The financial sector and capital markets have opined about Anglo American hastening the review of its portfolio, while others consider the situation to be an opportunity for mergers and acquisitions (M&A). Unsurprisingly, missing in the discussion is the role of state.
Critically, what is — or should be — South Africa’s industrial policy strategy in the context of the global race for minerals required for a low carbon economy? A response should transcend narrow arguments offered by proponents of the renewables, who see the country as simply a recipient of financial loans and finished products.
The strategy should also address itself to how to respond to predatory capital, like BHP, whose selfish interest could have pernicious effects on emerging and middle economies like ours in the Global South. Governments are grappling with global companies that wield excessive power that impinge on competitive behaviour.
This is the core of antitrust cases by the US department of justice against giant tech companies such as Google, Microsoft and Apple. In South Africa, what can we expect from institutions that govern competitive behaviour, such as the Competition Commission, and those that regulate the financial sector, such as the Reserve Bank?
South Africans should be assured that those entrusted with this responsibility will not gamble away our, and the country’s, access to critical minerals like copper, that will benefit us in the low carbon economy trajectory
The interest of these institutions should look at the actions of companies like BHP and their effects on South Africa’s economic development and growth. This should include people, industries, and financial markets. Add to this dynamic the Public Investment Corporation (PIC), the second-largest single shareholder in Anglo American.
The PIC’s portfolio aims to safeguard the livelihood of all public servants, through investment in assets that secure the financial future of South Africa.
There is also the Industrial Development Corporation’s shareholding in Anglo American and combined with the PIC these state entities have a sizeable stake. Therefore, South Africans should be assured that those entrusted with this responsibility will not gamble away our, and the country’s, access to critical minerals like copper, that will benefit us in the low carbon economy trajectory.
There is a need to articulate the role of South Africa’s diplomatic mission with countries of the Global South, for example Chile and Peru with their deposits of copper and manganese, where Anglo American operates. In our solidarity to industrialise and meet our global commitment to net zero goals, we are obliged to share experiences that prevent our societies from being preyed on by greedy capital that comes under the cloak of investment.
For South Africa and the Global South, it should be apparent that the mining economic model of pit to port is outdated. Since the state is the custodian of all the minerals on behalf of the people of South Africa, it should use these critical minerals to develop our economies to realise a better life for all.
Here are a few thoughts on how such an industrial strategy anchored on critical minerals can be achieved. There should be a centralised statewide co-ordination mechanism, not department, to drive the strategy, populated and led by a professional bureaucracy.
The implications are that the state should invest heavily in geological mapping in every part of the country to unearth the needed minerals. Linkages with trade and industry agencies will be essential.
The policy strategy should determine what the strategic minerals are. When it has, it should determine what its role is vis-à-vis the private sector, but without relinquishing its final decision-making power — state-private sector partnerships, with the state owning at least above 50% in the strategic minerals.
Domestic companies with a proven track record in the industry should receive priority and attention.
These factors bear implications for regulations and on interventions like the industrialist programme. For example, Mexico after classifying lithium as a strategic mineral, is likely to review legislation because it will not be giving new concessions. Chile, as it develops its state-focused lithium strategy, will allow private sector involvement but as a minority owner in strategic minerals.
The Democratic Republic of Congo is mooting a review of contracts with companies, with a view to establishing what they call an Opec-like structure in cobalt to preserve and protect the country’s share. Policy should combine the use of an export quota system and an export ban on critical minerals to encourage national refining capacity.
China is setting up processing plants in countries like Tanzania to secure long-term offtake of nickel. Export quotas should be linked to tariffs to manage exportation. Namibia and some Latin American countries have banned the export of lithium. Indonesia, which owns half of global nickel production, banned the export of nickel ore in 2014 to encourage refining nationally, thereby growing the sales from $784m in 2019 to $6.72bn in 2022.
BHP’s action has opened a door on South Africa’s minerals. Strategic, or critical, minerals should propel South Africa to eliminate energy poverty and a low carbon economy
BHP’s action has opened a door on South Africa’s minerals. Strategic, or critical, minerals should propel South Africa to eliminate energy poverty and a low carbon economy. Companies interested in these minerals should, as a condition, invest in electricity transmission.
The same applies to investment in electric trains and vehicles. Therefore, not only should South Africa refine the copper that BHP was hoping to take for nothing, but it should ascertain that those who produce wind turbines set up plants here if they use our copper.
This applies to other producers as well. Though platinum is down, it will bounce back.
These are the ways in which the state, on our behalf, can unlock value in companies like Anglo American. The coming 30 years of democratic governance cannot be counted only in the foreign exchange revenue of mining companies — it must reflect in South Africa’s real human development and economic growth. The governing party must be deliberate about it because it is essentially encapsulated in its aspiration of a developmental state.
• Lekorotsoana is Chief of Staff: Mineral Resources and Energy
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