
Sometimes it's not what the government does that defines it; it's what it doesn't do.
Cohen is a freelance writer.
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