Umsebenzi Online Volume 22, Number 2, 13 October 2023: Red Alert: Critical raw materials for whom and at what cost?
SACP South African Communist Party
Critical raw materials for whom and at what cost? Statement at the Bench-Marks Foundation Conference in Johannesburg on 10 October 2023
Umsebenzi Online Volume 22, Number 2, 13 October 2023
Volume 22, Number 2, 13 October2023 | |
|
Red AlertCritical raw materials for whom and at what cost? Statement at the Bench-Marks Foundation Conference in Johannesburg on 10 October 2023 |  |
By Solly Mapaila, SACP General Secretary
The capitalist mode of production is based on inequality and the exploitation of the working-class, nature, and natural resources. Its results include rapacious destruction of the environment, chasing riches and profits with no regard to life. Capitalist accumulation and consequences have become more dangerous.
The greedy capitalist appropriators have monopolised trillions, either in hoards or in circulation as capital. Conservative estimates suggest at least 103 trillion in US dollars. The United States-led imperialist regimes of Europe and North America gain a lot via taxation from the surplus resources expatriated by their capitalist bosses from exploiting labour and resources across the world.
The United States-led imperialist regimes unleash the resources to provoke and bankroll wars, as they did in Ukraine, in pursuit of totalitarian control of wealth in every part of the wealth. Yet both the resources appropriated by the bourgeoisie and unleashed from tax revenue by their states to make imperialist wars are needed to eradicate mass poverty and stop global warming.
Critical raw materials for whom and at what cost?
As we grapple with the way forward, we should pay attention to the relationship between the extraction of critical raw materials and the development of more technologically advanced instruments of production and products produced as commodities. The digital economy has arisen in this process. It is crucial to reclaim it from capitalist control, as we should do with the entire economy, to serve the needs of people, emancipate the workers from economic exploitation, lift the poor out of poverty and stop global warming.
The digital economy, the transition to low carbon electric power generation, and to low- and zero-carbon emitting transport, to name but a few mega trends, have given rise to renewed neocolonial and imperialist scramble for raw materials.
This conference’s theme identifies two questions for discussion. First, whether the renewed scramble for raw materials will continue to keep nations and communities affected by extraction subjugated. Second, whether communities will benefit, or whether they will be subjugated more.
If I may add, have comprador sections of the capitalist class and political elites not positioned themselves as recipients of crumbs from the exploitation of labour and our resources?
The impact of the renewed scramble for raw materials on nations and communities depends on various factors. I wish to highlight a few, for now.
Illicit minerals trade and financial flows
As the SACP, we are calling for a review of the verification process for the minerals that mining houses claim in their production output and financial statements. Here is why we are making the call.
A study undertaken under the “African Growth Initiative at Brookings” lists South Africa as the top emitter of illicit financial flows in Africa. It is estimated South Africa emitted approximately US$442 billion in illicit financial flows from 1980 to 2018.
In the book titled Trade Misinvoicing in Primary Commodities in Developing Countries: The Cases of Chile, Côte d’Ivoire, Nigeria, South Africa, and Zambia, published in 2016, the United Nations Conference on Trade and Development particularly singles out the extractive industry as being more prone to illicit financial flows.
Misinvoicing is identified by various contributions to the literature as a significant driver of illicit financial flows. We concluded misinvoicing includes under-declaration of mined minerals and other extracted resources.
In addition, we are also worried by illegal mining activities both in the formal and informal sectors, including the so-called “zama-zamas”.
To clamp down on illicit minerals trade and financial flows from the extractive sector, the state must verify each particle, composition, weight, and value of each mineral extracted in South Africa. This is the only way to confirm if the mining houses are sincere in their declaration of the minerals that they have extracted in our country, and to ensure that they pay the correct amounts of tax and royalties.
If not stopped, illicit financial flows from the extractive industry will continue to cause losses for the nation.
We reached our conclusion about illicit financial flows years ago. In 2017 and 2022, we consolidated our perspectives about the problem in our 14th and 15th National Congress reports, declarations, and resolutions.
Resource royalties
We are calling for a review of the minerals royalties’ framework to give practical effect to the law. The says the minerals of our country belong to the people as a whole. The question is whether this is true in practice.
To answer the question, we need to appreciate, as Karl Marx says in Capital, that the money-form is the fully developed shape of the value-form embedded in every commodity. I draw attention to this because I propose every South African needs to pay particular attention to the value-form of every particle and weight of each mineral extracted in our country for sale as a commodity.
Leave aside, for now, employment, wages, associated personal income tax, VAT and corporate income tax because every formal sector makes the “contributions” in the economy.
To calculate whether the mineral resources of our country belong to the people as a whole, we need to focus on the total amount and the money-form of the minerals. We need to pay particular attention to the relationship between the values of profits and royalties. This is because, in practice, the minerals belong largely to those who own the greater of the two - royalties and profits.
Royalties go to national revenue for redistributed to serve the people as a whole. This includes supporting mine shareholders with infrastructure for the mines and the other things that they need and receive from the state. Meanwhile, profits belong only to them.
Our analysis in the relationship between the two is that the value of profits overwhelms the value of royalties. Mine shareholders who alone appropriate profits from our minerals claim the lion’s share of our country’s minerals’ ownership. This negates both the letter and spirit of the law.
Resource windfall tax
In want to take this opportunity to reiterate our long-standing call for a resource windfall tax, including on windfall profits generated from changes in currency exchange.
If, for example, domestic currency weakens significantly compared to foreign currency in minerals export, earnings from mineral exports may increase when converted back into the domestic currency, leading to windfall profits.
There are other conditions that may culminate in windfall profits from minerals. As long as a windfall profit occurs, a windfall tax has to be applied on it.
Transparency regarding profits from our minerals
The so-called “multinational corporations” that extract minerals in our country (and in many other countries) do not publicly declare their profits locally as they are listed elsewhere.
When bourgeois ideologues and media speak about accountability and transparency, they problematise the state, leaving out capital when it is not transparent and not accountable. This must end because the minerals belong to the people as a whole.
Every mining house that extracts minerals in our country must publicly declared profits from the minerals in our country.
State capacity and agenda
Without the state backed and checked by popular mobilisation managing the extractive sector well, capital will continue to exploit both society and its minerals, subjugating and impoverishing the affected nations and communities.
Corporate exploitation resulting in devastation includes environmental degradation. This will continue if the state, labour in the capital-labour relation contradictions, and broader societal mobilisation, are weak. To capital, there is nothing important than profits. This is the reason we are facing impoverishment in the land abundant with minerals. It is for the same reason that the world is facing global warming from environmental degradation.
Domestic minerals beneficiation
To ensure greater benefit for the people, including bringing down unemployment (which now affects approximately 12 million active and discouraged work-seekers), we need policies that localise the beneficiation of our minerals. We need to use this to industrialise our economy through manufacturing expansion and diversification.
That we have not industrialised our economy is largely a reflection of the historical balance forces shaped, the long history and lasting legacy of colonial and imperialist domination and exploitation. However, let us be frank. It is also a reflection of our post-1994 domestic policy weaknesses, including a lack of adequate productive capacity development and subordination to the dominant and corrupting forces of capital. In particular, neoliberal policy capture has ensured our country does not industrialise post-1994. We need to end this as a matter of urgency.
International situation and balance of forces
People in the central African region, supported by their militaries, embarked on popular uprisings recently, changing their governments. This is a response to imperialist forces such as France, which count Africa’s minerals like uranium, plutonium, and thorium in what they call their interests.
Despite Africa being rich with many minerals, the African people are poor as the minerals enrich mainly the United States and its Western European allied regimes and former colonisers of African countries. Profits, expatriated, and taxes by the imperialist regimes are the lion’s share of the money-form of the minerals. This is what you need to appreciate in looking at why the United States, France and other former colonial metropoles were the first to come out in condemning the African people. We all know it is not true that the imperialist regimes are against coups because they sponsored and supported many coups and leaders who lost elections in many parts of the world, including recently in the DRC.
The imperialist forces determine what they say and do not based on justice but on whether they stand to benefit or lose. If justice is likely to result in loss for them, they go against it. This is what they are doing against the Palestinian people, whose lands the Israeli apartheid settler state established in 1948 expropriated as it expanded.
Given the imperialist regimes’ military, financial and economic strength, acquired through injustice (colonial and imperialist domination and exploitation), the renewed scramble for raw materials will continue to keep nations and communities affected by extraction subjugated and impoverished.
In conclusion and solidarity with the Palestinian people
It is important to build a strong and thriving public economy in the extractive sector to roll back exploitation, in addition to taking decisive steps to end illicit mining activities and financial flows, reviewing the resource royalties’ framework, ensuring domestic minerals beneficiation, and driving industrialising.
While I touch on other countries, most of my input focus on South Africa because of the multiple crises we face - economic stagnation, high levels of unemployment, poverty and inequality, electricity under-capacity crisis, high level crime including illicit mining, you name it all. However, if truth be told, the measures I outlined are needed to turn the tide against subjugation, impoverishment and poverty in the entire African continent, in Latin America and elsewhere. But it is up to the people of each country to decide democratically.
Let me end expressing our unwavering solidarity with the besieged people of Palestine, who have endured an atrocious occupation of their land for 75 years by the Israeli settler state.
Now the apartheid Israeli regime supported by the United States with high-tech mass murdering weaponry is attacking the Palestinian people indiscriminately and killing them in the Gaza strip.
It is also inhuman for the United States-backed apartheid Israeli regime to millions of Palestinian people with water, food, electricity, medicine and fuel.
Umsebenzi Online is an online voice of the South African working class
ISSUED BY THE SOUTH AFRICAN COMMUNIST PARTY | SACP
EST. 1921 AS THE COMMUNIST PARTY OF SOUTH AFRICA | CPSA