Preservation or Exploitation? A Study of the Development of the Mining Rights Legislation on the Witwatersrand Goldfields from 1886 to 2008¶
Stott, Joan (2008). Preservation or Exploitation? A Study of the Development of the Mining Rights Legislation on the Witwatersrand Goldfields from 1886 to 2008. Master of Economics thesis, Rhodes University. Rhodes University.
| Type | thesis |
| Scope | Economics and economic history of apartheid |
| Method | synthesis review |
| Period studied | 1886–2008 |
| Regions | Witwatersrand, Transvaal/ZAR, Union and Republic of South Africa, Orange Free State goldfields |
| Themes | mining migrant labour, business and state, macro fiscal finance debt, transition post apartheid, origins segregation, manufacturing industrial policy, comparative theory, methods data sources |
| Citation key | stott2008 |
Argument¶
The thesis tests Ostrom's assumption that resource users are short-term plunderers while officials are informed, public-interested designers of optimal policy. It does so through an institutional history of Witwatersrand gold mining rights and title law (gold laws, mynpacht, mining leases, 1967 Act, MPRDA 2004), read from the mining-house and state perspectives. It draws on property-rights theory, new institutional economics and industrial organisation. It concludes that both mining houses and the state oscillated between 'preserver' and 'exploiter', each serving its own ends. Taxation of gold was not shown to be exploitative, since the industry stayed profitable, and state policy was not always optimal.
Evidence and method¶
Mostly secondary literature, above all Kaplan's 1985 PhD on the gold laws, plus Webb (1981), Yudelman (1983), Innes (1984), Sander (2000), Feinstein (2005), Fine and Rustomjee (1996), Moll (1990) and Nattrass (1995). Also uses the 1995 DME mineral policy discussion document, Chamber of Mines publications, press articles (Business Day, Financial Mail) and several personal communications and interviews with industry officials and academics.
Place in the debates¶
- Did the state exploit or preserve the gold industry through taxation and rights legislation? (see The state and capital: instrumentalism, autonomy and fractions of capital). Largely preservative: the formula tax, lease system and later subsidies prolonged mine lives and the industry still prospered. Feinstein's view that taxes were discriminatory and exploitative is acknowledged, and some policy (e.g. Hertzog's gold standard stance) is treated as self-serving.
- Mining capital's power over the state vs state dominance (state-capital relationship) (see The state and capital: instrumentalism, autonomy and fractions of capital). Sides with Yudelman and Fine and Rustomjee: a symbiotic relationship in which the state viewed mining as its instrument, and mining houses had strong influence via the Chamber of Mines and the allocation of property rights.
- Ostrom's view of rational egoist users and optimal government (see The state and capital: instrumentalism, autonomy and fractions of capital). Rejects both halves. Mining houses were profit-maximising, 'perfectly competitive' firms who were both exploitative and preservative, and the state lacked information and sometimes served voters or itself.
- Private vs state ownership of mineral rights (see Post-apartheid economic policy, governance and corruption). Argues private ownership suited deep-level capital-intensive mining, but treats the MPRDA as a negotiated if contested shift to state custodianship.
Findings¶
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Early Rand mining companies behaved exploitatively, driven by share speculation and short-term profit, before maturing. (p. 68)
the decision making by company managers…was dominated by the pursuit of profits
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Foreign ownership meant most gold dividends left the country through 1930. (p. 54)
in 1917 only 14 per cent of the shares of gold mining companies were locally owned, while in 1930 it was estimated that 75 per cent of the annual dividends from gold mines [were] paid to overseas shareholders
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Mining houses used the gold laws to monopolise prospective ground, e.g. via nominee holders and werf-mynpachts. (p. 74)
The situation had enabled the large mining groups virtually to monopolise prospective gold mining areas by acquiring the mineralised land or options to purchase it.
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Early Transvaal taxation of gold was light, but mining was already central to state revenue. (p. 147)
With only 2.5 per cent of total gold production taxed – and this only as an alternative to paying license fees – the majority of profits went to shareholders and capitalists rather than to the state
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The state's gold-tax formula, intended to extend mine life, could be gamed by varying ore grade. (p. 152)
the South African state has historically maintained a policy of maximising the working life of the gold mines
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Leaving the gold standard in 1932 produced a fiscal windfall as gold's share of revenue jumped. (p. 156)
gold mining profits went from contributing 8 per cent of total fiscal revenue in 1932 to 33 per cent in 1933
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Gold's fiscal contribution collapsed in the late apartheid crisis, which Nattrass links to the state's turn to negotiation. (p. 164)
the proportion of tax revenue collected from the gold mining industry dropped from 26.4 per cent in 1981 to less than 1 per cent in 1993
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The 1967 Act ended the mynpacht, because state policy had long favoured the lease system. (p. 91)
only nine had been “registered between 1942 and 1967”
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Mining houses pre-empted the ANC by engaging early on black economic empowerment ownership restructuring (JCI, Anglo). (p. 96)
JCI officials met with the ANC leadership in Paris, as far back as 1989, in anticipation of the changing political economy of South Africa.
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The 2002 charter set staged black ownership targets as the condition for converting old order mining rights. (p. 105)
15 per cent of mining companies’ South African assets, or equivalent in units of production, have to be held by black partners by 2009 and 26 per cent by 2014
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The state in 1948 backed away from nationalising gold mines because of foreign investor flight. (p. 168)
was certainly in some measure brought about by the need to remove the apprehension of foreign investors on the taking of office of the new government
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Kaplan, L.V. (1985) PhD thesis, The Development of Various Aspects of the Gold Mining Laws in South Africa from 1871 until 1967 (Wits Law) | secondary literature compilation | 1871-1967 | Principal source for the evolution of gold laws, mynpacht and mining lease titles, Chamber of Mines lobbying, and state-mining relations, used as the legal-historical backbone of Chapters 3-4. |
| Webb, A.C.M. (1981) Witwatersrand Genesis: early gold mining companies 1886-1894 (Rhodes PhD thesis) | secondary literature compilation | 1886-1894 | Supplies evidence on early company behaviour, speculation, the 1889 crash, the Chamber of Mines' role in gold law amendments and early taxation. |
| Sander (2000) history of Johannesburg Consolidated Investment Company 1889-1995 | secondary literature compilation | 1889-1995 | Used for the Jameson Raid, the South African War, 1930s gold standard and tax episodes, and 1989-90s JCI/Anglo engagement with the ANC and BEE. |
| Yudelman (1983) The Emergence of Modern South Africa: State, Capital, and the Incorporation of Organised Labour on the South African Gold Fields 1902-1939 | secondary literature compilation | 1902-1939 (with later references to 1970s-80s) | Source for state-capital relations, mining's share of fiscal revenue, lobbying by Lionel Phillips, and the 1930s tax regime. |
| Innes (1984) Anglo American and the Rise of Modern South Africa | secondary literature compilation | 1886-1980s | Supplies the account of the group system, monopoly relations, fixed gold price and cost constraints, and the 1919 free gold market. |
| Feinstein (2005) An Economic History of South Africa | secondary literature compilation | 1886-1990s | Source for gold price movements, taxation and state use of mining revenue, and the decline of gold mining profitability. |
| Moll (1990) PhD thesis, Output and Productivity Trends in South Africa | secondary literature compilation | 1920s-1980s | Used for the gold mining tax formula and the inverse relation between ore grade and real gold price. |
| Fine and Rustomjee (1996) The Political Economy of South Africa: From Minerals-Energy Complex to Industrialisation | secondary literature compilation | 1920s-1990s | Used for the state-capital relationship, 1930s gold taxation, and the interpretation of state dependence on mining. |
| De Kock (1924) Selected Subjects in the Economic History of South Africa | secondary literature compilation | 1886-1923 | Supplies figures and accounts on early company behaviour, extraction rates, the 1919 premium gold arrangement and mining's share of Union revenue. |
| Department of Mines (1936) The Mineral Resources of the Union of South Africa | commission or official report | 1936 (descriptive of 1886-1936) | Source for the geology and geography of the Witwatersrand field, group system and Chamber of Mines functions. |
| Report of the Low Grade Ore Commission, U.G. 16-1932 | commission or official report | 1932 (covering 1911-1932) | Cited (via Kaplan) for annual overseas dividend payments exceeding annual investment in gold mining, and for Chamber of Mines evidence on mining lease profit shares. |
| Gold Law Commission Report 1901-02 | commission or official report | 1901-1902 | Cited (via Kaplan) for the finding that owners' rights had grown excessively and for the recommendation to retain werf-mynpachten, evidencing state intent to redefine property rights. |
| Department of Minerals and Energy Affairs and Mineral and Energy Policy Centre (Nov 1995) Discussion Document on a Minerals and Mining Policy for South Africa | commission or official report | 1994-1995 | Main source for the 1995 multi-stakeholder policy negotiations, industry and ANC positions, and mineral rights ownership debates. |
| Minerals and Petroleum Resources Development Act 28 of 2002 (MPRDA) and the Broad-Based Socio-Economic Empowerment Charter for the Mining Industry (2002) and Scorecard | legislation gazette | 2002-2004 | The legislative and charter provisions (custodianship, conversion of old-order rights, 15% and 26% black ownership targets) that the thesis assesses. |
| Chamber of Mines of South Africa (CMSA) publications 2002-2005, incl. 'Mining' (2004b), presentations (2004c, 2005b), speeches, statements and the 2004 Annual Report 'Preserving the Future with Mining' (2004f) | employer association records | 1991-2005 | Evidence of industry views on the MPRDA, BEE charter, conversion of rights, and claims of industry preservation efforts and empowerment deals. |
| Business Day, Financial Mail, Business Times, Mining Weekly, FinWeek press articles 2005-2008 | newspapers periodicals | 2005-2008 | Documents recent industry and DME positions, BEE conversion problems, investment decline and Anglo American's shifting South African exposure. |
| Author's interviews and personal communications (Baxter 2005, Lilford 2005, Graulich 2005, Ramos 2004, Mather 2005, Webb 2008) | interviews oral history | 2004-2008 | Industry and academic informants supply views on costs, technology, management change, investment and the transformation of the industry. |
| Van Blerck (1992) Mining Tax in South Africa; Van Waasdijk (1964) Public Expenditure in South Africa; Cooke (1969) Chamber of Mines presidential address | secondary literature compilation | 1936-1969 | Source for the gold tax formula, capital allowances for deep-level mines, fiscal concessions, and 1960s mine assistance. |
| Nattrass (1995) The Crisis in South African Gold Mining, World Development | secondary literature compilation | 1980s-1993 | Source for the declining share of gold in tax revenue and the end of state assistance to marginal mines. |
| Graduate School of Business UCT (2000) The South African Mining Industry in the 21st Century | commission or official report | 2000 | Used on the group system, mining houses' restructuring, isolation under apartheid and the economic importance of mining. |
Inference¶
Quantification: Illustrative figures.
Qualitative historical and institutional analysis built on a literature-based chronology of mining rights legislation (1886-2008), interpreted through a four-part theoretical framework (neoclassical/Keynesian, industrial organisation, property rights, new institutional economics) to classify the state and mining houses as 'preserver' or 'exploiter'. Claims are established by narrative case reconstruction from secondary legal and economic histories, official policy documents and trade-press, with no formal testing.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| The state designed mining-rights and tax policy mainly to serve its own ends, so policy was not consistently optimal or preservative, contradicting Ostrom's assumption of informed, public-interest officials. (p. 181) | Kaplan, Yudelman, Fine and Rustomjee and Sander narrative accounts of the gold laws and state-mining relations. | Illustrative or anecdotal |
| The mining houses used the Chamber of Mines to shape the gold law in their favour, securing tenure, renewable mynpachten and larger titles, and tended to take pre-emptive, preservative stances later (e.g. BEE). (p. 77) | Kaplan's and Webb's accounts of gold law amendments (1891, 1898, 1908, 1934), Yudelman on Phillips' lobbying, and Sander on JCI-ANC contacts. | Partial data |
| Early mining companies behaved exploitatively (speculation, high-grading, cost-cutting), but after the 1889 crash and the cyanide process they matured into more sustained, profit-minded operations. (p. 65) | Webb (1981), De Kock (1924) and Sander (2000) for company behaviour, the 1889 crash and extraction rates. | Partial data |
| Taxation of gold mining was not exploitative in the sense of destroying the industry; the tax formula and lease system encouraged mining of lower-grade ore and prolonged mine life. (p. 182) | Moll, Van Blerck, Sander, Kettell and Feinstein on the formula tax and lease provisions; qualitative judgement that industry remained profitable. | Partial data |
| The 1908 mining lease and the 1967 abolition of the mynpacht represented gradual tightening of state control over mining rights, but the transition was slow and negotiated in industry's favour (e.g. the 1934 Act). (p. 163) | Kaplan's legal history of the 1908 Gold Law, 1918 and 1934 Acts and the 1967 Act, including the Department of Mines' finding that only nine mynpachts were granted in 1942-1967. | Partial data |
| The MPRDA, mining charter and conversion of old-order rights created regulatory uncertainty and eroded trust between industry and state, and was associated with declining investment and gold output. (p. 102) | CMSA publications, DME statements and press reports (Business Day, Financial Mail, Business Times), mostly quoting industry sources. | Illustrative or anecdotal |
| Mining capital and its foreign ownership meant that the bulk of dividends was remitted abroad until at least 1930, shaping the state's redistributive motives. (p. 54) | Kaplan (1985: 57) figures on foreign ownership and dividends, plus the 1932 Low Grade Ore Commission finding. | Partial data |
The author's caveats¶
The author acknowledges the study is an overall, broad assessment rather than a measured test. She notes that no optimal level of taxation was assessed, that the formula's design may have been deliberate or flawed with little evidence either way, that labour, industrial policy and the Orange Free State are largely excluded, and that game theory and the detail of rule design are outside scope.
Gaps in the evidence¶
The preserver/exploiter classification is never operationalised with measurable indicators such as extraction paths, ore grades mined, reserve life, effective tax rates, or rents captured by the state versus shareholders. Mine- and firm-level data (Chamber of Mines and company annual reports, Mining Leases Board records, Hansard and parliamentary select committee records, Treasury and Reserve Bank series), which existed and are accessible in archives, would allow testing of the tax and grade claims. The thesis leans on a handful of secondary studies (Kaplan, Webb, Sander, Yudelman), industry-supplied documents and a few interviews, with little primary archival work and no evidence on BEE outcomes or post-conversion investment beyond press anecdotes.
Replicability: Data poorly documented.