Resource Nationalism Speech – by Gold Fields CEO Nick Holland (Johannesburg – August 15, 2013)

This speech was give by Gold Fields CEO Nick Holland at the Gordon Institute of Business Science in Johannesburg on
15 August 2013.

Thank you and good evening, it is certainly good to be here and I’m glad that we’ve mentioned the fact that it’s the eve of the anniversary of the Marikana tragedy. I guess some of the things I’m going to talk about tonight are probably going to be appropriate in the context of that terrible tragedy of over a year ago.

A lot of debate has been raised on resource nationalism. It has been rated the number one risk in various surveys. I guess what is interesting is maybe that risk has been somewhat overshadowed of late by the decline in metal prices across the mining industry, which in of itself I think presents another challenge.So the reason that we’ve decided to look at this topic is to spark some debate. And I think there are going to be a lot of different views on resource  nationalism. What is it really? Is it good? Is it bad? And the other thing I just want to highlight is this is not a South Africa centric presentation.

Many of the problems that we’re currently experiencing in the South African mining industry are not unique to South Africa. The same issues present themselves around the world. And in fact I will be doing this presentation in Australia in the Down Under conference later this month. I will also be doing it in Arequipa in the Perumin Mining Convention in Peru, and also at the World Gold Council in September in Denver, Colorado. So we’re going to be doing this around the world to spark as much interest and debate as we can.

We’ve had a crack at trying to define what we mean by resource nationalism. And by the way it is not nationalisation. I’m here to talk about resource nationalism, a very different concept. And in our view there is nothing wrong with resource nationalism. In fact, it is very rational of governments to have this as a key objective.

We believe that the appropriate description of resource nationalism is a country’s efforts to extract the maximum value and develop an impact from finite resources in the ground. And that’s one of the operative words: finite resources. Let’s remember this is not an industrial concern producing widgets which can go on forever. We have a finite resource. Surely governments are correct in wanting to extract as much as they can for the benefit of the  country and their people from these finite resources. In fact, we would even go further and say not only is it legitimate, it is actually their duty for the benefit of their people. Certainly that is the view that we have on this.

I guess with what we’re seeing on balance sheets of countries around the world – here we have 41 countries – showing their central government debt as a percentage of GDP, which has rocketed to an average of 75% over the past year. It is entirely understandable why governments would be looking to try and get a bigger piece of the pie so that they can try and sort out some of this debt. That is one of the reasons why resource nationalism is on the rise.

Yet while we believe it is completely rational to have resource nationalism, a lot of people say it is wrong, it is bad. And you can see some of the comments that have been made on this slide. So clearly there is a disconnect somewhere. Why do we see these comments made in the public domain if resource nationalism is appropriate and rational?

We have to try and explore this disconnect. And what we believe is the problem here is that we’re focussing on the wrong pie. We’re focussing on a pie that is made up of mining profits, where everybody wants to have a bigger slice of a declining pie. Because that’s what you see every day when you pick up the newspapers. Mining profits. Look at how much money these guys are making. We need to get more of it.

So when you’ve got more and more people trying to get a bigger piece of this pie, then you find that the pie gets smaller. Instead we should be focussing on growing a different pie, which is the mining resources economy. And that pie can help fuel growth in the overall world economy. That’s what we want to explore with you further today.

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