It's Mine Baby Mine - The ANC's Debate on the 'Second Transition'

By Saliem Fakir · 26 Mar 2012

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At times it’s hard to take at face value whether what is being said in ANC discussion documents is for real or just rhetorical flush.

The latest ANC buzzword is this notion of ‘the second transition’. The first transition, an ANC discussion document argues, is the consolidation of democracy (a coded way of saying consolidation of the ANC’s power).

The second transition is about social and economic transformation. To some it may sound like a new idea, but in actual fact, this second transition process has quietly been carrying on for some time now. The problem is with the way that it’s been happening.

In truth, the second transition has long been about securing an “elite” transition, which, even ANC documents and other public statements acknowledge, has failed the majority of South Africans.

Most of it has been focused on the mining, financial and services sectors.

The first part of the second transition, in mining in particular, has taken place via black economic empowerment or BEE deals. These have predominantly involved deals with Anglo-Afrikaans white capital. The second part, which is still to come, will be through the opening up of new mining opportunities.

Mineral wealth in South Africa has not been exhausted and our country is way behind other African states and mining countries in terms of investment and growth in the minerals sector.

Moreover, services and finance won’t grow without developments in the real economy. Thus, mining makes a lot of sense if a country doesn’t have much else going for it. Mining could lift all boats, so to speak.

Nonetheless, black ownership of mining in the Johannesburg Stock Exchange’s top 25 mining companies was only about 5% at the end of March 2010.

Hence this splurge on infrastructure development, this new romance with state-owned mining companies and this revisiting of empowerment rules and ownership patterns as per the President’s State of the Nation Address. It is all part of “second transition” talk.

The second transition debate though also has an element of self-interest to it, as the ANC is genuinely concerned about discontent and the backlash arising from the lack of employment growth. Simultaneously, internal pressures within the state and business elite to do something about the long-lagging mining economy, is spurring renewed energy in the sector.

Thus far there has been a lot of mining prospecting and production rights given to BEE players in the coal-mining sector, with some in chrome, manganese, iron ore and others. However, the value of these can only be unlocked through improvements in infrastructure development, especially for coal mining in the Waterberg area of Limpopo.

At the same time, the relationship between the state and the black elite is bound to grow because their fate is mutually tied and, as the ANC itself can’t pay all its bills, it will have to call in favours (as it has recurrently done) from its network of empowerment beneficiaries. 

This is aligned to what the second transition document itself refers to as the need to cultivate a patriotic bourgeoisie coming from the ranks of business and the growing black middle class whose numbers, according to the second transition discussion document, constitute close to a third of South Africa’s overall middle class.

In the end, these relations of mutual dependence matter because they will tell us whose interests will really be served in the ANC’s on-going second transition.

In 1970 mining constituted 21% of our GDP and employed directly close to 700 000 people. Today mining directly employs about 500 000 people and contributes less than 5% to our GDP.

What is of the past is gone, but these statistics don’t tell us about the negative impact of mining.
We must remember that the history of mining in this country is a tragic history of exploitation, capital flight, under-development, corruption and environmental damage.

Worth noting is the loss of state revenue on windfall profits because the state was unwilling to tax mining houses. In addition, there has also been the loss of income for workers and their families because state power worked against their fair share leading further to massive profits for mining companies. And, of course, mining companies also externalised the true environmental costs of their activities -- a cost now being borne by the state.

It doesn’t seem like this will change either given the experience of Aurora, the renegade mining company owned by relatives of the Zumas and Mandelas who ran off with workers’ money, causing untold misery to them and their families. 

The aftermath of the Aurora saga still continues and within mining itself, the tale of tragedy for many and prosperity for some continues to play out.

Not getting it right in mining once again means that there will be lost opportunities to diversify our economy, essentially, away from mining.

Traditionally the relationship between the state, mining conglomerates and workers has been the defining nexus of how mining wealth was created -- but where wealth was concentrated in the hands of a few.

Overall the concentration of wealth is a continued challenge that has not been addressed since 1994. What is changing - and the ANC document refers to this geo-political shift - is that the minerals bonanza offers a new terrain of resource exploitation deals, but this time, away from the Anglo-American sphere.

The ANC is already pushing the state apparatus in the direction of state-to-state relations - partly manifested through BRICS - where state political and economic interests become more closely aligned.

China is often cited as a model and frequently visited for “learnings” by state officials and ministers as the ANC sees a stronger role for the state given the on-going debates about a need for a resurgent development state. The various ANC discussion documents reinforce this need and role.
Relations and growing ties with India is along similar lines even though those opening up the frontier of African investments happen to be private companies like Tata, Mittal, Neotel and so on. Tata, for example, an Indian family business conglomerate, has been in South Africa for a while now.

Following close on the heels of the renewed assertion to increase infrastructure investments announced by Zuma, Tata is already setting up a joint venture with a local coal company to expand its mining in the as-yet undeveloped coal-beds of the Waterberg.

Then we must also consider the growing presence of Chinese investments in mining. All, as it were, happening under the radar in weakly governed provinces like Limpopo.

The key for South Africa is not just minerals extraction but also mining beneficiation if we are to reap greater rewards for our own economy. But Chinese investments haven’t always gone our way given the extent to which chrome hoarding is happening in China at the expense of our own national interests with little local beneficiation. Chrome is viewed globally as a strategic mineral and South Africa has the world’s largest deposits.

The mistake of privatising steel milling and processing to Mittal is also coming back to haunt the state, as steel is far cheaper to import than to purchase from the domestic market.

This will matter more now, as steel demand will grow when infrastructure development rolls out in the next few years. A foreign focused steel price monopoly holds no advantage for up-stream economic investments and development initiatives.

Moreover, our record on beneficiation has not been stellar despite the bold talk to make sure it happens. Beneficiation will only take place if there is strong state capability to direct this development. It also requires a sound skills, innovation and entrepreneurship base, which at present is weak.

In the final analysis, the second transition is really dependent on the state of health of the ANC as a party. Thus, who wins the ANC’s internal battle at Mangaung really does matter.

The weaker the party is politically and financially, the more the urge to hold onto power at all cost by different groupings within the ANC will force unacceptable compromises on the rest of the population.

The second transition will likely go the traditional way: feathering the pockets of the well connected and mutually dependent because mining, money and political power will be the only things holding these forces together.

At best, this is really what the second transition is likely to look like. 

Fakir is an independent writer based in Cape Town.

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