September 27, 2010

Zuma rules out nationalisation of mining sector

South African president Jacob Zuma ruled out the nationalisation of the country's mining sector as he closed a tense congress of the ruling party in Durban. The week-long ANC National General Council was marked by fiery speeches and calls by the the party's left for the state take-over of the the economy's largest export sector. South Africa is among the world's largest producers of gold, platinum and chromium, having reaped thirty-two billion euros in 2008 alone from its mining industry. „The party is committed to its mixed-economy policy with government intervention, and there is “nothing that investors must be jittery about”, Zuma said at a briefing in Durban after the national general council meeting. He also said “cogent scientific argument” would be needed for the ANC to change its economic policy.

Investor confidence in the mining industry has been questioned over the past two years by repeated calls for nationalisation by the ANC Youth League . It has been further eroded by uncertainty around mining rights, especially after the saga of ArcelorMittal’s iron-ore rights, and Lonmin ’s loss of the right to mine associated products apart from platinum to politically connected individuals and empowerment groups. The decision by the national general council to investigate the options for nationalisation has put the matter back on the ANC’s agenda, although it is not party policy. A two-year investigation on the issue would be considered by the ANC’s elective congress in 2012.

ANC economic committee chairman Enoch Godongwana said “everybody is happy” with the outcome of the council, and the investigation into nationalisation would “probably” be conducted by the ANC’s economic committee. Minister in the Presidency Trevor Manuel said the state could not afford to pay for mines, and there were other priorities that would require additional funding such as the national health insurance scheme. The creation of a state-owned mining company appeared to be a strong suggestion arising from the council, but there were no details on what role it would play, and how it would be capitalised.

The traditional model of nationalisation involves seizing control of an asset with or without paying compensation. There has been speculation that a state mining company could involve itself in the acquisition of stakes in mining companies, and even the bail-out of ailing mines and black economic empowerment interests in the sector.

The public face of the nationalisation debate has been ANC Youth League president Julius Malema. Mr Godongwana said if one discarded the rhetoric and looked at what the youth league said in its final proposal to the council on nationalisation, it was in fact “quite nuanced”. It said in a discussion document it wanted a state mining company, an expropriation model and amendment of the Minerals and Petroleum Resources Development Act to allow greater state participation in mineral resources industries. (Business Day)

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