Financialization and the extractive industries: The case of South African platinum mining

Abstract

This paper examines the impacts of financialization on corporate strategy in the extractive industries with a case study of South African platinum mining during the first two decades after apartheid. Drawing on insights from literature on financialization of the firm, the paper examines how intensified shareholder value pressures shaped strategy at major platinum mining companies during the long commodities boom of the 2000s and subsequent slump from 2009. The paper argues that financialization exacerbates the already intense cyclical volatility of the extractive industries. Efforts to fulfil narratives of shareholder value delivery during the boom manifested in large dividend distribution, gearing of balance sheets and aggressive outlays on capacity expansion and mergers and acquisition activity to demonstrate to the market an ambitious pipeline of growth projects. The result was financial fragility and excess capacity which has exacerbated the impact of the slump in subsequent years with severe social consequences. Distributional contest between management and organized labour has intensified as management has sought to restore internationally competitive rates of return on capital. The paper argues financialization of the firm in mining creates particularly acute distributional contestation and instability, due to the contradictions between the powerful abstractive tendencies of financialized capitalism and the social embeddedness of mining as a landed industry. The analysis has broader implications for the study of the extractive industries and development, and the political economy of post-apartheid South Africa.