Nationalising South African mines: Back to a prosperous future, or down a rabbit hole?

[protected email address] (Department of Economics, University of Stellenbosch)

Stellenbosch Working Paper Series No. WP17/2011Publication date: 2011Author(s):Abstract:

Nationalisation is high on the policy agenda in South Africa. This paper considers the case for nationalising the local mining sector from an evidence-based perspective. The relevant evidence is derived from theoretical considerations and related to the known features of the South African mining sector and economy. A strong case against nationalisation emerges, which can be summarised as follows: The mining sector is competitive and therefore a poor candidate for public ownership. Further, the resources sector does not dominate the South African economy nor does it create the risk of Dutch Disease. Nationalising the mining sector will cost the government more than it receives. This is not only a bad idea in itself, but it will limit the scope for distributive policies on the national budget. The contemporary international experience demonstrates the risks of fiscal imprudence. Finally, nationalising the resources sector will undermine support for those very market-based institutions required to achieve a higher long-run growth trajectory.

JEL Classification:

L22, L52, L71

Keywords:

Nationalisation, South Africa, mining sector

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