Win or Lose? Nationalisation of Mines and the Nonprofit Sector

Wednesday, 28 April, 2010 - 09:23

South Africa, under the African National Congress (ANC) led government, should consult the nonprofit sector when debating the nationalisation of mines. The claim that mining companies are not channeling enough resources to communities is unfounded. Mining companies are investing millions of rands into communities through corporate social investment (CSI). As the debate around the nationalisation of mines gains momentum, NPOs need to focus on the potential impact that nationalisation might have on CSI and ensure they remain relevant. We need to look at ways in which a nationalised mine will channel CSI funds to communities. Will government channel CSI funds to NPOs through its government departments or other state institutions such as the National Development Agency

The Freedom Charter signed and sealed in June 1955 stated that the people shall share in the country’s wealth and more importantly ‘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 rekindled talk for the nationalisation of South African mines by sections of the ruling party who believe that the time is now ripe to put this item onto the African National Congress agenda for the 2012 Centenary Conference and for this ultimately to become government policy.

How will nationalisation be good news for NPOs in South Africa?

As things are today it is not government policy nor is it, according to various reports, the ANC’s national executive committee’s immediate concern. Yet, should this proposal be taken to the next level of debate we need to ask what would be the deal for the nonprofit sector and how will the ruling party engage with the sector on this vital issue?

There are an estimated 160 000 nonprofit organisations operating in South Africa comprising of non-government organisations (NGOs), community-based organisations (CBOs), faith based organisations (FBOs), education institutions, sports clubs, etc, that employ more than one million people. A further five million citizens volunteer their talents and energy towards the implementation of good works in communities through these structures. Collectively they can stimulate the economy in raising funds and self-generated income by R18 billion per annum. There is no doubt that this is a powerful and important force for the fulfillment of social justice and the safe-keeping of democracy.

Nonprofit organisations play a crucial role in society. These organisations, whether large or small, meet a diverse range of social and spiritual needs by caring for the sick and vulnerable, responding to disasters, developing communities, protecting the environment or educating youth and adults. They are a source of inspiration and their enthusiasm for a better world is contagious. A smart government would consult and seek their wisdom on such a contentious issue as nationalisation.

Currently a high number of NPOs secure a portion of their income through corporate social investment (CSI). During 2009 (as stated in 12th Edition of The CSI Handbook) over R5.1 billion of private sector funding flowed towards NPO projects and programmes for education, job creation, health, community development, food security, arts and culture, sport, housing, the environment and many other services. Of this total it is stated that the mining and quarrying industries contribute on average 20 percent and spend significantly more on CSI than any other industrial sector. The mining sector is obliged by law to support local economic development (LED) in the communities in which they operate and from where they draw their labour. LED initiatives are frequently integrated with CSI budgets.

CSI in South Africa has shown a steady annual 10 percent growth over the past 14 years and there is no doubt that government’s Broad-Based Black Economic Empowerment (B-BBEE) scorecard has enthused more support, a trend that we can expect to continue, according to experts.

President of the Southern Africa Institute of Fundraising, Zai Miller, stated that “The affects that nationalisation might have on CSI is something we haven’t considered as we don’t think the government will take this idea further, but NPOs need to ensure we remain relevant if this does gain support.”

For the benefit of taking this argument forward let us assume that the monies accrued by nationalised mines could run into billions of Rands. How will government allocate funds and more specifically how could funds flow to NPOs? Could it be via various government ministries such as education, health, social development and then contracting of NPOs for service delivery? Or through a distribution point such as the National Development Agency? Or will it be so big that it requires the establishment of an NPO Ministry?

Or could this mean that a majority of NPOs will simply fall away as government steels up its structures and acquires sufficient resources to address all our social issues and competently provide all that is needed to address poverty and inequality making altruistic services from the voluntary sector redundant?

So who is doing the blustering and why?

The key proponent for this move towards nationalisation of the mines is ANC Youth League president, Julius Malema, who has stated that mining companies don’t plough enough back into communities and that he believes this can be done more expediently through the State machinery.

The nonprofit sector will need to challenge his thinking and so, logically, will the mining houses.

CEO of Tshikululu Social Investments, Tracey Henry, a management agency of CSI funds for nine companies, mostly in the mining and financial sectors, that managed CSI grantmaking funds of R495 million on behalf of client companies during 2009, said that “Anglo American alone, disbursed R80 million in CSI funds during 2008 to more than 250 community projects and a further R400-odd million was spent by the company on other CSI initiatives via their operations. This is a substantial investment towards economic transformation in the country”.

Other empowerment initiatives of the company include the Anglo Zimele enterprise development unit, supporting the creation of 228 businesses with a collective turnover of R1.3 billion and jobs for more than 10 400 people. Procurement deals are made with HDI’s (historically disadvantaged South Africans) to the tune of R24.6 billion a year.

Another mining champion for development is African Rainbow Minerals that contributed R60 million towards community upliftment and social investment in 2009. Of this, R19.3 million was spent on CSI, R22 million on Social and Labour Plans (SLPs) and R28 million on local economic development (LED), according to their 2009 annual report.

The above examples of good corporate citizenship demonstrate that Malema’s concerns are unfounded and that the ‘people’ are already benefitting from resources below the earth.

When asked about Malema’s proposal at a foreign investors meeting, Minister Susan Shabangu of the Department of Mineral Resources said “Not in my lifetime … it’s not going to happen” and she further argued that for the state to become involved in such a precarious industry it will have to be efficient, it will have to demonstrate competency.

History is fraught with good and bad stories. Did NPOs benefit?

The risks and advantages of nationalisation are constantly debated around the world but it seems that mining is the riskiest and dirtiest of all. Probably due to an ongoing need for reinvestment in new equipment and technology and pressure from labour movements for higher safety standards. Trillions of Rands have already been plunged into the growth and development of mining, which is never ending.

For more than 150 years the French Government has had an on-off-on romance with nationalisation. They have coupled with various sectors like banking, car manufacturing, telecommunications, electricity supply, the Paris’s underground Metro system and more. But State-owned mines are now history as demands for crippling subsidies put a strain on the French economy. Efforts were successful to coerce the private sector in taking these millstones from around their necks. Today France is rated as the number one country on the United Nations Human Development Index (HDI) and it is to be noted that this country has a rapidly growing and very feisty NPO sector.

Another good example of nationalisation for people development is Sweden, a social democratic welfare state that is also a monarchy. They nationalised an iron ore mining company, LKAB, in 1950. All surpluses from this vibrant globally active enterprise enriched the Swedish socialist system for better education, health care, social services, public transport, pension funds and so forth which makes it a desirable country to live in and rated as number seven on the UN HDI. Since the economic downturn LKAB has been seeking to raise capital for new ventures and in order to do this they restructured last year into a public company. Sweden also has a vibrant and active nonprofit sector mostly in the arts, culture and recreation areas but higher education institutions such as Umeå University, one of the oldest in the country, have dynamic fundraising programmes.

In Africa we have learned many lessons about the challenges of nationalisation. In Botswana the State has benefitted through ownership of mines that has assisted in the development of the people but more needs to be done in meeting the needs of communities and alleviating poverty. The NPO sector remains small in that country but it is lively and reliant on the private sector and individuals for donations. Other countries like Zambia, Uganda and the Democratic Republic of Congo tell us that this model just isn’t a good fit in the mining industry where the deepest and most sophisticated mines require the highest level of expertise in engineering, management, marketing and care of assets.

A number of state-owned and public enterprises work closely with community-based organisations. The Eskom Development Foundation, Transnet and Telkom Foundation have demonstrated a commitment to social-economic development and spent R222 million on CSI last year engaging numerous NPOs.

A very old state-owned enterprise, *Komatiland Forests (KLF), with a bi-line stating “Growth through Partnership”, neatly sums up their philosophy for engagement with NPOs. They have a very inspiring corporate social investment policy and last year spent R8 million on CSI, a further R2 million on bursaries for students and they also offer in-house Adult Basic Education and Training (ABET) and wellness programmes for employees. According to Hazel Banda, who manages their CSI Fund within the Human Resource Department, “We work extensively with NPOs and communities in close proximity to our operations and our CSI allocation is integral to our operational budget.”

An ideal model for a developmental state seems to be something along these lines where the State, the private sector and civil society take equal responsibility for meeting social needs.

Research indicates that nationalisation can be a solid move in some countries but it has a limited life cycle and is dependent upon the choice of commodity such as the Venezuelan experience in the Orinoco oil fields. This has not addressed poverty on the ground but it has enabled the State to balance its books and create a number of jobs.

As a nation we need to ask: can we take this step of nationalisation when so many other burning issues are on the agenda for development of our people? If this call by the ANCYL is a move to fight poverty, then it lacks substance and shows no real evidence to support its attempt.

Should the nationalisation proposal be taken seriously, then the NPO sector will need to be consulted by government (and for that matter the ANC) on such a drastic and risky move as it and millions of beneficiaries stand to go into free fall. We can’t afford a dip of R1 billion in annual CSI spend either temporary or permanently.

NPOs will need to forearm themselves and be well-prepared with questions for engagement on this subject. Some of these questions to be tackled could include:

  • How will nationalisation be good news for NPOs?
  • Will the current level of CSI be increased or even maintained?
  • Will community/social development funds become a regular budget item of a state owned and managed enterprise?
  • Will surpluses derived be ploughed into Treasury to booster budgets in government departments - social development, health, education, environment, arts and culture, etc. for partnerships with NPOs?
  • Will surpluses derived be managed through a distribution point such as the National Development Agency to NPOs?
  • Will there be a new independent NPO Ministry?
  • And finally: Is it possible that some NPOs will be compromised and so close down?

*South Africa Forest Company Limited (SAFCOL)) is 100 percent shareholder in Komatiland Forest. SAFCOL reports to the Department of Public Enterprise.

- Ann Bown is a consultant at Charisma Communications. Bown is a consultant to the nonprofit sector on matters of sustainability, fundraising and public relations.

Related organisation(s): 
Southern Africa Institute of Fundraising

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