To nationalise or not

**Blurock** · 12-Jan-13, 09:01 AM

African Romance, a Government backed diamond-cutting and beneficiation company, is being liquidated. This is sad and hopefully a forensic audit will reveal the reasons and what can be done to avoid a similar scenario.

In stead of nationalising mines, I believe that this type of operation, where value is added to raw minerals and materials before exporting, is the way to go.

Nationalisation will add no value. In stead, it will destroy value and tarnish South Africa's image in the rest of the world. Already investors are turning away to more attractive and viable operations in other countries. Rating agencies have downgraded South Africa's rating due to poor political leadership and because of uncertainty due to cries for nationalisation. Jobs will be lost as a result with many people suffering.

In stead of exporting diamonds, gold, iron ore and other raw materials, we should create new industries where the raw materials can be converted into products that can be exported. This will create the much sought after jobs, but most importantly there is an opportunity to create skills and higher paid positions than just labouring in a mine to extract the minerals.

**Justloadit** · 12-Jan-13, 03:17 PM

The biggest hindrance here in my opinion is the amount of power wielded by employees due to the LRA, and secondly is the continuous implementation BEE.
No investor is going to allow a majority share holder control the investor's capital.
To get experience you first have to give in order to get.
The current majority of citizens of South African's attitude is the expectation to receive with out any contribution.

Until this attitude changes, there is going to be no progress in the local industry. As it is, the local manufacturing industry is downsizing, and restructuring by being more automated. Yes it is a recipe for disaster, but who has provided the ingredients?

**Dave A** · 14-Jan-13, 01:04 PM

I reckon nationalisation should only be considered where there's a clear downstream benefit to the country as a whole, and it's highly unlikely you'll get proper coverage or the country will end up being held to ransom, if left to natural private sector supplier forces.

Easy examples are infrastructure - roads, rail transport, harbours, electrical power supply - where there would be significant shortages in coverage if left to the private sector alone.

If there's going to be healthy, natural competition, and widespread supply at reasonable prices, government should leave the private sector to it.

**Justloadit** · 14-Jan-13, 02:11 PM

I think SANRAL is a poor example of allowing an organization look after our road infrastructure.

**Blurock** · 14-Jan-13, 05:23 PM

The problem is not that the local industry is mechanising, that may create new skills in manufacturing and servicing of the robots and machines, the problem is that we are just importing without a thought of how imports destroy the local industry and jobs that go with it.

I am not convinced that our local textile industry was that bad. There were some very reputable firms with quality products. The problem was illegal imports and products "dumped" here at prices lower than our raw material cost. Because of this unlawful competition they paid measly wages and cut corners and eventually paid the price.

We still have not learnt our lessons and will continue to buy imported cars, food and whatever at the expense of local production. We may wake up one day to find that we have no manufacturing skills at all. Even if we then want to restart the factories, we will not have the infrastructure or skilled workers to manufacture anything. We will be totally at the mercy of our overseas suppliers who will be able to manipulate demand and prices as they wish.

**Dave A** · 14-Jan-13, 08:58 PM

Blurock, I think that's a problem where you have to look to the regulatory environment to assist.

If you just "nationalise the industry" and the state owned company still has to operate under the same conditions, all you're doing is subsidising the operation from tax payer's funds. (Like we do for SAA, although that seems more connected to crippling inefficiency than regulatory environment).

**Blurock** · 14-Jan-13, 10:29 PM

Originally Posted by Dave A

Blurock, I think that's a problem where you have to look to the regulatory environment to assist.

If you just "nationalise the industry" and the state owned company still has to operate under the same conditions, all you're doing is subsidising the operation from tax payer's funds. (Like we do for SAA, although that seems more connected to crippling inefficiency than regulatory environment).

Just to set the record straight, I am totally against nationalisation! I apologise if I did not express myself clearly.

What I am proposing is that all these bodies propagating nationalisation should rather spend their energy in creating sustainable industries built around the raw materials that are being exported without any value add. Iron ore could be reworked into iron and steel products with much higher value that the stones being loaded onto Chinese ships.

Why do we export gold bars? Why do we not have a flourishing jewellery industry? In stead, we import gold chains, rings and other gold jewellery from Italy and other European countries. The diamond cutting industry shamefully failed, but at least there was an effort. Hopefully the forensic audit will reveal the reasons for failure and how it can be prevented in future.

Without a value add and skills transfer we are doomed to rely on imports for everything. We have the people and the skills, we just need more of them. If the USA realised that they need industry and the skills that go with it, how much more do we need more industrialisation?

Don't give me stories about an unreliable workforce. It is all inter related, almost like a domino effect. The more jobs we lose, the more s#!t is going to hit the fan, and soon!

Yes, I agree our education system is crap, but we have to start somewhere and train those people that we can. We need to develop more entrepreneurs who can make something and not just stand in a queue, waiting for a job or waiting for a handout from government.

**Newretailer** · 17-Jan-13, 09:21 AM

I can just see that all this nonsense going on may just result in nationalisation of the mines. Can you picture it? The mines will run even more inefficiently than they do now, workers will never be laid off, no matter how big the losses, the tax payers will have to fund mine operations, all whilst a couple of fat cats make themselves even richer at everyones expense. What is one more situation like that anyway. I have always believed that was the only reason Malema was so for nationalisation.

I am sounding horribly cynical today.