Advantages and disadvantages of nationalising mines

Advantages and disadvantages of nationalising mines The Freedom Charter signed and preserved in June 1955 affirmed that the people shall share in the country’s wealth and more significantly ‘the mineral wealth below the soil, the banks, and monopoly industries shall be transferred to the ownership of the people as a whole†. There has been a lot of debate for the nationalisation of South African mines by members of the ANC who deem that it is now the ideal time to cement this item onto the ANC’s agenda for the 2012 Centenary Conference and for this to at last become government policy. According to a variety of reports, it is not the ANC’s national executive committee’s concern and as things stand today it is not government policy. Not everyone is as keen as Julius Malema to have mines nationalised (Mpho, 2011). Foreign investment has already declined due to Malema’s uncertain statements regarding the nationalisation of the South African mines. Advantages of nationalising mines A sector th at is nationalised, allows the government to have direct control over that sector. If the mining sector is nationalised, this would entice the government to sell more minerals within the South African borders rather than export these minerals to foreign countries. If mines were to be nationalised, then the revenue generated would be part of national revenue, and thus would benefit the entire country. Economic development and the total well being of the individual will be improved. South Africa has an unequal distribution of income, this extra revenue will allow government to redistribute income more equally, thus reducing poverty as well as lowering the unemployment rate. There will, however, be a substantial amount of legal and economic costs as well as costs which the government would have to face from the transferring of funds. All of these costs would occur in the short term, increasing government debt. However, in the long run, if the government flourishes, nationailasion of th e mines will benefit the entire nation. Disadvantages of nationailsation Nationalisation would create panic among foreign investors. South Africa has a history of state owned enterprises that haven’t been very successful, this would place more doubt in the mind of the foreign invertor. The mining sector, after nationalisation, could take a very long time to boast a profit. Resources are scarce, therefore during this time, resources may become depleted, resulting in huge losses for the South African economy. There are very large and vast costs that government would have to encounter if the mines of the country are nationalised. Some of these costs include the general operation and running of the mines, possible shutting down of the mines as well as developing the mines. If the government has not shown any signs of profit, these costs will still have to be incurred which could be detrimental to the economy and the well being of the individual South Afrrican. Debt of the governm ent would increase at tremendous rates and this will spill over and result in great fiscal deficits. Clive Coetzee, Kwazulu-Natal Treasury economist stated that the mining industry supports the four macroeconomic goals, economic growth, employment, a low inflation rate and a surplus in the balance of payments. He further states that in 2008 around 500 000 people were employed in the mining sector which contributes to 6, 1% of total non-agricultural formal employment. This is without the indirect effects of mining, if these effects are taken into account another 500 000 jobs are likely to exist. I believe that the private sector already has the necessary capital as well as human resource proficiency to maintain and sustain this sector. Therefore there is no reason to nationalize the mines in South Africa. Nationalisation has been tried in many countries. By looking at countries like Botswana, Zambia and Venezuela, one can clearly see that the nationalisation attempts of these countri es have failed.