It's a revolution or never for economic transformation in South Africa

By Siyabonga Hadebe

The people of South Africa can be extremely naive when it comes to the issues involving the economy and its functioning. They believe that transformative change has occurred in the mining industry, the heartbeat of the country's economy. But nothing can be further from the truth…

They are also convinced that a new class of Black mining moguls has replaced the old order that was dominated by the likes of Anglo-American, De Beers and Anglovaal until round about year 2000. In reality, this is where most people lose the plot.

The real mining ownership has not changed a bit in spite of the darker-skinned individuals claiming to be in charge. Even more shocking; apartheid capital continues to be a nucleus that makes the British pound and the US dollar the most powerful currencies in the world. [Side note: Thanks to the exploitation of South Africa's mineral resources].

Speaking at the 2017 Mining Indaba, Anglo American CEO Mark Cutifani purported that “Black South Africans have replaced white ‘Randlords’.” This was a perfect act of misleading the world since there is absolutely no truth in this claim. 

Truly speaking, we seriously do not understand how big economic players in mining pretended to bequeath their assets after 1994 to the so-called new Black owners while at the same time they continued to retain almost absolute control of the production, technologies, skills, markets and value chains. 

From Mvelaphanda, Africa Rainbow Minerals and Shanduka to Exxaro, Seriti, Phembani and Kgalagadi Manganese, these companies represent the maximum form of this illusion and their existence amounts to nothing but fronting of the economic transformation agenda in South Africa. 

The shades of blackness in upper echelons of the South African mining industry remains nothing else but a deception. The aim is to make the Black majority believe that indeed change has happened in one of the most conservative, grotesque and inhumane sectors of the economy.

In one interview billionaire Rob Hersov, who is the son of Anglovaal founder Bob Hersov, proudly declares that Anglovaal is not at all transformed, but its spirit lives through Africa Rainbow Minerals [Side note: Linked to Patrice Motsepe], Aveng Mining and other businesses. 

He adds that these businesses are still running successfully. Mining has been the heartbeat of South Africa since gold and diamonds were first mined at a large commercial scale in the latter parts of the 1800s. The Hersov family has been very much an arm of the Randlords, and what Rob Hersov said about Motsepe’s Africa Rainbow Minerals is a reflection of what Anglovaal is telling.

It is therefore difficult to separate mining from the South African economy as it is difficult to divorce it from the suffering and pain of Africans. It was in the mining industry that both inherent Western slavery as well as the practice of job reservation and poor pay were first perfected before apartheid made gross violations of worker rights a norm in all workplaces. 

Writing for The New York Times in 1983, Joseph Lelyveld contended that Anglo owner Harry Oppenheimer “more than anyone else has managed to preserve and strengthen the economic ties binding Johannesburg to Western financial centres.” The mining industry therefore remained the sole and important link between South Africa and the world throughout the tumultuous years of apartheid. But most importantly, apartheid and economic development for whites in South Africa would not have been keystones they are today without this sector.

South Africa is synonymous with mining, and vice versa. Mineral production is still one of the key sectors in the South African economy. The sector contributes just under 10% to the GDP and employs around half a million people [Side note: 10% to the Gross Domestic Product (GDP) because the bulk of the mining profits in South Africa are taken offshore to benefit US and Britain]. These figures unfortunately do not tell the genuine story of how mining continues to shape the economy at large. Moreover, they also do not provide an in-depth understanding of how the South African economy is structured.

It is general knowledge that the South African economy remains lily-white and untransformed. There is a pretence that ownership of mining companies debunks the trend, and black people are displayed as the new owners. For example, Cutifani deceitfully claimed that Black South Africans own more than 45% of Anglo South African operating assets, which is not true. 

Unfortunately, this phenomenon has not really attracted attention of those who want to see genuine transformation in the economy.

This article therefore seeks to highlight that the mining industry and its ownership have not changed a single bit, notwithstanding the new Black owners that are said to have displaced the old apartheid magnates. The notion of the minerals‐energy complex remains relevant and potent in the South African economy as it was three decades ago. 

Authors Ben Fine and Zavareh Rustomjee define the minerals‐energy complex as “a system of accumulation, centred on core sectors that have a character and dynamic of its own that evolved and was far from pre-determined.” Its history and consequences can be traced back to the emergence of mining in the 1870s to date. 

Thus, it is extremely complex to discuss South Africa’s political economy, and by implication the minerals‐energy complex, without mentioning Anglo-American. The company was once responsible for over 87% of the JSE’s market capitalization prior to its emigration to Britain in the 2000s. Companies such as South African Breweries (now Belgian), OK Bazaars (partly acquired by Shoprite), Edgars, AngloGold, Anglo Plats, Remgro, PG Glass and Lion Match belonged to the almost invincible Anglo-American stable at some point in time.

What also needs to be borne in mind is that Anglo-American engineered the financialization of South African capitalism. The company exclusively and single-handedly transformed the relationships between the financial and productive units of the South African economy including mining. 

Today, the financial sector is at least six times larger than the real economy and is an effective shield that protects the local assets of Randlords. Fine and Rustomjee argue that at the end of apartheid “the position of large-scale private capital seems to have been securely safeguarded…” Indeed, Anglo-American understood the game better than everyone else.

It is reasonable to suggest that Anglo-American still remains very much a relevant player (godfather) of not just the South African mining industry, and by extension the economy, but also controls international markets for minerals. It is thus impossible that the company had no plan for its local assets when it exited the South African market for Europe. 

This plan included the fragmentation of mining industry as a whole by creating numerous companies as fronts while maintaining indirect but powerful control over these new firms and their business. The only way to explain this strategy is that Anglo-American and other players of the old order decided to ease pressure of transformation from their shoulders and got away with it due to the partisan cover-up by the mainstream media of corporate crimes. 

Randlords were first to master the practice of fronting and using Black proxies. Fronting is a very complex practice that cannot be understood by both laymen and seemingly sophisticated, educated individuals in corporate offices and suits. It is the only effective way of protecting the legacy of those who have always owned the South African economy. The likelihood is that up to almost 70% to 80% of companies in South Africa directly trace their roots from the Randlord dynasty. 

The owners ‘voluntarily’ dismantled conglomerates such as Anglo-American just before 1994, and this was to achieve two things. First, the large companies that dominated the South African economy during apartheid were interested in exporting their capital overseas in fear of a “political risk”, as former Anglo CEO Tony Trahar put, as a result of a Black government. As such, the companies relocated overseas.

Secondly, Anglo owner Harry Oppenheimer was a glue that kept capital together. Financial assets of mining and other companies were therefore seen as a potent catalyst to transform South Africa into becoming “overly financialised”, that is to make it easier to move capital around. Thirdly, the assets were fragmented into smaller companies to mitigate the risk as well as to avert possible political attention that might arise. 

On their part, the Randlords offloaded some of the mining assets to Black individuals such as Cyril Ramaphosa, James Motlatsi, Mzi Khumalo, Patrice Motsepe, Sipho Nkosi, Mike Teke, Mxolisi Mgojo and Daphne Mashile-Nkosi. These people were going to become their top-order batsmen in efforts to appease the Black majority that could push for drastic changes in mining and companies.

Other assets of mining houses were moved to Discovery Health, TEBA Bank and a number of private insurance companies. Today, people such as Adrián Gore and Stephen Kosseff are hailed as super entrepreneurs while they benefited handsomely from the re-alignments in the country’s mining sector. Gore and Kosseff, for example, have not been shy to play in political spaces in recent years for obvious reasons. 

Expansion through Vitality Health by Discovery to the UK and dual listing by Investec in London signals where the force of gravity pulls South African capital. Anglo-American and London are a common factor in the post-1994 financial architecture. Nonetheless, the “new” owners in mining are a continuation of deceit that underlies the BEE deals and their shortcomings. It is now known that Anglo-American was the mastermind behind BEE.

It was therefore advantageous to put Black faces to act as reliable, able ‘shepherds’ or subordinates who must protect their mining investments and assets. These include Glencore’s repositioning as Optimum to help the company to milk Eskom. This approach had to be backed up with an exceptionally strong Minerals Council South Africa (MCSA) that was going to serve as a counterweight to state power. The change from Chamber of Mines to MCSA has not resulted in anything but fortification of the minerals‐energy complex. 

On top of it all, the structure of South Africa’s mining industry and its relationship with external markets has also barely changed even with an increase in black owned and led companies. The conditions of service and employment have not varied a bit to the benefit of a black worker. 

Furthermore, illicit financial flows, or BEPS, have actually worsened in the mining sector over the past 26 years. This is an indication that the local players work in close cooperation with the external players like Anglo-American, Lonmin and developed countries that consume South African minerals.

Global mining is dominated by buyers rather than producers; it makes sense for the companies to align themselves with advanced economies. If it is indeed true that the mining industry has moved forward, it is necessary to ask: how come the MCSA advanced the argument of “once empowered, always empowered” when the government wanted to increase the BEE stakes from 26% to 30% under Minerals and Energy Minister Msebenzi Zwane during former President Jacob Zuma's tenure? 

Also, how come the mining industry opposed the MPRDA amendments that would have altered the sales and marketing framework as well as the pricing mechanisms for the benefit of the South African economy? Those amendments evaporated to thin air and it is back to normal business for the sector, and no one agitates for transformation any longer.

The Black workers are left on their own in this myriad of complex ownership model. In fact, the Association of Mineworkers and Construction Union (AMCU) was correct to break away from the National Union of Mineworkers (NUM) which had continuously failed to separate itself from the old, dirty money. NUM was just like these newly created Black companies that served the Randlords based in London. It was therefore unsurprising that the platinum strike in 2012 ended in tragedy. 

It is worth noting that all the things outlined above are happening right before the Black owners, Chairmen, CEOs and executives in the mining sector. The mining industry is infested with gross practices of fronting that are stripping the country bare and naked. 

The legal economic transactions and other arrangements concerning companies are nonetheless way too complicated to understand. But what is clear is that the Randlords are at least one million steps ahead of everyone. Although the MPRDA refers to minerals as national patrimony, it is however unlikely that the South African populace will ever own its minerals. [Side note: Lest the apartheid economy is completely dismantled and replaced.]

Mining companies have perfected the art of cross directorships and stock ownership. For example, the owner of Shanduka was a Board member of Lonmin [Side note: Whose Black face was used as a front for a repeat of the Sharpeville massacre in Marikana by white Randlords to avoid international attention and condemnation of the racist massacre]. 

These are the same companies that are responsible for the chaos prevailing in state-owned enterprises. The dream of economic freedom is unlikely to be achieved unless the ownership structure of mining and financial companies is transformed. A new South African economy will not be realised without cutting ties with the legacy of the Randlords, and by extension, British capital imperialism.

Siya yibanga le economy