Dear Reader: Banking on nationalisation

Nationalisation of South Africa’s mines has been a hot topic of conversation in government circles for some time now. Its most obvious supporters are to be found among the ANC’s left wing alliance partners. No surprise there. But here’s the curious bit: behind the scenes many “white” mine owners, especially of South Africa’s failing gold mines, are all for it, too.

Surprised? If you think about it, the reasons are obvious: all the big profits have long ago been pocketed; and looming ever larger as each day passes is the prospect of having to pay the billions it is likely to cost to fix, or at least contain, the ecological disaster the miners are leaving behind. Get the state to nationalise the mines, and the taxpayer will end up paying that nasty bill.

Avowed capitalists are not likely to openly plead the cause of nationalisation. But they have gleefully discovered an indirect means of achieving that end: get BEE partners to buy you out – with public funding. When they soon go bust, as they must do, the ANC government is easily pressured to bail them out – with more taxpayer money.

White mine bosses might risk jail for failing to fulfil their environmental obligations, but the bets are that this is unlikely to happen to the ANC’s friends and relatives in the mining business.

Now see our story The heroes of Shaft 3.

Still on the subject of nationalisation:
German ex-banker and investment consultant Michael Duerr, who managed to sour Tito Mboweni’s last years as governor of the SA Reserve Bank, has now managed to provoke Mboweni’s successor, Gill Marcus, into addressing a letter to all the bank’s shareholders. In it the “Office of the Governor” declares its absolute opposition to the demands of those shareholders who appear to support Duerr’s campaign for the nationalisation of the bank. (It is understood that this faction, by now, holds between 10% and 30% of all shareholder votes.)

In a nutshell, Duerr's argument is: if it is to continue as a company with private shareholders, the Reserve Bank must be listed and its shares freely trading on the JSE. In addition dividends commensurate with profits must be paid to shareholders. (Currently only minute, nominal dividends are paid, clearly to the prejudice of private shareholders.)

Failing that, says Duerr, the Bank must be nationalised - its current shareholders must be appropriately compensated for their shares.

In her letter Marcus raises the patriotic forefinger, accusing “a very small minority of irresponsible shareholders” of having caused all sorts of troubles for the bank, “a national asset”. She praises the good and “responsible” shareholders whose interests are not “profit making” and who support the notion that the Reserve Bank “is neither designed nor expected to maximise profits”, and says they should “exercise their rights and duties” as a “significant contribution to the diversity necessary for the achievement of the very broad consensus on which we operate”.

A few days later, Duerr responded with a letter of his own: a persiflage – a gently riling sendup – of Marcus’s letter. “The minority of shareholders who sit on the board of directors ... do not appear to care about the national interests of the Republic of South Africa,” the “Office of the Shareholder Caretaker” declares in his letter. “They call the vast majority of shareholders ‘nuts’ and ‘greedy’ ...  will not discuss reasonable requests and never return phone calls.”

Then the sting: “Currently, the bank lists a staggering R324bn in assets – all achieved with the same shareholders’ capital.” And, finally, the big question: “Who are the rightful owners?”

By Duerr’s reckoning, the private shareholders of the Reserve Bank are the owners of a big chunk of that fabulous fortune.

In an accompanying document, Duerr sets a fresh cat amongst the pigeons: he argues that a foreigner such as himself – a German citizen – who has invested in SA Reserve Bank shares, has rights by virtue of the Bilateral Investment Treaty entered into between South Africa and Germany in 1995 and ratified in 1998. Rights that the local Reserve Bank Act denies him. He intends approaching the (World Bank-sponsored) International Centre for the Settlement of Investment Disputes to resolve the matter.

ICSID rules prescribe that prior to the proceedings the claimant must have unsuccessfully tried to resolve the matter directly. On 19 March, Duerr informed Pravin Gordhan about his claim and of South Africa’s alleged breach of the “Treaty between ... Germany and the Republic of South Africa concerning the Encouragement and Protection of Investments”.

“Unknowingly”, he assumes.

The treaty supercedes local law. Duerr lists almost a dozen contraventions, and informs the minister of his intention to “enforce the missing corporate governance”.

He has also written to German Chancellor Angela Merkel, asking for her government’s support.

As we went to press, there was talk that local shareholders with the required minimum 10% of votes intend calling on the chairman of the board to convene the first-ever extraordinary general meeting of shareholders. On the agenda, apart from the corporate governance and accompanying shareholder issues, the proposers are said to be tabling a resolution calling for an independent audit of the bank’s assets and liabilities. It is here that Duerr expects the most resistance. “But,” he says, “the issues will be dealt with, one way or another. It’s not going to go away like the flu.”

So you see, nationalisation is fashionable talk in high capitalist circles too.

The Editor

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Submitted by : Anthony Krijger of Westville on 2010-04-29 12:51:30
Clearly not what Juju had in mind!


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