Resource nationalism in the South African mineral sector: Sanity through stability

Abstract

Despite economic law and policy instruments with righteous intentions, the politics of resource nationalism could render these instruments unworkable. South Africa is a case in point. After the establishment of democracy, the country's outdated law and policy framework was replaced with a modern system, and in many respects an exemplary one. Converting the privately-owned mineral right system into a scheme of state custodianship allowed for several resource nationalism instruments, in addition to a resources royalty structure that first, compensates for the loss of a non-renewable resource; second, provides for optimal resource use through encouraging value addition to mineral production; and third, effectively targets economic rents. However, despite these improvements, the country went through a process of fierce debate on whether or not mines should be nationalized: the debate was fuelled by public anger with claims of political non-delivery. The result was considerable noise because of public unawareness of facts and distortion of the facts in political rhetoric. The purpose of this article is, first, to establish the status of resource nationalism in South Africa's mineral and fiscal frameworks; second, to give an opinion on the findings of the African National Congress's document on state intervention (Maximising the Developmental Impact of the People's Mineral Assets: State Intervention in the Minerals Sector (SIMS), 2012); and third, to fruitfully contribute to the fundamental discussion on how South Africans benefit from their mineral riches. The methodology is to start with explaining resource nationalism as an international issue for the extractive industries; then to offer an overview of existing resource nationalism instruments in South AfricaÂ-along with their effectiveness in attracting rents and investment. The major finding is that South Africa has resource nationalism firmly ingrained in its current suite of instruments. However, it is necessary to address the perceptions of bad governance, and above all, maintain the stability of the rules governing mineral development in South Africa.