Nationalisation not the answer to poverty

The mindless call for nationalisation of mines has irreparably damaged South Africa's attractiveness as an investment destination amidst global economic turmoil.  The ANC Youth League seems determined to continue the nationalisation debate, to the detriment of foreign investor confidence in SA.

It doesn’t take an economist to work out that nationalisation is not the answer to all evils, as touted by the ANC Youth League (YL). Their argument is based on the Freedom Charter, which says the mineral wealth belongs to the people as a whole. According to the YL, nationalisation will transfer the wealth to the people by transferring ownership of mines to them, however this is simply untrue. The government would own the mines, just like they currently do with parastatals SAA and Eskom. The employees at SAA don’t own the aircraft, just as the employees at Eskom don’t own the power stations. Employees of government-owned parastatals are no better off than workers in the private industry.  

The Youth League sites nationalisation as a success in countries like Venezuela, Cuba and Zimbabwe. The average person who knows a bit about the world knows that these countries are all in varying stages of failure – partly because of nationalisation. Why would we want to compare ourselves to countries where the citizens are  worse off that our own? By nationalising an industry, you simply change ownership from a private entity to the government. This open up the door to increased corruption and ANC policies of cadre deployment.  Venezuela is listed in position 164 out of 178 in the Corruption Perceptions Index - South Africa is number 54.

I was impressed with Minster of Mineral Resources, Susan Shabangu, when she publicly took a stand and said that SA had lost out on foreign investment in the mining sector because the debate on nationalisation had scared away potential investors. Public Enterprises Minister Malusi Gigaba has also conceded that SA’s "reckless" nationalisation debate was deterring foreign investment. Shabangu said having such a debate at a time when the world economy was in turmoil, and when there was intense global competition for investment, was inappropriate. The focus should rather be on resolving poverty, unemployment and inequality.

Nationalisation of mines in SA is not the answer to poverty; it will simply cause economic turmoil because of decreased foreign investor confidence. It’s time that the ANC tackle their Youth League and stop entertaining their thoughtless ideas.