Introduction
Between 1998 and 2004, South Africa’s African National Congress (ANC) government issued legislation that entrenched Black Economic Empowerment (BEE) and gave effect to the nationalisation of mineral rights ownership (Capps 2012a). This was done to facilitate the transfer of a quarter of ownership of mining houses to black elites (Capps and Mnwana 2015; Bowman 2019). This nationalising of mineral rights changed the system of property rights in mining insofar as it undermined the viability of mining houses at the time.
This historical moment was the ANC’s exercise of political and regulatory power to build a black business class that would ideologically be the patriotic drivers of industry. The inherent tension, however, was the need to attract large amounts of investment in an inherently capital-intensive industry to sustain the inclusion of entrant elite. How did this tension play out empirically, and what were the outcomes?
Methodologically, this article exploits the nationalisation of mineral rights, which creates a ‘before and after’ context of the outcomes of interest: fixed investment, emergence of black capital and evolving state–business relations. Do the aims of the policy of creating a black capitalist class and stimulating investment through competition for mineral rights materialise? What actually happens? The article draws out some findings that can be summarised from four perspectives of the actors involved. These are the state, the Anglo American Platinum mining company (Amplats), ‘black capitalist class’, and labour and communities.
From the state’s perspective, mining capital had made the first move during the political transition negotiations of the early 1990s by co-opting black connected elite in empowerment deals (see Hirsch 2005; Levy et al. 2021). Faced with the imperative for direct state involvement in creating a black capitalist class (Freund 2007), the ANC initiated a process of formalising empowerment deals by creating an official policy and legislation that in effect ‘programmatised’ and impersonalised black economic empowerment (Levy et al. 2021). As noted by Freund, the state would supposedly be developmental insofar as it envisaged the emergence of a developmentally oriented elite: ‘[t]his elite will straddle the boundaries between the management ranks in the private sector, the established bureaucracy and politicians’ (Freund 2007, 663).
However, the state fails in two important ways. First, it helps create a narrow, overwhelmingly unproductive crony elite class. Second, it is itself hollowed out in the process of contestation for state favours – favours which become the main ‘business’ strategy for some capitalists seeking private enrichment unrelated to any productive activity. This process of the systematic hollowing out of the state and repurposing the state for systematic looting is gaining attention in South African literature (see Chipkin and Swilling 2018; Levy et al. 2021). This capture of state is different from earlier in literature such as Padayachee and Morrell (1991), who document the historical domination of capital over mining and agriculture in South Africa and the subsequent influence of the state, or Lawrence and Zeilig’s (2018) descriptive phrases ‘colonisation by capital’ and ‘revolving door’ between business and politics. In South Africa, this ‘revolving door’ was a step towards a more extreme form of state capture.
From an incumbent mining capital perspective, rule-based empowerment did not resolve its motive to decisively resecure mineral rights. To create predictable government decisions regarding its own interests, Amplats resorted to co-opting mainly black politically connected elite. This created Lawrence and Zeilig’s (2018) ‘revolving door’ – not of capitalists mainly interested in productive real economy development and accumulation, but of cronies seeking passive stock transfers and state favours for personal enrichment. However, this cronyism, at least from the perspective of Amplats, was the means of protecting its own investment. This article demonstrates how crony capitalism as a solution to Amplats’ dilemma plays out with mixed outcomes – some fixed investment, some black empowerment, but an overall corrosion of productive capacity, mainly through two channels. First, this corrosion happens through unproductive black elite crowding out entrepreneurship. Second, the corrosion happens through the hollowing out of the state through ANC factional battles and capture by various parasitic elites.
Examining the black capitalist class, it becomes apparent that this is a narrow but not homogenous group. It is mainly faction-ridden and unproductive, but some of the group maintain some distance from factional contestations and strive for productivity. Where there is some success in creating real investment, this is at arm’s length from ANC factional battles. For most, however, the main accumulation strategy is creating shell companies which are used to participate in BEE deals, without tangible investment. As such, there is limited creation of a black business class that can compete and thrive alongside the incumbent white business class. This process has not corresponded with any creation of domestic productive capability or diversification (Freund 2007).
Mine workers and mining communities have largely been left behind by the narrow exclusionary crony deals. More recently, however, there has been a collective response by mining communities to disrupt operations through protracted wage strikes and blocking of roads to mines. Mining communities are using these potent actions to demand inclusion in the economic benefits of local mining operations. Amplats recognised the need to engage proactively with the communities to gain their support, and in 2018 they referred to this exercise as a ‘social licence to operate’, contrasting this to the government-imposed ‘regulatory licence’ required to access mineral rights. ‘Social licence’ refers to the power that labour and communities have to secure the operating environment on the basis of sharing in the economic benefits of mining activity (Amplats 2018). This term – ‘social licence to operate’ – is used much earlier by Kirkwood (2006) when studying the role of Amplats’ Lebowa Platinum mine in surrounding communities.
Overall, the article reaffirms the centrality of minerals in both the primitive accumulation and evolution of the political economy of South Africa (Ashman, Fine and Newman 2011). As documented by Fine and Rumstomjee (2006) and O’Meara (1983), Anglo American Corporation, as the multinational is called, has a history of spending resources to collaborate with government in South Africa, but the fixed investment outcomes and creation of capitalist classes differ in post-apartheid South Africa. Far from fostering a patriotic black capitalist class and a transformed mining industry, the process of cronyism supported by legislated mining policy served the interests of incumbent capital because the allocation of mineral rights was recaptured in order to restore pre-policy allocations. The process also served the interests of a narrow black elite mainly concerned with short-sighted personal enrichment.
Theoretical framework: crony capitalism, productive activity and state capture
Crony capitalism refers to a capitalism in which companies prosper on the basis of their political connections and influence with government officials, rather than their ability to succeed in the marketplace. Companies with connections may gain in the form of public contracts, subsidies, bailouts or regulatory protection against rivals (Price 2013; Holcombe 2013). Holcombe argues that when business can profit from government connections and policies, this potentially entices firms to pursue benefits through government favours rather than through productive activity. Moreover, Holcombe argues that more government involvement in industry fosters crony capitalism, by requiring business to court government for protection and for government preferential treatment. As such, capitalism becomes crony capitalism when those in government gain sufficient power to provide their cronies with special benefits (Holcombe 2013).
Holcombe also argues that crony capitalism is related to state capture as state officials or agencies are increasingly influenced and even controlled by business interests. This article will show that what started out as a commitment mechanism could become a pathway to weakening state institutions. When the government can deliver favours to businesses, the latter have an incentive to devote resources to acquiring the favours, which may take many forms: ‘[s]uch firms devote resources to obtaining government favours, expending resources that might otherwise have been devoted to productive activity’ (Holcombe 2013, 544).
Haber (2002) and Haber, Razo and Maurer (2003) probe why governments grant such favours and create such entitlements. They propose that crony capitalism allows government to guarantee tenure and protection of property rights to a subset of asset holders. Such arrangements are made credible by enabling members of government or their families to share in the rents generated by the asset holders. This may take the form of jobs, co-investments or transfers of stock. What matters is that any attempt by the government to change the economic policies that benefit the asset holders will have a negative effect on the wealth and happiness of crucial members of the political elite that support the government. Thus, Haber concludes that crony capitalism is not solely an economic phenomenon, but is a political creation and has political consequences. These consequences include the following.
First, rent seeking becomes widespread beyond what is required to induce investment. Second, the personalised nature of crony systems means that commitments of the government are credible so long as that particular government or faction is in power, therefore agents operate with short time horizons, hence engage in short-term capital investment decisions. Third, there are negative consequences on distribution of income because crony capitalism creates insiders and outsiders, which exacerbates political factionalism and, ultimately, inequality.
Anglo American Platinum case study
Amplats is a case of exceptional success, with a net growth in market value of around 9900% in 2019 relative to 1995 and its ranking within the top 10 companies by market capitalisation.1 The company is heavily exposed to international investors who rely on the stability of the rules of the game to ensure that their investments are secure from capture. Despite the political shifts and policy uncertainties, Amplats has been able to secure investments that have catapulted the company to become the world’s leading platinum producer during this study period. Securing these investments depends on securing mineral rights. The empirical process by which mineral rights have been secured after the nationalisation of mineral rights through the Mineral and Petroleum Resources Development Act 28 of 2002 is the focus of this study.
Table 1 shows that of the 14 mine-building related projects to which Amplats committed in the late 1990s and early 2000s, it managed to complete 13, and sold the other one. By tracing the corporate strategy of Amplats during this period, this article highlights the mechanisms by which platinum mining capital was able to secure mineral rights and protect its investment in South Africa. The article uses documentary analysis including company annual reports, policy documents and investment banks’ reports.
Amplats’ main investments, 1995–2018.
| Mine | No. of projects/ investments | No. of completed projects | Approximate annual average capital expenditure, 1995–2018 (million rand) |
|---|---|---|---|
| Amandebult (Tumela and Dishaba) | 1 | 1 | 685 |
| Bokoni (Lebowa) | 1 | 1 | 264 |
| Booysendal | 1 | 0 | Sold |
| BPRM | 3 | 3 | 792 |
| Kroondal | 1 | 1 | 176 |
| Modikwa | 2 | 2 | 230 |
| Mogalakwena | 1 | 1 | 1555 |
| Pandora | 1 | 1 | 71 |
| Rustenburg Section | 1 | 1 | 1212 |
| Twickenham | 1 | 1 | 492 |
| Union | 1 | 1 | 310 |
Source: Amplats’ annual reports. Calculations by the author.
Background to platinum mining and the rise of Amplats
South Africa is the richest country in the world in terms of the value of its mineral reserves, estimated at US$2.4 trillion (World Bank 2019). Along with substantial deposits of gold, coal, copper and iron ore, the country hosts 80% of the world’s platinum group metals (hereafter referred to as PGMs or just platinum). Platinum is a relatively recent discovery in South Africa, said to have been discovered by Andries Lombaard and Hans Merensky in 1924 in a geological area called the Bushveld Igneous Complex (BIC). The deposit is a layered intrusion occupying 66,000 km² and runs through Limpopo province (formerly Northern Transvaal, consisting of the Lebowa area), North West province (formerly Western Transvaal, consisting of the Bophuthatswana area) and Mpumalanga province (formerly Eastern Transvaal province) – see Figure 1. In response to the discovery, several small companies were formed to exploit the western deposit in the Rustenburg area, specifically a high-grade, more easily mineable intrusion called the Merensky Reef. These companies included Premier Rustenburg Platinum, Eerstegeluk Platinum Mines and the Rustenburg Platinum Company. These were eventually bought by the Johannesburg Consolidated Investment (JCI) in 1926. JCI would in 1995 become a new Johannesburg Stock Exchange-listed company called Anglo American Platinum (Amplats) as an outcome of large-scale unbundling and offshore listing of several conglomerate companies in South Africa. From the onset, Amplats was the world’s largest producer of platinum (Amplats 1995).
The Bushveld Igneous Complex and the homelands in northern South Africa (formerly Transvaal). Source: Map created by the author, drawing on mine names in the Northam (2012) report.
For the approximate 70 years of JCI/Amplats’ mining of platinum, the company either privately owned mineral rights or leased rights from government. However, a significant share of its mining rights was held by land-owning rural communities in the Bophuthatswana homelands and Lebowa homelands (see Figure 1). The history of this ownership, from the 1800s, is worth outlining briefly. Through various wars and policies such as the policy of separate development, black people were dispossessed of their land in many parts of South Africa and forced to occupy less valued land in the margins (Baldwin 1975). These less valued areas would eventually be reserved as places where millions of black people were relocated after being permanently removed from their homes across South Africa. The areas became euphemistically known as homelands or Bantustans (Manson 2013). However, in some parts of the former Transvaal region, an opportunity arose for black people in the 1860s to acquire farmland on a ‘tribal’ basis, through missionary intercession. Generally, the name of the ‘tribe’ chief – as traditional authority – would appear in the title deed. Missionary mediation was only allowed up until 1881, after which black people could purchase land in the name of a functionary of the state, such as a minister of native affairs. The process of re-registering the farms under this new law required the chief as representative. This enabled Transvaal-based black people to retain the right to purchase land outside the designated areas set aside for them under the 1913 and 1936 Land Acts. In the Rustenburg region alone, more than 80 farms were acquired through such means (Manson 2013). As outlined above, Lombaard and Merensky later discovered large deposits of platinum in this land purchased by these communities in the eastern and western part of the BIC. The chiefs of these areas sold prospecting rights for income to incumbent companies such as JCI and later Impala Platinum (Manson 2013). Thus, throughout the 1920s to the 1980s, these incumbent companies thrived on this comfortable arrangement of privately held rights and rights leased from government and from these rural communities.
The late 1990s ushered in a period of political transition in South Africa, with the imminent end of the apartheid regime. In anticipation of its end, the apartheid government aggressively liberalised state mineral rights, registering about six thousand mineral deeds of cession and prospecting contracts between 1991 and 1994, releasing them for market acquisition. While radically reducing state involvement in the industry, the government issued the Minerals Act of 1991 which enhanced the protection of private rights acquired in terms of repealed legislation and reinforced the perpetuity of rights in leased homeland areas (Capps 2012a). In the Lebowa homeland, the result was that
By 1994, Anglo American’s Rustenburg Platinum Holdings … had gained exclusive control of the mining rights to 26 farms through a series of agreements with the Lebowa government … . As mining rights were perpetual rights in law, this effectively enabled [Amplats] to monopolise the entire eastern limb of the BIC. (Capps 2012b, 72)
The transition to democracy in 1994 reunited homelands into one republic and coincided with a politically stable period, anchored by a constitution that was supported politically and institutionally. Importantly to private capital, the constitutional settlement explicitly protected private property rights from future unconstitutional expropriation. To Amplats, this meant it could proceed with a business-as-usual approach. To other sectors, however, the universal protection of property rights did not resolve uncertainties relating to future government actions. Thus, to align with political interests and to secure business interests, some big business actors in finance, retail and services started forming ties with black-organised business and some prominent politicians through a set of empowerment deals mainly involving transferring unissued equity and handing out board directorships. To the contrary, Amplats relied on its secure ownership of mineral rights and airtight lease arrangements with traditional authorities (Badenhorst 2011; Manson 2013; Capps and Mnwana 2015).
Given its secure mineral rights, Amplats’ key challenge was securing more prospecting rights or growing by acquisition. To this end, Amplats ramped up expansion investment in its operations and sought to acquire neighbouring deposits. In October 1997, the company entered into a surface lease agreement on the Boschkoppies Farm with the Royal Bafokeng Authority – located in the former Bophuthatswana homeland – under which it began building the Bafokeng Rasimone Platinum Mine. In February 1999, the Royal Bafokeng Authority negotiated a further joint venture with Amplats to expand Bafokeng Rasimone Platinum Mine to include the Authority’s mineral reserves on the adjacent farm Styldrift (Amplats 1999). Together with other strategic acquisitions, Amplats rapidly expanded its assets. In 1999, by the end of Nelson Mandela’s five-year presidential term, Amplats had consolidated its position in the sunrise platinum industry.
The Asian financial crisis, the end of the first wave of BEE and the beginning of rules and factions for materialistic accumulation
While Amplats was doing well in a sector seemingly protected from political pressure, the July 1997 Asian financial crisis led to a stock market crash on the Johannesburg Stock Exchange in October 1997. This financial crisis also annihilated several BEE deals, most of which had bought stocks using debt and relied on dividends from those stocks to repay the debt (BEECom 2001; Wasserman 2020). In response, a black business forum with prominent politically connected members, the Black Management Forum (BMF), held a national conference in Stellenbosch in November 1997, where the idea of the Black Economic Empowerment Commission (BEECom) was conceived. The aim of the BEECom was to facilitate the entrance of black capital into business through the creation of state policies that would serve this purpose. The prevailing view was that black people should direct and take charge of a new vision for Black Economic Empowerment (BEE); a process that until then had been driven by the private sector (Levy et al. 2021).
The Asian financial crisis and its impact on empowerment deals amplified, if not triggered, a long-standing discussion within black-organised business and with the leading liberation party, the ANC. Specifically, the oldest and largest black business chamber, the National African Federated Chamber of Commerce (NAFCOC), had in 1990 adopted a black economic empowerment programme which it set to achieve by 2000. With the impending rise of the ANC to power, workshops were held between representatives from the ANC and black business in October 1993 at Mopani Lodge in the Kruger National Park, Limpopo province. The then secretary general of the ANC, Cyril Ramaphosa, received the courtship of black business, who wanted him to be placed at the centre of economic ‘transformation’.2 The coalition-building meeting was formalised under the Mopani Memorandum of Understanding of 1993. There were four important areas of agreement. First, black business would create mechanisms of coordination with the ANC and other relevant parties. Second, affirmative action legislation would be introduced. Third, a black business caucus would be established to amplify its impact on various public forums regarding policy formulation. Finally, there would be a review of the objectives of state institutions in order to make them more responsive to the needs of black business – as well as a restructuring of public corporations and parastatals in order to make them more representative of the South African population (Chabane, Goldstein and Roberts 2006).
To unify the varied black business organisations, the Black Business Council (BBC) was founded in 1996 to be an umbrella group of 11 black business organisations (Chabane, Goldstein and Roberts 2006). The Council appointed Cyril Ramaphosa to head what would be called the BEECom. Following the meeting held in November 1997 in Stellenbosch, the BEECom was formally established in May 1998 under the auspices of the BBC, with strong support from the ANC (O’Malley 2004). The commission reported on the status of participation of black people in the private sector, noting that only four per cent of mining-sector management positions were held by black people. Consequently, one of the main outcomes of the commission was a resolution to be adopted by the state, worded in the following way in the commission’s report:
the state is seeking the return of private mineral rights to the government, in line with the rest of the world. Government’s long-term objective is for all mineral rights to [vest] in the State for the benefit of and on behalf of all the people in South Africa … . The right to prospect and to mine for all minerals will vest in the State. (BEECom 2001, 65)
In 1998, the cabinet approved the White Paper on Minerals and Mining Policy for South Africa, published as the Mineral and Petroleum Resources Development Act in 2002 and accompanied by iterative Mining Industry Charters since 2004 that set out the framework, targets and timetables of transforming the ownership of the industry. This new development would see the overhaul of the system of old order rights that underpinned the relationship between (platinum) mining houses and traditional authority. This relationship between mining houses and traditional authority had minimal involvement of the state and therefore did not require mining houses to form strong political ties with the state. The introduction of the new legislation changed the game by repealing the Minerals Act of 1991 that empowered the mining houses to secure mineral rights with traditional authority (Capps 2012a). In essence, the state was nationalising the mineral rights and setting out new rules of the game of securing and resecuring mineral rights. In addition, government published the Broad-Based Black Economic Empowerment Act 53 of 2003 (BEE Act), formalising transformation requirements in the private sector. The question Amplats was facing was how to secure viability of its business under the new rules of the game. Not only was the company’s existence in jeopardy, but its future as a monopoly power on platinum was compromised. A readily available response was to comply with the new legislation, which required a transfer of company ownership of 15% by 2009, increasing to 26% by 2014. But in reality, compliance could not guarantee protection. The company pursued a (necessary) strategy of building a network of politically influential black elite that could influence government decisions in the company’s favour; in particular, in the allocation of mineral rights.
But who were the right persons to co-opt for deals to secure political protection? Indeed, the question became ‘BEE for who?’ A programme meant to be impersonal and programmatic materialised into a programme dependent on identities and proximity to dominant political factions.
Understanding the elite deals through factional politics within the ANC and black-organised business
To seek out political connections required entering the game of politics in the new South Africa. Similar to the Africa-wide politics of ‘liberation party’ turned ‘governing party’, politics revolved around the ruling ANC, making it paramount to understand the internal dynamics and influential personalities of the party. The alliance between black-organised business and the ANC formed what could be called an ‘empowerment deals market’ whereby Amplats and peers could pick the ‘right people’ for credibility-building deals.
Picking the right people would, coincidentally, expose the factional politics associated with personalised connections. Table A1 at Annex 1 sets out how the ANC evolved over time from a generally united liberation party to a faction-ridden party in power. This emergence of factions within the party also saw factional support by internally fractured black-organised business. These factional contests would eventually be imported into the state (Booysen 2011), blurring the lines between the ANC and the state. This meant the Department of Minerals and Energy (DME) became a ‘gatekeeper’, where the discretion of the minister and director general could be used to discriminatorily grant mineral rights.
Empirically, the factionalisation of the ANC is important to explain who emerges as the black business baron of platinum, and how this happens. Table A1 at Annex 1 suggests that factions within the ANC, from an empowerment deals perspective, start as early as Thabo Mbeki’s presidency. This move to a personalised nature of politics within the ANC and government also meant BEE winners were individuals – insiders and those supporting the right faction – rather than corporate beneficiaries. Booysen observes that
Pro-Mbeki persons, organisations and companies getting preferential access to top empowerment deals were greatly resented. The pre-emptive moves to take Mbeki and his consorts out of power hence helped prevent the Mbeki camp appropriating more of what was effectively regarded as ANC ‘family silver’. (Booysen 2011, 371)
That deals were associated with factions within the ANC translated to ‘waves’ of BEE deals highly correlated with these factions. Table 2 captures the correlation of BEE deals using Booysen (2011)’s periodisation of ANC factions based on presiding heads of the party and Intellidex’s (2015) periodisation of ‘waves’ of BEE deals. During the first generation of transactions beginning in the early 1990s, empowerment deals tended to go to members of black-organised business, mainly NAFCOC. The Asian financial crisis ended this first wave of deals. However, with the establishment of the BEECom, and talks of an impending state-led mining policy and industry charters, a new wave of BEE began. More politically connected black elite were available for empowerment deals, particularly after some major internal movements within the elite core of the ANC. These movements included the departure of anti-Mbeki ANC leaders Cyril Ramaphosa and Tokyo Sexwale from active politics into business, along with several top government officials leaving government for the private sector. Taking advantage of the developing BEE, the changes in mining policy between 2002 and 2004, and the rise of commodity prices from 2000, a wave of registrations of black-owned platinum companies began, as shown in Figure 2. Several of these companies soon participated in BEE deals, but cashed out soon after or failed, shown by deregistrations of these companies.
Company registrations and deregistrations in platinum: frequency by year, 1995–2018. Source: Author. Data drawn from ‘Who Owns Whom’ database (https://www.whoownswhom.co.za/).
Note: The data search used SIC code 24240 for platinum.
Periodisation of mining BEE deals, 1990–2018.
| ANC periodisation | BEE periodisation | Exogenous shock that ends current wave |
|---|---|---|
| MANDELA PERIOD – early capture of state power 1994–99 | Wave 1 = 1990–1997: first wave of BEE deals between insiders | Asian financial crash in 1997 |
| MBEKI PERIOD I – ANC control and elaboration of state structures (mid 1990s–2004) | Wave 2 = 1998–2004: pre-MPRDA BEE activity | 2004 mining policy (MPRDA) |
| MBEKI PERIOD II – interregnum of contest and paralysis (2005–08) | Wave 3 = 2005–2008: growth, boom, then crash | Global financial crisis of 2008 |
| ZUMA PERIOD I – repopulating and taking control (2008–09) | Wave 4 = 2009–2012: emergence of Zuma-allied network, top-up BEE deals to reach 26% target | Platinum strikes and Marikana massacre |
| ZUMA PERIOD II – new cycles of contest (2009 onwards) | Wave 5 = 2013–2018: restructuring, emergence of Sibanye, China players, downsizing of Amplats | Plunge in platinum price, 2015/16 |
Sources: Author; ANC periodisation (column 1): Booysen 2011; BEE periodisation (column 2): author and Intellidex 2015.
Focusing on the sample of these companies, and isolating those led by prominent elite, empirically shows the dominant BEE beneficiaries in platinum, courted by the dominant producers of platinum in South Africa (see Table 3). The table not only shows the pool of black partners favoured for platinum deals, but it shows the timing of entering the deals, with some correlation with the ANC factional movements. The table also shows that very few BEE partners survived and became ‘above-faction’ platinum-producing enterprises.
Sample of black-owned platinum firms owned by prominent politically connected elite actors.
| BEE company | Year registered | Year closed | Initial BEE deal year | Incumbent partner | Operating status | Transparency rating (1–10) | Politically connected directors | Political association | Government-employed director |
|---|---|---|---|---|---|---|---|---|---|
| Mmakau Mining | 1995 | n/a | 2001 | Implats | active | 4 | Bridgette Radebe (Patrice Motsepe’s sister) | NAFCOC/Mbeki | Jeff Radebe |
| Mvelaphanda Platinum | 1999 | 2013 | 2000 | Northam | dissolved | 2 | Tokyo Sexwale, Lazarus Zim, N. Mtshothisa, M. Ramaite | Zuma allied | N. Mtshotshisa |
| Khumama Platinum | 2002 | 2020 | 2003 | Amplats | dissolved | 2 | N. Mtshotshisa, Paseko Ncholo, Robinson Ramaite | Mtshotshisa, late ex-wife of Cyril Ramaphosa | Paseko Ncholo, Robinson Ramaite |
| African Rainbow Minerals | 2004 | n/a | 2003 | Amplats and Implats | active | 8 | Patrice Motsepe | NAFCOC | Simelane, Rejoice Vakashile |
| Gubevu Consortium Investment | 2004 | 2019 | Post 2004 | Eastern Platinum | deregistration process | 2 | Penuell Maduna, Olive Shisana | Mbeki (Minister of Justice under Mbeki, 1999 to 2004) | Penuell Maduna, Olive Shisana |
| Kagiso Platinum Venture | 2005 | 2016 | 2006 | Xstrata | deregistered | 3 | Eric Molobi | Political prisoner, ex-Telkom chair | Eric Molobi |
| Afripalm Resources | 2006 | in liquidation | 2006 | Northam | voluntary liquidation | 2 | Atul Gupta, Duduzane Zuma, Menzi Mbatha, Lazarus Zim | Zuma allied | Philisiwe Mthwthwa |
| Afripalm Horizons | 2007 | post-2010 | Post 2007 | Northam | deregistered | 2 | Rajesh Gupta, Duduzane Zuma, Menzi Mbatha, Lazarus Zim | Zuma allied | Lazarus Zim |
| Usiba Resources | 2007 | unspecified | 2008 | Eastern Platinum | unspecified | 2 | Zwelakhe Sisulu | Son of Walter Sisulu, former ANC Director of Information | Not disclosed |
| Royal Bafokeng Platinum | 2008 | n/a | 1999 | Amplats and Implats | active | 9 | None found | Land-owning traditional community | None found |
| Mabengela Investments | 2008 | n/a | Post 2008 | Northam | not specified | 1 | Remona Govender, Mduduzi Mtshali, Duduzane Zuma | Zuma allied | Not disclosed |
| Atisa Group | 2009 | 2018 | 2014 | Northam | deregistration process | 4 | Hamilton Mbele, Lazarus Zim | Zuma allied | Lazarus Zim |
| Zambezi Platinum | 2014 | n/a | 2014 | Northam | active | 5 | Lazarus Zim | Zuma allied | Lazarus Zim |
Source: Compiled by author from ‘Who Owns Whom’ database (https://www.whoownswhom.co.za/).
Amplats’ political connections and the scramble for platinum belt mining rights (1999–2001)
After the events associated with the 1997 financial crises, Amplats applied its understanding of the changing policy regime and the political dynamics in South Africa to swiftly build networks with strategic black elites. For the first time, Amplats included a discussion of mining rights in its 1999 report, alluding to its concern over mining and mineral rights ownership. It emphasised its massive investments it had injected in the industry, saying that
the growth and stability of the South African platinum industry depends on the long-term commitment of all stakeholders … . Amplats’ ability and willingness to sustain these developmental activities … are of necessity predicated on security of tenure of its mineral rights. (Amplats 1999, 18)
The series of initiatives – building networks, securing rights and developing new investments – that brought in black elites had enormous positive financial implications for the company. Between 1999 and 2001, gross revenue increased from R8.8 billion to R18.7 billion, profit before taxation increased from R3.2 billion to R12.3 billion, while cost of sales only increased by R3 billion despite the extensive expansion projects under its portfolio (Amplats 1999, 2000, 2001). The market capitalisation of the company grew from R8 billion to R100 billion, while the returns to shareholders grew from 27.6% in 1998 to 66.2% in 2001. The growth in market capitalisation was driven not by issuing shares, but by an impressive rise in the share price. Beyond the sound business fundamentals and favourable market conditions, the company’s political networks aided its growth strategy.
Rules and deals: the Mineral and Petroleum Resources Development Act and Black Economic Empowerment, 2002–2008
In 2002, government issued the draft of the Mineral and Petroleum Resources Development Act. At this stage, Amplats had secured strong connections with politically connected black elite and had re-established itself as a major player in the industry. This is starkly illustrated by Amplats’ announcement at the time that it had agreements in place with the DME that ensured security of tenure over the reserves the company needed to meet both its short- and long-term production plans (Amplats 2002). Amplats had already concluded empowerment deals valued at more than R8 billion, which constituted the greater part of the 15% empowerment target set by government for five years’ time from the issue of the Act (Amplats 2002). However, the DME was pressurising Amplats to broaden BEE partners towards meeting empowerment targets.
To that end, in July 2003, Amplats and Khumama Platinum announced an agreement to establish a 50:50 joint venture to develop the Booysendal Platinum Project on the eastern limb of the platinum belt (Amplats 2003). Khumama was a BEE consortium chaired by the late Nomazizi Mtshotshisa, who was an ANC activist and Cyril Ramaphosa’s ex-wife (Naki 2008). This agreement was brokered by the DME, who granted the mining rights to Khumama. In August 2004, Amplats signed a joint venture agreement with yet another DME-sponsored consortium, Pelawan Investments, to develop the Ga-Phasha PGM project. The DME contributed farms for the venture on behalf of Pelawan. Amplats agreed to finance this process (Amplats 2004).
In April 2008, the DME finally issued Amplats with the following high ore-grade licences which were associated with 85% of total 2007 output: Rustenburg – 8 licences; Amandelbult – 1 licence; Union – 2 licences; Lebowa – 2 licences; Mogalakwena – 1 licence; Twickenham – 1 licence; and Der Brochen (including Mototolo) – 1 licence (Amplats 2008).
The global financial crisis, the end of the second wave of BEE and Amplats’ non-factional consolidation
Similar to the impact of the 1997 Asian financial crisis, the 2008 global financial crisis contributed to the crumbling of many BEE deals. Platinum-sector deals were also affected, such as the crumbling of both Lonmin’s Incwala BEE deal and, later, Northam's Mvelaphanda BEE deal. The market-dependent deals became increasingly difficult to effect post the global financial crisis, especially for new aspirant black elites. Coinciding with the rise of Jacob Zuma in the ANC, the global financial crisis moment also saw further fracturing of black-organised business, with the breakaway and rise of Zuma-allied black-organised business (see Table A1 at Annex 1). For companies like Lonmin and Northam who needed to ‘re-empower’ themselves, aligning with the new faction seemed prudent. As such, Northam entered into a BEE deal with a consortium including the Zuma-aligned ‘Gupta brothers’, linked extensively with state capture in South Africa (see Levy et al. 2021 and Gray 2021 for more about state capture in South Africa). Table 3 shows some of the companies registered by the Gupta brothers to facilitate this process. Lonmin, on the other hand, leveraged its long-standing relationship with anti-Thabo Mbeki ANC insider Cyril Ramaphosa, who became Zuma’s deputy in 2014. Contrary to its peers, Amplats consolidated its political position via its resilient and thriving joint venture deals mainly with Motsepe’s African Rainbow Minerals and the Bafokeng’s Royal Bafokeng Platinum. While the rise of the Zuma faction and Zuma-aligned organised business was important, it was not specifically threatening to the security of rights of Amplats property because of the stable credibility of its black partners and a relatively strong rule of law. What was temporarily bothersome were the ANC’s threats of nationalisation of the mining industry, a stance that the ANC eventually dropped.
The narrow reach of BEE, with the questionable impact of industrial mining on local communities, was increasingly becoming the next risk factor facing Amplats and the industry broadly. These grievances were taken forward by organised labour in the form of protests for higher wages and better working conditions. This culminated in what is called the Marikana massacre in August 2012, when the South African police force killed 34 workers protesting at Lonmin’s Marikana mine (see Alexander 2013). This case was extremely sensitive, not least because Cyril Ramaphosa – the BEE partner of Lonmin – was implicated in the sequence of events leading up to the tragedy (Tandwa 2017). The platinum workers’ strikes continued well into 2014, exacerbated by strained business–labour relations, and unravelling labour–labour relations where a new, radical union, the Association of Mineworkers and Construction Union (AMCU), emerged from the historically dominant National Union of Mineworkers (see Sinwell 2015). These developments created tension with Amplats’ corporate strategy of expansion, which relied on protecting itself by securing the regulatory licence to operate through elitist BEE deals. These new developments created a new problem – that of securing a ‘social licence’ to operate.
The limits of rules and deals: cronyism, state capture and falling investments (2014 to 2019)
The single most material aspect characterising the 2014 to 2019 period is the decline in prices of the full basket of commodities. Not only that, but South Africa remained squeezed because of low to negative growth, low investments, high inequality, poverty and unemployment. The structural, systemic, racial context presented a fertile environment for factional conflict, where new actors emerged to contest rents. Apart from the crony elite associated with ANC factional contests, organised labour in platinum broke away from the ANC-dependent alliance to contest rents independently through AMCU. This pointed to the limited reach of BEE deals to sufficiently accommodate labour and local communities. Following this development, expressed through protracted labour strikes, Amplats shifted its corporate strategy from elite deals to what it called ‘multi-stakeholder engagement’. The company sought to secure ‘social licences’ from mine-hosting communities and labour unions, actors without whom their operations could not exist. While political connections were necessary for the security of tenure, the new challenge was community unrest and labour unrest, because of the socio-economic challenges felt in these mostly former homeland mining regions. Taking all these factors into account, the context of investment, and of Amplats, became one of fractured relations with the Zuma government, coupled with frustrated public-service-starved local communities.
The result has been a decline in investment, with only maintenance capital in place of expansion capital – reversing the momentum of the expansionist personality of Amplats. The company rationalised its portfolio by exiting non-core assets, which saw the disposal of the Rustenburg, the Union, the Pandora, the Kroondal and the Bokoni mines between 2015 and 2018. There are two important observations to these decisions. First, as explained by van Graan and Esterhuizen (2016), the decline in the commodity price has been important but not uneconomical. The contracting investment is the outcome of domestic economic stagnation. Second, the deals that survived Amplats’ axe have been with those black partners that have run the mining operations and grown the investment, such as Motsepe’s African Rainbow Minerals and the Bafokeng’s Royal Bafokeng Platinum. These are islands of excellence where rules and deals balance to create positive, real transformation in the form of independent black mining producers.
While deals have been important in the investment story of Amplats, political connections are not a substitute for healthy local community relations, and this is a cautionary tale of the limits of deals. Moreover, the imperative of racial class transformation that simultaneously encourages investments has remained the important, but at times contradictory, project in South Africa.
Discussion and conclusions
The case study on Amplats illuminates the tension of a racially untransformed corporate sector in a new democracy that is politically led by a historically disenfranchised constituency. The case study also illuminates how, in practice, economic actors respond when faced with changing political actors. Economic actors will tend to invest in de facto political power, as opposed to de jure political power (Acemoglu and Robinson 2008). They do so because it is de facto power that is often essential for the determination of economic policies and the distribution of economic resources. This article empirically demonstrates these dealings by showing how Amplats’ strategy of building political connections keeps intact the distribution of platinum mining rights, and therefore the economic status quo. Recently, however, this arrangement has been interrupted. The local communities and unions have emerged as powerful actors who control the ‘social licence’ to operate. This empirical development challenges the comfortable view of exclusive deals to sustain mining rents. Changing mining from enclave practices to inclusive mining operations remains the current challenge of mining investment.
Apart from crony capitalism as a ‘solution’ to maintaining investment in platinum mining, this article points to broader consequences of crony capitalism on South Africa’s institutional development. First, BEE’s ambiguity between rules and deals, coupled with the discovery that political clout could translate to financial returns without productive capability, opened opportunities for erosion of BEE as a programmatic mechanism of broad-based private-sector transformation. While growth accelerated during the commodity/BEE boom period of 2000 to 2008, it was not mainly driven by domestic fixed investments spurred by ‘transformation deals’ (Amplats and a few other ‘big businesses’ provide an exception). Overall, there was a disjuncture between deals and fixed investments during this period, with transfers of equity scarcely translating to fixed investment.
Second, the lack of fixed investment, coupled with the collapse of growth post-2008 and the consequent thinning of the BEE deals pipeline, meant that there was little room to accommodate emerging aspirant elites. This scarcity of economic opportunity facilitated ‘a volatile politics of inclusion and exclusion … [provoking] bitter factional struggles within the ANC … [and undermining] both the organizational integrity of the ANC and its capacity to deliver on its electoral mandate’ (Beresford 2015, 226).
Third, along with the erosion of the ANC, its factional contests would eventually be imported into the state (Booysen 2011), blurring the lines between the ANC and the state. With a collapsed BEE deals space, this ‘ANC is the state’ equation saw increasing boldness by the political leadership in the governing party to target state-owned enterprises and most government entities as the next low-hanging fruit of personal accumulation. The outcome was not broader accommodation of elites, but accommodation of a different faction, with a more visible emphasis on the capture of state institutions by both politicians and the private sector. Finally, the BEE policy clearly incentivised crony capitalism without creating an internal logic of wealth creation through the requirements of building fixed investment productive enterprises. Amplats’ approach, to create co-producing joint ventures, was initially resisted by the government, even though this approach carried a superior win–win formula. The contradictions of BEE also meant that by being overdependent on the state to create entrepreneurs, it created a system vulnerable to formation of ‘political capitalists’ or ‘tenderpreneurs’ – an elite group that could not challenge the governing party. By creating a business class that was largely consumerist rather than productive, the system built its own internal downward spiral. In the final analysis, if the cronyism cannot exist with expanding productive activity to expand economic opportunity, it will continue to erode all institutional infrastructure and reverse gains in transformation and development.