SOUTH Africa is at great risk of becoming a victim of the resource curse, but there is a narrow window through which this fate can be avoided.

There are precedents for this. In the 1980s and 1990s, countries like the Democratic Republic of the Congo and Zambia mismanaged their mineral resources so extensively that mineral rents collapsed together with production and investments as well as jobs and tax revenues. This had economic impoverishment as a consequence. It took radical changes to legislation and a commodity boom to redress the situation, but both countries lost at least 20 years of meaningful economic development.

The signs are clear that SA faces similar dangers, as our natural bounty no longer generates wealth and equitable development and instead has become a source of division and conflict. Co-operation, the key ingredient required to turn the dust hidden far below the surface into gold, is waning. Distrust leads to disinvestment and that dust can no longer be extracted at a price the market will take. It is worth more left buried far below the surface than when it is extracted.

The latest headlines create a sense that something dark is happening. It is a depressing litany of stories of mines closing, workers being laid off, licences being revoked, litigations, failed wage agreements and strikes and threats of strikes.

SA is, of course, not alone in facing the sobering effect of slumping commodity prices. The outlook has universally turned bleak. After an exuberant decade-long supercycle, all resource-rich countries face the painful reality of a new commodity bear. And with it comes the inevitability of restructuring, downsizing and socioeconomic pain.

The difference in other, similarly affected, countries is that vital, painful restructuring is already occurring, and it is taking place less fractiously. If there was ever a time for the parties to come together, it is now. Failure to do so has the very real prospect of leading to economic destruction on a scale never before encountered.

So, why is this not happening in SA? Why is the disconnect between industry, labour, government and communities so frightfully wide and increasingly deep?

The slump in commodity prices is inflaming a fundamental and longstanding dispute about the role mining should play in SA’s development trajectory. It is about transformation and the Mining Charter; the nationalisation debate and the role of the state in mining; beneficiation; taxation; housing and living conditions; working conditions; productivity and safety; communities and local development; pollution; and, of course, wages. The conflicts abound, heightened by catastrophes like Marikana.

In the 2000s, exploding commodity prices allowed the industry to paper over most of these issues by taking on ever-growing commitments while expanding production on the continuation of the old labour-intensive, migrant workers model. The cost curve dramatically increased, but was dwarfed by often extraordinary revenue and market capitalisation growth.

As for the growing uncertainty in SA’s mining industry that the dispute generated, it was partially resolved through separate listings for companies with wide international exposure that felt that their local holdings were already dragging value down.

Collapsing prices have called that bet short and have shown how unsustainable the expenditure lever truly was. They have also demonstrated that very little has been resolved for a sustainable future.

Because social expectations remain high and lag behind market reality by a wide margin, the industry is left with very few options. In other countries, marginal operations would be suspended, shuttered or sold. Balance sheets would be restructured.

In SA, the past few weeks have demonstrated the extent of the quandary facing mining companies. Government will resist downsizing. Labour unions, locked in a bitter internecine battle, will not agree to wage deals that fall short of promises they have made. Communities facing widespread poverty, poor services and few economic prospects will continue to expect too much.

This narrows the industry’s restructuring options and raises the stakes dramatically. It increases the temptation to shut down operations entirely or radically cut long-term capital expenditure in the hope of better prices in the future. While this is logical in the current context, it in turn represents a threat to the longer-term prospects of the industry and its stakeholders, ensuring that a growing portion of SA’s mineral resources will remain locked into valueless dust deep down under the surface.

A vicious circle has taken hold. Yet, the cruel irony is that through a combination of intentional and accidental factors — the Mining Charter and the run for safety that many mining houses and foreign investors started about a decade ago — the country’s mining industry has achieved remarkable degrees of local ownership.

Those capitalists from London have largely been replaced by big and small shareholders, many of whom are ordinary South Africans — mine workers included. This only adds to the impoverishing effects of the crisis. The vision held by the Freedom Charter of a widespread and nonracial ownership of the country’s mineral wealth has in fact been partly achieved.

This extraordinary crisis has, to a large extent, been created by the industry’s main stakeholders themselves, who have selfishly expected too much from the country’s natural resources. But what we have broken, we can fix. A new deal should be possible if all parties accept their fair share of responsibility in the situation as a precursor to finding sustainable outcomes.

And the country has solid foundations for this. We have world-class expertise, an entrepreneurial culture and a sophisticated financial system with solid capital-raising capacity. We also have a benchmark-setting constitution.

In addition, the Mineral and Petroleum Resources Development Act, for all of its issues, achieved something remarkable: The vesting of all mineral resources rights in the people through state custodianship. Mining companies do not own these resources. They are given the right to explore, mine, process, refine, sell and retain the proceeds, provided they comply with regulations and pay royalties.

The benefit of this compact is obvious. The prospect of profits motivates investors to underwrite the huge capital investments required. Profits act as reward for risk without direct government investment, while legislation ensures that social returns are guaranteed and the public interest is protected.

Competitive and mutually exclusive claims should be replaced by a comprehensive commitment to custodianship. True custodianship, embraced by all, should allow a more constructive and new co-operative mineral economy.

Such a co-operative mineral economy should rest on a comprehensive reassessment of what the full economic potential of the country’s mineral resources truly is. Good economics should lead the way. An independent valuation of the potential wealth, provided by authoritative experts, should set the foundation for a second step, a conversation about the factors — capital, labour, skills and technology — required to extract that resource at realistic future prices.

This should then frame the next step, which is how best to share the proceeds. That conversation should obviously be based on the imperative that costs do not exceed prices over the long term. Because, in the absence of mineral rents, there can be no proceeds and therefore no socioeconomic benefits to be shared.

SA has a rich tradition of appointing highly reputable judges to lead independent, credible processes serving the national interest. Escaping the resource curse, a clear and present danger, certainly qualifies.

Baissac is managing director of Eunomix.