April 2010 Nationalisation of SA Mines and the Nonprofit Sector? Or While Nero Fiddles, Rome Burns 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 elements of the ruling party who believe that the time is now ripe to put this item onto the African National Congress’s agenda for the 2012 Centenary Conference and for this ultimately to become government policy. What could such a move mean to nonprofit organisations (NPOs) in South Africa? There are an estimated 160 000 nonprofit organisations operating in South Africa comprising of non-government organizations, community based organisations, faith based organisations, education institutions, sports clubs, etc that employ more than 1 million people. A further 5 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 organizations, 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 definitely 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% 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% growth over the past 14 years and there is no doubt that governments’ Broad-Based Black Economic Empowerment (B-BBEE) score card has enthused more support, a trend that we can expect to continue, according to experts. Ms Zai Miller, President of the Southern Africa Institute of Fundraising 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 nationalized 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 Nonprofit sector will need to challenge his thinking and so, logically, will the mining houses. Ms Tracey Henry, CEO of Tshikululu Social Investments, 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 the African Rainbow Minerals company 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 Mr Malema’s concerns are unfounded and that the ‘people’ are already benefitting from resources below the earth. When asked about Mr 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? 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 and it is to be noted that this country has a rapidly growing and very feisty NPO sector that enjoys support from the government and the private sector. Another good example of nationalisation for people development is Sweden, a social democratic welfare state that is also a monarchy. They nationalized 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 country human development index. 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, appointing a CEO/President and board of directors - now a tax paying enterprise contributing towards government coffers rather than a direct income stream. There is no evidence indicating that LKAB had any type of relationship with the voluntary sector but they do invest in the wellbeing of their own employees. It is interesting to note that Sweden has a vibrant and active non-profit 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 for large capital campaigns where they receive support from the private sector and individuals but not from the government. So there’s never a 100% financial reliance in a socialist system. In 1947 the United Kingdom nationalised all coal mines, a vision that many Unionist had been fighting for decades as working conditions were so appalling and small mines were no longer viable. The deal was better working conditions such as shower rooms with hot water for workers, less working hours, higher wages and as the piece de resistance: free coal to employees. Sadly within 38 years the dream turned into destruction as unemployment rose, working conditions and safety plummeted, wages were frozen and the free coal turned into a subsidized deal. By the mid 1980’s a new authority was in place and privatization of the mines commenced. Communities never directly benefitted from nationalisation and today many mining villages with a small aging population remain lifeless and dreary. However, in South Wales and some other parts of the United Kingdom a few enterprising miners reclaimed their rights and today own and run mines that sustain the community and stimulate the local economy. It is also noteworthy that prior to nationalisation working class areas had what was known as Benevolent Trusts or Societies, managed by trustees who would use their investment savvy and secure donations from influential businessmen to bridge the poverty gap and also look after widows and orphans – these have returned to 21st century Britain in the form of voluntary associations and charities – around 250 000 are registered. In Africa we have learned many lessons about the challenges of nationalisation – experiences from Zambia, Uganda and the DRC tell us that this 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 Foundations 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 ABET and wellness programmes for employees. According to Mrs 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, buy armaments 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 definitely 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 even 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:
*South Africa Forest Company Limited(SAFCOL)) is 100% shareholder in Komatiland Forest. SAFCOL reports to the Department of Public Enterprise. Article by Ann Bown, Charisma Communications.
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