Let’s not add mines to taxpayers’ burden

THERE’S no better argument against the nationalisation of mines than the struggles of some of our miners.

Impala Platinum this week told the market that it needs to raise about R4-billion to bolster its balance sheet, a statement not well received by shareholders. And this is a miner that is perhaps the best managed of the lot.

Impala’s stock plunged as much as 15%, an expression of the lack of appetite for the travails of commodity producers, especially those tied to the South African narrative.

In a few months, Lonmin is likely to stand before shareholders with a begging bowl as it struggles with its own legacy issues, not to mention weak commodity prices.

Anglo American, after years of uncertainty surrounding its platinum assets, looks to finally be in serious talks about disposing of them.

For gold miners, the story is one of managing a rapidly depreciating ore body. From miner to miner, the story is uniformly bleak. Even the promise once held by South Deep is wearing thin.

Now, imagine if these assets were sitting on the balance sheet of South Africa Inc.

Just look at the list of stateowned enterprises that already pose a risk to the National Treasury’s targets for fiscal consolidation: Eskom, whose woes are well known and whose ability to improve its financial standing will be constrained for some time to come; Petro SA, which recently reported a loss of some R14.9-billion; and SAA, about which the less said the better.

As the sole shareholder, the government is going to have to come to the financial aid of these companies, as seen by the sale of its Vodacom stake to plaster over Eskom’s funding shortfall.

But how much more of the family silver will be sold off to support these institutions?

If the ruling party had gone ahead with resource nationalisation, we’d be adding the woes of the resources sector onto our balance sheet.

The platinum belt needs a fresh injection of capital, which we know current investors aren’t too happy about. Lonmin’s stock is down more than 80% on the expectation that the miner will attempt its third rights issue in seven years.

AngloGold Ashanti’s well-regarded CEO, Venkat Venkatakrishnan, must have thought his tenure would be cut short in September last year when a shareholder revolt forced him to backtrack on restructuring plans.

Those in the ANC who still believe in nationalising the mines as something of a “final solution” to radical transformation of the economy, need to really think about exactly what it would imply.

As the sole shareholder of South African mines or a majority shareholder with, say, a 51% stake, the government would now be looking at a massive bill to recapitalise these

The government is going to have to come to the aid of [state] companies

operations to ensure the wheels remain greased, and that workers remain employed.

What would be the knock-on effect on Eskom’s build plans, or the ambitious base-load expansion plans centred on capital-intensive nuclear power?

There’s also the impact on social welfare — how would we continue to meet the bill for payments to nearly 17 million people? The ballooning public sector wage bill is yet another consideration.

The defeat of nationalisation as a policy in 2012 was a godsend, but there are still murmurings in the party about a renewed push. At least those against the idea will have fresh ammunition. There are sectors of the economy in which state involvement is warranted, but commodities is not one of them — the lows are too hard to stomach.