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In this analysis The Common Sense tracked over six decades of data for mining investment in South Africa to show how post-1994 mining policy decisions, and most importantly the decision to expropriate mineral rights without compensation, laid low the South African mining economy.

The chart below tracks investment in mining exploration as a share of GDP since 1960. What it shows is a steep downward trajectory, particularly after 1994, that was interrupted by a little spike at the peak of the global commodity super-cycle, but which fizzled to leave an industry that today stands as a shadow of its former self. The dotted vertical line in 2004 marks the enactment of the Mineral and Petroleum Resources Development Act (MPRDA) which was the law that effectively expropriated South African mineral rights. Note that mining investment had been falling in the years ahead of the enactment given that the industry understood what the government was trying to do and understood what the implications for mining businesses would be.

That expropriation decision remains popular in the government to this day. Just two months ago, President Cyril Ramaphosa told Parliament, “But when the government changed the law and nationalised all the mineral rights in the country, it opened up space for black people to get into mining.”

The next chart shows what that decision did to the value of mining exploration investment in rand terms, adjusted for inflation. The trend is the same. The data shows that whereas mining investment held relatively high levels between 1960 and roughly 1990 the indicator fell through the 1990s, was briefly interrupted by the peak of the commodity super cycle, but fell sharply after that essentially resuming the post-1990 downward trendline.

The post-1994 consequences are set out on the three graphics below. These take data in 10-year intervals for mining's share of GDP, the total number of people employed in mining, and total gold production, and compare them to each other. The upshot of that comparison is that mining’s share of GDP is down more than 50% over the past 30 years while employment is down around 30%, and gold production is down 83%.

The central reason for all of this is mining policy. At odds with its protestations to the contrary, the South African government has expropriated property without compensation post-1994. In 2004, after a decade of threatening to do so, the government enacted the MPRDA. The Act at the time was the most revolutionary piece of policy that had been introduced by the African National Congress (ANC) in government and abolished the private ownership of mineral rights. Prior to the MPRDA, mineral rights had belonged to private individuals or corporations that owned the surface land. But under the MPRDA the state nationalised the minerals beneath the soil without compensating the previous owners, making the argument that if the state holds the mineral resources these might be better invested to the advantage to all South Africans.

The consequences of that decision can now be read in the data charts above.

At the time of the MPRDA being drafted, social justice activists and politicians made the argument that in private hands mineral rights were not used to the advantage of the country or its people and that by placing those rights in the hands of the state, a great social and economic transformation of the country might be achieved. This is very much the same argument that is currently being made around efforts to expropriate all manner of property without compensation and also the expropriation of private medical insurance funds.

[Note: The current expropriation act is not a land reform measure but would instead allow the seizure of any fixed or movable property for less than its market value.]

The final chart shows the scale of what South Africa likely lost. It plots gold production against the real gold price. Between 1984 and 2024 output fell by 85% as the inflation-adjusted price that more than doubled. Had South African production held up to any considerable extent, the implications for the fiscus, for employment, and for the strength of the currency would have been profound.

Peter Major, probably South Africa's top mining analyst, speaking to The Common Sense's great friends at BizNews about Anglo American's 1999 departure for London said: "The claws were out for Anglo American. The unions and the ANC in the 1980s said what they were going to do to Anglo when they took over. They put the fear of God into everybody related to Anglo, including investors, and so when they had the opportunity to leave the country in 1999, they took it."