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Sovereign wealth fund could quell nationalisation talk
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19th August 2011
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The discussions around nationalisation create uncertainty and all investors dislike uncertainty. The discussion of a change in regime detracts from investment, so any discussion of this sort will not be good for investments, says Coal of Africa chairperson and mining entrepreneur Richard Linnell.

He tells Mining Weekly that he is not adverse to the ‘correct form of nationalisation’. “However, I am frightened by irrational and uninformed discussion on something that is actually quite difficult and, because there is political merit in the debate, it attracts attention and people tend to get frightened by it. You cannot discount the political merit – it just has to be managed correctly,” Linnell says.

He believes that South Africa should look at alternatives to nationalisation, or ways to satisfy the needs of nationalisation, such as the creation of a sovereign wealth fund. “It is an even better suggestion than black economic empowerment (BEE), where only a select few have benefited, that has not really worked as wealth has not been distributed widely enough. A sovereign wealth fund could be financed by surplus capital that can be found in the Public Investment Corporation fund, the National Empowerment Fund and the National Lotteries Board,” he says.

The fund could, in turn, invest in equity, and the returns of that fund could be deployed to assist communities “in places such as the Eastern Cape, where mining activities are not prevalent”. “This is a much more equitable way for everybody in the country to benefit from the concept of State-owned rights,” Linnell says.

He points out that, at the moment, govern- ment benefits significantly from the mining industry. “Government receives royalties and taxes, it benefits from job creation in the mining industry and from goods made in South Africa and purchased by the mines, and one can say that 15% is used for servicing the capital.”

Linnell believes a sovereign wealth fund would reduce the number of individuals who have made a significant amount of money out of BEE deals and it would eliminate the risk of creating uncertainty among investors.

He concludes there is merit in the claims that there is a need for transformation and a need to spread the wealth throughout South Africa. “I think there will have to be a reshuffling of the cards and the pressure for a new ‘Convention for a Democratic South Africa’ to try to resolve some of these transformation issues. We have to address these things.”

Edited by: Martin Zhuwakinyu


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Coal of Africa chairperson Richard Linnell speaks about alternatives to nationalisation. Cameraperson: Nicholas Boyd. Editing: Darlene Creamer.
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