PLEASE NOTE:

MyNews24 is a user-generated section of News24.com. The stories here come from users.

 
brettsacks
 
Comments: 9
Article views: 535
 
 
Latest Badges:


 
View all brettsacks's badges.
 

Nationalisation

06 June 2012, 08:51
Nationalisation is a sensitive and emotional topic and with our economy (and the world economy) slowing down, it may appear as though handing over the mines and banks to government will lead to a faster equilibrium between black and white people – rich and poor. I understand where the majority of nationalisation supporters are coming from – whites came to their land and stole their riches. I’m sure the form of revenge that Malema so aggressively promotes is exactly what the ANC and Mandela stand for. Not. But to be honest, this majority, just don’t know any better. It’s not their fault; not being educated is part our country’s fundamental problem.

Malema points out that 90% of business is owned by white South Africans. In fact, according to economist Mike Schüssler, white people own 41% of SA’s assets and black people 27%. This is still a shocking figure considering that white people account for less than 10% of the population. However, let’s consider this: in order to run a company, one would need 20 years of education (school & university) as well as another ±15 years working experience. This means, that to efficiently run a company, one needs 35 years – we have only been in democracy for 17 years. We can’t really expect too much more transition than we have? Unless we put uneducated and inexperienced people in the top positions. Nah, not a good idea!
Another fundamental problem is Julius Malema who is preaching economic policy. I’m sorry, but, from which university did Malema attain his docrate in economics?  People can only make decisions based on the knowledge that they have. Unfortunately, the masses are being educated by Malema himself. This is dangerous.

So, I decided to take a (rough) look at the economic impact on South Africa if indeed the ANC decided to nationalise mines.
The cost to purchase the mines, in order to nationalize them, is around R954 221 million which is computed by using all the mining companies’ equity and liabilities (or assets). This cost would amount to roughly 47% of South Africa’s GDP – a big expense albeit a once off expense. To put it into perspective, that's almost 30 times what South Africa spent on the FIFA World Cup. That’s a lot. Considering the world economic climate, I don’t think that the SA government lending the cash to buy out the mines and in turn upping its debt to GDP ratio by 47% is a good idea. The value that government would need to pay, as given above, is a prudent one as there would need to be some sort of premium for control/expropriation.
If the government buys the mines and earns their net profits, there will be an increase in the revenue made by government by an amount of R99 553 million. Whereas mining used to account for 0.52% of GDP, it would now account for 5.22% of GDP – and increase of 4.7%. So far so good.
However:

1) Now that government is running the mines, they would need to make regular fixed asset purchases as a private company would do to maintain the mine and its income generating functionality. This results in a cost of about R74 669 million. 

2) Another interesting fact that I stumbled upon is the opportunity cost of running the mines. Currently, when mines pay their water & electricity costs, it’s an income for government owned companies. Therefore, this voids an income of around R5 390 million. Technically, we could double this amount because government are not earning the income and are providing the service at their own expense.

After the above two ‘expenses’ are taken into account, this will leave government’s revenue from operating mines at R29 994 million. This is a decrease of about R80 000 million which would leave government’s profit from the mines making up about 3.79% of GDP; down 1.43% from the aforementioned 5.22%

Ok, so that’s a lot of numbers. So far, to summarize, nationalizing the mines would lead to an additional amount of R19 494 million which totals roughly 3 times more than what the government collects from taxes now. This is great, let’s nationalize!
No. Let’s not. There are a couple of facts to be considered that are purely qualitative and obviously prove to have a quantitative effect.

The first one is the prospect of government running the mines. Not that any government around the world is particularly good at running a country let alone a company, the ANC has done a pretty sad job with Telkom, Eskom and SAA. These companies are so poorly run that the taxpayer occasionally bails them out (SAA) or they can’t meet consumer demand (Eskom) or the service is just so bad, customers are turned away (Telkom). Do we really want this government running mines? It’s a no brainer that the private sector will always do a better job than government because of a one word motivating factor – profit. It would be completely and utterly unreasonable and irrational to even consider that the government would run the mining companies anywhere near as efficiently and/or as profitable as the private sector.

The second factor to consider is the pace at which foreign investors will leave our country. I don’t think it’s even necessary to quantify the effect on our economy when South Africa decides to become a rogue state and take back land and business. The economy will crumble, the rich will leave to pastures greener and the poor will become poorer – even while owning the mines… Ironic. Zimbabwe ring any bells?

The above two points are not up for debate. Profit motive will always lead to a more efficient machine; and a country (in this day and age) cannot function without foreign investment.

The argument that nationalization will bring equality to our land and a level the playing field, financially, is downright nasty and absurd. In conclusion, if the ANC decides to nationalize the mines, it will have a complete adverse affect on our country leaving the poor in a much worse position. There have to be other initiatives, perhaps raising mining/banking tax; providing skills to the uneducated et cetera. Simply put, we can’t nationalization our country or we will die a quick and painful death. Nationalization is something that looks too good to be true and it is; big time.

References:
http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=199&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr.x=77&pr.y=0http://www.safrica.info/business/economy/sectors/mining.htm#economyhttp://www.statssa.gov.za/publications/statskeyfindings.asp?PPN=p2001&SCH=4819http://www.statssa.gov.za/publications/statsdownload.asp?ppn=P2041&SCH=4994

Disclaimer: All articles and letters published on MyNews24 have been independently written by members of News24's community. The views of users published on News24 are therefore their own and do not necessarily represent the views of News24. News24 editors also reserve the right to edit or delete any and all comments received.
 

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
9 comments
Add your comment
Comment 0 characters remaining

Read more from our Users

Submitted by
The Last Contrarian
My drunken scrawl VS an illiterat...

I am a writer; that is to say I’m an alcoholic. The link between alcoholism and writing ability is the only reliable indicator of good and profound writing.  Read more...

30 comments 883 views
Submitted by
FrancoisFMarais
Religion or Relationship - Lookin...

We were out fishing somewhere but the clouds came up and the weather looked bad. Winds were howling and rains were threatening. Read more...

44 comments 596 views
Submitted by
Bheki Dlamini
I celebrate fear. That works for ...

I can never say that the last four years, following my venturing into formal business, was any easy. It was the test of a lifetime. There were times when I wished I had never left my employ. Read more...

6 comments 433 views
Submitted by
Jerry Mashile
Changing face of culture

Heritage day is here again. While other groups in South Africa have defined their cultural practices, some remain confused and lost. This  Read more...

11 comments 396 views
Submitted by
Molifi_Tshabalala
What revolutionary duty for ANC t...

The ANC sounds more confused, using some words and phrases such as radicalism, revolution, and economic transformation out of their proper contexts.  Read more...

12 comments 1361 views
Submitted by
Mpiyakhe Dhlamini
Where are the intellectuals?

South Africa has a relatively free media, it's citizens enjoy the right to say whatever they want and to whomever they want with some sensible restrictions. Read more...

13 comments 406 views

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Magical Massinga

Spend 5 nights at the gorgeous Massinga Beach Lodge in Mozambique and only pay for 4 from R13 220 per person sharing. Includes return flights, accommodation, transfers and romantic turndown. Book now!

Kalahari.com - shop online today

Pre-order your iPhone 6 at kalahari.com

Hurry and pre-order your own iPhone 6 now at SA’s favourite online store!

Bargain box – 60% off

Reduced prices, very limited stock. While stocks last. Hurry and shop now!

Mind blow low prices on electronics

Get either the Prestigio multiphone or Proline tablet 7” tablet for only R699. Offers valid while stocks last. Shop now!

30% off Barbie toys

Save 30% on all Barbie toys and accessories. Offer valid while stocks last. Shop now!

Baby extravanganza month at kalahari.com

Celebrate baby month with a wide range of awesome baby products. Offers valid while stocks last. Shop now.

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

 

services

E-mail Alerts The latest headlines in your inbox

RSS feeds News delivered really simply.

Mobile News24 on your mobile or PDA

E-mail Newsletters You choose what you want

News24 on your iPhone Get News24 headlines on your iPhone.

SMS Alerts Get breaking news stories via SMS.

Blogs Your opinion on you, me and everyone.

Calais Website keywords automated by OpenCalais.

 
Interactive Advertising Bureau
 
© 2014 24.com. All rights reserved.
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.