Mr Chairperson, hon Minister and hon members, the mining industry undoubtedly forms the foundation of South Africa's economy. In particular, it is an important net generator of foreign exchange and attracts a large foreign investment flow. Repeated calls from politicians and trade unions have recently been made for the government to take over ownership of the mines. While government has continually downplayed this demand, a public debate has erupted over the appropriateness of such a call. The South African mining industry has declined overall over the past few years in spite of the global boom. It still remains the fifth biggest industry worldwide as measured by value added to GDP, measuring US$21 billion. However, this is nine times smaller than the mining industry of China, six times smaller than that of the USA, a third of Australia's mining industry, and it lags behind Brazil. It is still larger than that of Canada, Russia, India and Chile. We are, therefore, a country with considerable mining abilities when compared to the international norm.
The mining industry has recently survived hardships on various fronts, which include difficulties in obtaining mining permits and rights, the effects of bad politics, a lack of skilled people, power cuts, procurement shortfalls and a lack of new projects. However, the sector is already experiencing an economic upswing. In spite of this, the mining industry's contribution to the GDP of the country shrank by 32% in the first quarter of 2009.
More than 50% of infrastructure spending is taking place in emerging markets. South Africa, as a developing country, can ill afford to lose its fair share of infrastructure investment owing to a mining policy not conducive to taking maximum advantage of this situation.
While mining accounts for approximately 7% of South Africa's GDP, our manufacturing industry is still heavily reliant on mining due to the mining industry it supports. It is still one of the country's biggest employers of semi-skilled and skilled employees, and a net generator of foreign exchange. The mining industry has been a major contributor to broad-based black economic empowerment, BEE for short, accounting for approximately R150 billion in BEE deals, or 33% of such deals done to date during the past 11 years. The need for BEE has been expressed by the Mineral and Petroleum Resources Development Act as "to substantially and meaningfully expand opportunities for historically disadvantaged persons".
Investors typically go where risk and reward are best aligned. If the risks outweigh the potential rewards, the country is going to struggle with investment. There is a real opportunity for Africa, but when it comes to the specific investment opportunity, people will still put it through a series of tests.
Where there is continual state ownership, with social services and employment benefits built in from the start, there may still be arguments supporting some or other form of nationalisation. In many instances, however, where national companies have been forced to privatise in terms of the World Bank's structural adjustment programmes, the worst of both worlds has also been evident. In Zambia during the late nineties, the privatisation of Zambia Copper Consolidated Mines stripped workers of various rights and exempted the new owners from environmental regulations.
The commodity trading pacts of 30 years ago have given way to the rules of the World Trade Organisation. With the likely accession to various international regulations and general agreements on trade in services, calls for nationalisation appear to be merely symbolic gestures. Meanwhile, the power of communities to claim ownership over what lies beneath the land remains as strong as ever.
The Mineral and Petroleum Resources Development Act, MPRDA, Act 28 of 2002, which came into operation on 1 April 2004, effectively removed the ownership of mineral rights from its previous owners and vested them in the state on behalf of the nation. Such stripping of vested ownership and rights of holders has, inter alia, been referred to as the nationalisation of privately owned mining rights.
Various court cases are pending against government and notices have been served in terms of the Institution of Legal Proceedings Against Certain Organs of State Act, the so-called the ILPA Act. The government has at all times maintained that the MPRDA did not lead to the expropriation of mineral rights, when, in fact, it did, and previous owners and holders of mineral rights could not prove that they had suffered financial loss. However, the Northern Gauteng High Court has recently ruled that the loss of mineral rights could be classified as expropriation and that the owners of mineral rights had to be compensated in terms of the law dealing with expropriated assets.
The views of the former Governor of the Reserve Bank, Tito Mboweni, and of the chief executive officer of the Chamber of Mines opposing the nationalisation of mines are a matter of public record. In addition to the Deputy President and the Minister of Mineral Resources, no fewer than three ANC leaders have recently stated that the nationalisation of mines would not take place. Deputy President Motlanthe, Minister Susan Shabangu, Deputy Minister Derek Hanekom, ANC secretary-general Mantashe, and ANC treasurer Mathews Phosa have all publicly opposed calls for nationalisation. On the other hand, the ANC Youth League and various other individuals are on record either as supporting calls for debate on the nationalisation of mines, or, in fact, have publicly stated their support for the nationalisation of the mining production capacity.
Following a briefing by the Department of Minerals and Energy and the Chamber of Mines in respect of illegal mining activities during 2008, some of the members of the committee were of the view that all disused mines should be nationalised as a solution to illegal mining. The notion creates further impetus for the nationalisation of mines, as the disused mines are not economical to mine for big mining companies due to various factors. The most important of these are the major financial costs associated with continually mining deeper for resources and costs relating to the safety of employees.
The closure of mining activities, especially in communities which historically have been heavily dependent on mining for a living, has led to members of the community engaging in illegal mining.
The nationalisation of South African mines would cost R1,4 trillion to R2 trillion, or, to put it differently, would treble South Africa's national debt overnight. Nationalisation of the mining sector is, thus, quite clearly the delusion of those who are completely out of touch with reality. The mining industry represents approximately 33% to 35% of the market value of the Johannesburg Stock Exchange.
In conclusion, nationalisation is an unaffordable, untimely and frankly unnecessary suggestion which has already undermined market stability. I thank you. [Time expired.]