South Africa rules out nationalising key mining industry
South Africa on Tuesday ruled out nationalising its key mining industry in a reassurance to jittery investors and a blow to those in the ruling ANC calling for a state takeover.
Mineral Resources Minister Susan Shabangu told a conference on mining investment in Africa that the African National Congress (ANC) had rejected nationalisation as an option for the world’s top platinum producer.
“We have consistently maintained that nationalisation is not the policy either of government or the ruling party,” said Shabangu.
“We welcome the fact that the report of the ANC task team on nationalisation has reinforced the ANC’s earlier decision that nationalisation is not a viable policy for South Africa. This is not a surprise, we have emphasised this before.”
The announcement of the ANC’s findings comes days after the party upheld a slate of disciplinary charges against the controversial leader of its youth league, Julius Malema, who has led demands for nationalisation.
The firebrand 30-year-old, once called a kingmaker who helped President Jacob Zuma into office, wants mining profits redirected to the millions of blacks still living in poverty 18 years after the end of apartheid.
The ANC commissioned a team of experts last year to draft a report on government intervention in the mining sector. It was presented at a high-level party meeting last weekend and is expected to be made public this month.
Business Day newspaper said Tuesday that the report warns nationalisation would lead to a near-collapse in foreign investment and instead proposes a tax shake-up, including a 50-percent tax on mining “super profits” that would pay for a sovereign wealth fund.
South Africa holds 88 percent of the world’s platinum reserves, 80 percent of its manganese and 30 percent of its gold.
Anglo American South Africa executive director Godfrey Gomwe said a policy ruling out nationalisation would end the doubt hanging over the industry.
“In common with the rest of the mining sector and the business community as a whole, we have made it very clear many times our strong view that nationalisation does not work and that the continuation of the debate on the topic has been damaging to South Africa’s reputation as an investment destination,” he said.
But industry analyst Peter Leon warned the proposed new tax regime could be as bad for investment as nationalisation.
“If enacted, (it) will impose a very heavy burden on the industry which is not conducive to investment in the country,” Leon, head of the African mining unit at law firm Webber Wentzel, said in a statement.
“It effectively amounts to nationalisation by stealth, by bringing about massive state intervention in the mining sector indirectly.”
The nationalisation debate has had ripple effects since being pushed into the public arena by Malema’s youth league.
Last month, citing failure to create more jobs and speed up economic growth, Fitch ratings agency downgraded South Africa’s outlook to negative, saying the debate was unlikely to lead to expropriations but had dented investor confidence.
While offering reassurances, Shabangu also took mining companies to task for dragging their heels in implementing policies, fronting black partners to score points under affirmative action laws and failing to meet social needs.
The nationalisation debate would not have taken place if the companies had not lagged on these matters, she said.
Shabangu also criticised mine bosses over safety, with 13 fatalities so far this year despite a three-percent drop from 127 deaths in 2010 to 123 last year.
“Some of them value profits more than the lives of the people,” she said.