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Mboweni dismisses nationalisation talk

Reuters | Sun, 11 Oct 2009 20:18
[miningmx.com] -- South African mines will not be nationalised despite "noises" from some politicians, South Africa's central bank Governor Tito Mboweni said on Saturday.

However, he warned in a memorial lecture that authorities in emerging countries must guard against excessive foreign ownership of banks.

Some politicians, including those from influential trade unions and the ruling ANC party's youth, have repeatedly called for government to take over ownership of the country's mines, a move that could scare off investors.

Government has so far downplayed the demands, while still allowing debate on the issue.

Speaking at Phokeng, in the heart of South Africa's platinum mining region about 150km (90 miles) north-west of Johannesburg, Mboweni said the talk was not likely to lead to anything.

"I don't think that argument is going to gain traction, I don't think it is going to get support," he said. "From time to time people are going to raise this for discussion and support, but I don't think it is going to go anywhere."

Mboweni, who leaves his post next month, said the government had only recently taken over mining rights from companies, and would not want to start another "difficult process"

. "The discussion will obviously take place from time to time, depending on who, from time to time, has the loudest voice ... the loudest voice is not necessarily the correct one."

ANC Youth League President Julius Malema, who has become increasingly vocal on national issues, this week repeated a demand for the nationalisation of mines.

South Africa is the world's biggest producer of platinum and one of the top producers of gold, although the influence of mining on GDP has declined, particularly as gold reserves become exhausted.

BUBBLE

Some mines have been forced to shut down, resulting in significant job losses, leading to anger among the trade union allies of the ruling party.

Mboweni, though, did warn that emerging countries should try ensure that local banks were not overly owned by foreigners.

Outside ownership could create significant outflow of funds should another severe global recession hit.

"Although we all rejoice when one or the other bank in our economies is owned by non-resident shareholders, the question arises as to the sustainability of such a model."

He said local banks had fared much better than foreign institutions during the global financial crisis, largely due to prudent lending policies and regulations that limit exposure to the toxic assets that hurt international banks.

Britain's Barclays took over domestic group ABSA about five years ago, but the rest of the country's big four banks are still locally owned. On the global crisis, Mboweni said the monetary and fiscal stimulus that had helped economies turn the corner would have to be removed at some point, but should be done in a way that did not harm the recovery.

"While excessive interest rate reduction may not only become inflationary down the line but may in fact be the breeding ground for the next asset price bubble," he said.

"So a fine line has to be drawn between recovery and sustainability."

Interest rates were cut to record low levels in advanced countries to help economies recover, yet in South Africa rates remain relatively high given lingering worries about inflation.

The repo rate has been cut 5 percentage points since December to 7 percent.