Introduction

1. Introduction The National Union of Metalworkers of South Africa (NUMSA) welcomes this opportunity to present its submission on the issue of a State Owned Mining Company and trusts that this engagement with the Portfolio Committee will assist in bringing the various constituencies together in a debate that has sparked all sorts of emotions as soon as the word “nationalization” is mentioned. This form of engagement also signals a shift on the part of government to provide a platform to stakeholders to raise questions related to the collective ownership of our country’s resources and how best these may be procured to the benefit of our fragile economy.

2. Government Development Indicators at a glance[1] Real GDP - R1251bn $144bn Real GDP per capita - R26 695 $3075 Population - 48 687 000 Employment - Employment as at Jan 2009 = 13.6 m Goal: Increase employment by 2014 numerical target = 16m Unemployment - 23.6% June 2009 [narrow definition] - 32.5% June 2009 [broad definition] Income Inequality - 0.679% (2008) [Gini-Coefficient / Stats SA IES] [1] Office of the Presidency National Planning South Africa Development Indicators 3rd edition

3. Background to the debate Already covered in previous presentations: • SAMDA – has referred to the regulatory framework and historical development of the mining industry in SA • NUM has already touched on the skewed nature of ownership in our economy, as well as the current levels of state involvement and employee participation in the mining sector through investments and shareholding. • Calls to Nationalize: The Freedom Charter (1955) The national wealth of our country, the heritage of all South Africans, shall be restored to the people; the mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole …

4. Polokwane Resolutions – Economic Transformation The Polokwane Resolutions[1] on Economic Transformation makes several references on the need for a developmental state to address the following: 1.6 A developmental state must ensure that our national resource endowments, including land, water, minerals and marine resources are exploited to effectively maximise the growth, development and employment potential embedded in such national assets, and not purely for profit maximisation. 1.7 Strengthening the role of state-owned enterprises and ensuring that, whilst remaining financially viable, SOEs, agencies and utilities - as well as companies in which the state has significant shareholding - respond to a clearly defined public mandate and act in terms of our overarching industrial policy and economic transformation objectives. [1] ANC 52nd National Conference 2007 Resolutions http://www.anc.org.za/ancdocs/history/conf/conference52/resolutions.pdf

5. 2.3 Transforming the structures of production and ownership, including through: Anti-monopoly and anti-concentration policy aimed at creating competitive markets, broadening ownership and participation by our people, addressing monopoly pricing and other forms of rent-seeking and anti-competitive behaviour and overcoming barriers to entry that inhibit the growth of small enterprises, including strategies to increase competition by promoting the emergence of new players in both South Africa and the SADC region. Many of our monopolies are based on the nation's natural resources and we must find ways and means to intervene, including through state custody of these resources on behalf of the people and regulation to ensure competitive pricing of inputs for our downstream manufacturing sector. Furthermore, the small size and relative isolation of our economy leads to monopolies in certain sectors which could be overcome by increasing regional economic integration with Southern Africa and the continent as a whole.

6. Arcelor-Mittal – Kumba Dispute For NUMSA there are a number of compelling reasons that favour the nationalization of the mines. The recent dispute between Arcelor-Mittal and Kumba Iron Ore provides the basis for one such reason. Given the strategic importance of iron ore and the steel mining industry in the country, NUMSA has repeatedly called on the state to reclaim Arcelor-Mittal (formerly Iscor) and to act decisively in the current dispute between Arcelor-Mittal and Kumba Iron Ore

7. NUMSA STATEMENT ON ARCELOR-MITTAL AND KUMBA DISPUTE The National Union of Metalworkers of South Africa (Numsa) notes the raging steel price war between ArcelorMittal and Kumba Iron Ore (mainly owned by Anglo American), which has been referred to mediation with the possibility of saving 4000 jobs that are now threatened. … Already our economy has suffered as a result of the privatization of Iscor (now ArcelorMittal), by the high cost of steel which is crippling domestic manufacturing, and by the outflow of profits to the firms' headquarters in Luxembourg and London. This dispute is another sign of the failure by our economy's managers, to transform the colonial character of our resource base. We recall the Freedom Charter, which mandated that the minerals beneath the soil and monopoly capital be transferred to the hands of our people as a whole … With the Freedom Charter guiding us, we reiterate our call for the nationalization of ArcelorMittal, so that the ‘people shall share in the country's wealth'. Ongoing bickering by ArcelorMittal and Kumba provides our peoples' government, led by the revolutionary African National Congress (ANC), the rationale to take over ArcelorMittal. Along with many in the ANC and Alliance, we believe that the nationalization of strategic components of our economy will enable our government to deal decisively with the inherent underdevelopment and structural challenges of our economy, and transcend the period of pre-history dominated by capitalism and greed.

8. Many of the country’s leading commercial newspapers also reacted strongly to the dispute: Donnelly Mail & Guardian Online July 16 2010 Kumba, Arcelor-Mittal stand-off heats up[1] The ongoing contractual dispute between steel giant ArcelorMittal and iron-ore supplier Kumba Iron Ore has descended into all-out war, with South Africa's steel industry, and the thousands it employs, standing in the firing line. Writing for Business Day, Sampson (2010)[2] said: The government should recognise that separating Iscor from its iron-ore deposits was a big mistake — as was its sale to a foreign competitor with conflicting interests. Likewise, Creamer (2010)[3] in his article saw the dispute “as a real opportunity for the State” to intervene: But, surely, there is also sufficient room for government to seek to influence the outcome in the national interest. Alternatively, only narrow share-holder interests will be served. [1] Donnelly, L 2010. “Kumba, Arcelor-Mittal stand-off heats up”. Mail & Guardian Online, July 16 2010 http://www.mg.co.za/article/2010-07-16-kumba-arcelormittal-standoff-heats-up • [2]Sampson, M 2010. “Try Vertical Integration – Saldhana Steel and Exports may be saved for the moment”. Business Day, 26 July 2010 http://www.businessday.co.za/articles/Content.aspx?id=115968 • [3] Creamer, T 2010. “State should seize iron-ore initiative and move debate into developmental realm”. Polity, 12 March 2010 http://www.polity.org.za/article/state-should-seize-iron-ore-initiative-and-move-debate-into-developmental-realm-2010-03-12

9. Article by Ingi Salgado (Business Report, Tuesday August 17 2010) “Arcelor Mittal fails to get serious about sustainability” - Article says that the report lacks detail – only provides a list of stakeholders but very little about engagement • “While Arcelor Mittal SA has been busy talking to the politically connected individuals in its BEE deal, it seems to have bypassed other people – such as those who breathe in the same smog of the Vaal Triangle even as they live in squalor on the doorstep of the group’s Vanderbijlpark plant. These people strike me as being more appropriate recipients of a BEE deal”

10. For some time now Arcelor-Mittal has benefited from hefty steel prices (Import Parity Pricing) and as Creamer (2010)[1] argues the steel monopoly continues to maximize profits under a new price “benchmarked model”[2] that is fundamentally the same as Import Parity Pricing (IPP): … there has been little noticeable difference between prices set under IPP and the benchmarked model. • Then there is the issue of beneficiation. According to Maree et al. (2008: 2)[3] South Africa is “well endowed with metals” with abundant reserves in platinum group metals & manganese – 80%, Chrome – 70%, gold and vanadium – 40%. In addition the country produces iron ore and coal. However, the writers have strong views on the use of IPP, arguing that IPP impedes “growth and employment creation by the downstream sectors”. (Maree et al. 2008: 7)[4] For Maree et al. (2008: 1)[5] beneficiation can only be successful if “value is added at every stage of production”. [1] Ibid. • [2] According to Creamer (2010) the new model “sets domestic selling prices after an analysis of domestic selling prices in four markets (the US, Germany, Brazil and China) and then adjusting these to its expectations for the South African currency for the forthcoming month. • [3] Maree, J, Lundall, P and Godfrey, S (2008) ‘The Dynamics and Skills Requirements of the Metals Beneficiation Sector’. Paper presented at the XIV SASA Congress, University of Stellenbosch, Stellenbosch, 7-10 July 2008 • [4] Ibid. p7 • [5] Ibid. p1

11. Article by Zavareh Rustomjee (Business Day, Friday 13 August 2010) “Kumba-Mittal Saga shows up real threats to SA’s growth” • “Beneficiation policy … not defined as an objective of the act” • Minerals policy must become an “active and integral instrument of industrial policy”

12. Venezuela • We need to take lessons from some of our Latin American comrades and the economic transformation of Venezuela has invaluable lessons for us here at home. According to Lander and Navarrete (2007: 12-13)[1] Venezuelan Constitutional provisions guarantee amongst others: … it defines clear and central state responsibilities in trade policy and the defence of national industries (article 301), reserves oil activity and other strategic activity for the state (article 302), and assigns the state a governing role in the development of sustainable farming and food security (article 305)(Constitution, 1999). • The guarantees that the text grants economic and social rights, in particular health, education and social security, are equally significant … [1] Lander, E and Navarrete, P 2007. The Economic Policy of the Latin American Left in Government. Havens Center Rosa Luxemburg Stiftung Transnational Institute. Amsterdam, Drukkerij Raddraaier B.V.

13. The “Bolivarian Alternative Agenda” (Chavez 1996 cited in Lander and Navarrete 2007: 11)[1] illustrates the mixed nature (public/private) of Venezuela’s new economic model underpinned by Chavez’s vision of “participatory democracy” (2007: 12): it seeks a “humanist self-managing and competitive” economic model that is summarised by the phrase “as much market as possible and as much state as necessary.” [1]Lander, E and Navarrete, P 2007. The Economic Policy of the Latin American Left in Government. Havens Center/Rosa Luxemburg Stiftung/ Transnational Institute. Amsterdam, Drukkerij Raddraaier B.V.

14. [Source: Lander & Navarrete, 2007: p11]

15. Call to Nationalize: Summing up the debate • Thus far it is difficult to pin the debate on any one position that supports nationalization or for that matter on any one position that is anti-nationalization. However, with reference to the Arcelor-Mittal – Kumba dispute Creamer (2010)[1] agrees that the dispute provides an ideal opportunity for the state to intervene and as Creamer himself puts it “ … government should seize the initiative and move the debate away from the domain of shareholder value and into the realm of national development”. • Both the ANCYL and NUM have provided the stimulus for nationalization and appropriately targeted the mines as a starting point. Likewise NUMSA believes that there is an urgent need to nationalize our mines and key sectors of our economy. While the form and content of nationalization might vary (some believe that public-private partnerships provides a catalyst for nationalization), others have argued that nationalization isn’t simply a case of state control, but that the underlying principle is one of social and collective ownership in which the state plays a leading role. • The state would have to take cognizance of the fact that calls for nationalization would also require a complete overhaul of our macro-economic policies and that we would need to revisit sectors that have been privatized under the Growth, Employment and Redistribution (GEAR) policy of 1996. Nothing short of a radical departure from GEAR can facilitate a shift to nationalization and in this context we call on the state to replace ‘case by case privatization’ with ‘case by case nationalization’. [1] Creamer, T 2010. “State should seize iron-ore initiative and move debate into developmental realm”. Polity, 12 March 2010 http://www.polity.org.za/article/state-should-seize-iron-ore-initiative-and-move-debate-into-developmental-realm-2010-03-12

16. Conservative journalists have ridiculed our calls for nationalization: Writing for the Mail & Guardian Online, Johnson (2009)[2] argues that renewed calls for nationalization emanating from the ANCYL and Castro Ngobese of the Young Communists is a non-starter: For a start, where would one find the money to buy them? Anything less than full compensation would start a panic among the foreign investors on whom South Africa depends. And where would one find the necessary human skills to run and manage them? And the prodigious sums required to sink new shafts?[2] Johnson, RW 2009. “Will SA reclaim its mines?” Mail & Guardian Online, July 14 2009 http://www.mg.co.za/article/2009-07-14-will-south-africa-reclaim-its-mines

17. However, as NUMSA we believe that with the right sort of political will we can overcome these difficulties. True, there has to be more engagement on the form and content on nationalization, including the constraints imposed by the negotiated settlement of 1994. Compensation might be the burning issue but we do not believe that our country’s developmental agenda should be held to ransom by foreign investors.

18. Thank You