Can the mining industry in South Africa kick-start a second development phase to alleviate poverty and inequality?

Abstract

The mining industry was the cornerstone upon which the development of the modern South African state was built over the past 120 years. Development followed a core–periphery model that reflects its colonial past but this became a developmental state model under apartheid. There has however been an increase in inequality since the end of apartheid in 1994 as reflected in the Gini coefficient. Several development plans have been produced since 1994 ranging from Black Economic Empowerment to the most recent neoliberal, National Development Plan: Vision 2030 which emphasises the importance of mineral resources for economic development and job creation. Can mineral resources however give a second kick-start to development to address poverty and inequality under the modern, limit to growth, imposed by sustainable development?

Keywords:

• South Africa
• Development
• Minerals
• Apartheid
• Sustainable

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Harriss (2002) [2] argues for a cross-disciplinary approach to the understanding of development processes, including anthropology to explain employment and poverty and environmental degradation and politics to explain why people rally around distinct causes.

2. Gini-coefficient of inequality: This measures the distribution of national income and is the most commonly used measure of inequality. The coefficient varies between 0, which reflects complete equality and 1, which indicates complete inequality (one person has all the income or consumption, all others have none) [3].

3. In its preamble the MPRDA (2002) states amongst other things: ‘Recognising that minerals and petroleum are non-renewable natural resources; Acknowledging that South Africa’s mineral and petroleum resources belong to the nation and that the State is the custodian thereof’.

4. For analysis of intergenerational equity see Sorensen (2013) [5].

5. For an analysis of sustainable mining see Sorensen (2012) [7].

6. General George Marshall visited Europe in 1947 and reported to President Truman (1945–1953) that Europe would fall to the communists unless something were done to rebuild the European economies. The European Recovery Program (ERP) – ‘The Marshall Plan’ – which ran from April 1948 to 1952 was developed jointly between the USA and Europe. The communist states of Eastern Europe led by Russia did not participate. The US Congress legislated US$13 billion initially which gave the needed impetus. ‘Marshall Aid took the form of fuel, raw materials, goods, loans and food, machinery and advisers’ [9]. An unforeseen result of the attractions of American consumerism that pervaded Europe as a result and spread around the world is the global environmental crisis of the present day.

7. In a closed economic system, according to the Harrod-Domar [13] the rate of growth in national income, g (%) is: g = s/k (1). Where, s is savings as a % of national income and the capital to output ratio, k is the value of capital per unit of output in a single time period. If national savings is s = 6% and assuming k = 3, then g = 2%. However if national savings are increased to 15% then growth increases to g = 5% [14]. The ‘two-gap’ model Chenery and Bruno (1962) [15] takes into account a foreign exchange gap (earnings from exports less expenditure on imports), b: g = s/k + b/k (2).

8. ‘… the classical example of comparative advantage, according to which growth is promoted by specialization’ according to Chenery (1961) ([17]: p. 18).

9. The allocation of resources in an economy is Pareto optimal, often called Pareto efficient, such that no one can be made better off without someone else being made worse off; the most famous notion of optimality in welfare economics [29].

10. There may in fact often be a high rate of savings in such economies according to Streeten (1973) [31]. The lack of development is then attributable to underuse of both capital and labour and not simply to the absence of capital.

11. The spur for the industrialisation in the pre-WWII period was the provision of military hardware. This period coincided with the rise of militarism in Japan which resulted in the invasion of Manchuria and China and expanding ambitions in the East which in turn brought the USA into WWII leading to Hiroshima and Nagasaki and the virtual destruction of the Japanese industrial state. Its rebuilding was then accomplished under MITI.

12. ‘Supporters of the impossibility theorem have gone further to argue that the adaptability of the developmental state to the African context is constrained by the continent’s “ubiquitous” failure of governance, as evidenced by abject poverty, widespread corruption in the public realm, violation of human rights and political instability’ ([35]: p. 32). It is argued in Section 2.5.1 that South Africa has already passed through a developmental state stage.

13. For an analysis of the post 1994 electricity crisis in South Africa see Sorensen (2011) [36].

14. ‘Still another interesting (if obvious) characteristic of the South African defence industry was the relatively small community of its senior leaders, scientists and engineers. For most of the apartheid era, the industry drew its top personnel from the white population, and largely from the even smaller subgroup of Afrikaners. This meant that industry insiders, key military leaders and top government officials came from the same limited population, attended many of the same schools and were strongly connected by bonds of ethnicity, family, church, school and social life. This did not attenuate significant cultural differences or eliminate deep feuds and grudges … but did promote a certain uniformity of world-view and common approach to problems. It also enabled industry, government and military leaders to resort to informal connections to communicate, influence decisions and solve problems. On the other hand, it contributed to a culture of secretive decision-making lacking transparency and accountability’ (Quoted in Freund, 2010: p. 6) [36].

15. The various Christian Democratic political movements attest to this, having some history in Europe and elsewhere: ‘But it can be said that by 1914 (they) … were generally in favour of democratic principles … and social policies built on welfarist principles’ ([40]: p. 3).

16. The inevitable result of living beyond their means can be seen in the current debt crisis in the Euro zone in which Greece then Portugal, Ireland, Spain and Italy are in danger of defaulting on their national debt which could lead to a global economic meltdown as their national debts are being guaranteed by the international banking system. ‘If you look at the troubles which have happened in European societies, this is purely because of the accumulated troubles of the worn-out welfare society. The labour laws induce sloth and indolence rather than hard work’ (Jin Liquin, Board Chairman of the China Investment Corporation interviewed on Al Jazeera, 2011) [46].

17. Resurrected by Hubbert (1956) [60].

18. One possibility would be ‘mothballing’ a plant until it was needed as with three small power stations in South Africa. This takes considerable cost and time at re-commissioning after the ‘down’ period.

19. It is irrational to believe there are infinite resources, the trick being simply to keep on redefining them.

20. Since the dawn of time to the end of 2009, it is estimated that 165,600 tonnes of gold has been mined of which about 65% has been mined since 1950 [67].

21. The value of platinum is also due to its use as a motor car exhaust catalyst [68].

22. Witness the quarry that has been transformed into the golf estate of Eagle Canyon in Roodepoort [70].

23. The industrial revolution was based on the successful exploitation of iron and coal.

24. ‘There is always somebody who pays, and international business is generally the main source of corruption’ according to George Soros (1998) [80].

25. ‘I’m pleased to announce that the US Department of Justice is launching a new Kleptocracy Asset Recovery Initiative aimed at combating large-scale foreign official corruption and recovering public funds for their intended – and proper – use: for the people of our nations. We’re assembling a team of prosecutors who will focus exclusively on this work and build upon efforts already underway to deter corruption, hold offenders accountable, and protect public resources’ states Holder (2010) [81].

26. For further analysis of the impact of legislation on transformation of South African mining see Sorensen (2011) [85].

27. Another possible limit to growth affecting the mining industry is the carbon (emissions) tax to be instituted from January, 2015 (Blane, 2013) [92].

28. Amongst those favoured were Cyril Ramaphosa and Tokyo Sexwale the former recently elected as Deputy President of the ANC at its Mangaung conference. Ramaphosa is chairman of the Shanduka Group and holds directorships in major South African corporations in the resources sector amongst others. Sexwale was Minister of Human Settlements and chairman of Mvelaphanda Holdings. See also Sorensen [85].

29. ‘The Department of Welfare (later Welfare and Pensions) was established in 1937 predating apartheid (1948–1994) to serve all races, although it concentrated on urban white welfare’ according to Lund (1993) [115].

30. For the economic impact of mining in South Africa see Sorensen (2011) [121].