It's time to address the nationalisation of SA mines

Allan Seccombe | Mon, 01 Feb 2010 19:35

[miningmx.com] -- Anglo American has drawn comfort from comments of senior South African government figures about its policy on nationalising the country’s mines as the contentious issue has again been raised by the youth wing of the ruling party and the rhetoric around the matter is showing no sign of abating.

At the Mining Indaba in Cape Town, the newly appointed head of Anglo American South Africa, Godfrey Gomwe, said the company, which has 40% of its assets in the country, is taking its steer from the public utterances of those heading the government. Anglo is the largest investor in South Africa's mines.

“The comments and statements made by President Jacob Zuma and Deputy President Kgalema Motlante reflect on the fact that we’re confident the South African government believes in a free market economy and it’s not about to do anything to impair that and cause damage to businesses and industry,” Gomwe told Miningmx.

“At this stage, this is a lot of debate and no policy positions have been taken. We will follow this debate but we believe in terms of statements made that in future we will continue to be in a free market domain.”

The African National Congress Youth League has grabbed headlines in South African media over recent months and again this week as it demands the nationalisation of mines and banks. It argued at meeting of its national executive committee over the weekend that all mining companies should be 60% owned by the state.

It said nationalisation should take place with or without compensation depending on the economic health of the company.

The youth league, along with the ruling party’s labour and communist party allies, played an instrumental role in the removal of former president Thabo Mbeki from his role as head of the ANC and the appointment of Jacob Zuma as the party’s president and ultimately the president of the country.

Mines minister Susan Shabangu has said there will be no nationalisation of mines, while this weekend the secretary general of the ANC, Gwede Mantashe, said reiterated the view in an interview with South Africa’s Sunday Times newspaper.

“Our position is very clear on this matter: there is no policy of appropriation of the mines,” he said, at the same time keeping the door open that policy may change. “You don’t bring finality to a policy debate. Policy debate must always evolve.”

This is exactly what the youth league’s intention is: to force the ruling party to debate whether the mines should be nationalised. The ruling party’s national general council meets in September and it has a national conference in 2012.

It was at the last national conference that Mbeki was publicly humiliated and forced out of the party’s leadership at the end of 2007. Not much later, the party decide to remove him from the country’s presidency.

There question is why exactly the youth league are so strident about this question of nationalisation.

Are they being used by the ruling party to test the waters of foreign investment on the issue and gauge investor reaction to the possibility of nationalisation? Or is it merely the ranting of a politically ambitious Julius Malema as head of the youth league, garnering headlines and building a platform of populist support in a country where there is a large unemployed segment of people who’ve yet to fully experience any benefit of black rule since 1994?

Malema argues that the ANC’s Freedom Charter adopted by the party in 1956 calls for the nation’s wealth to be “transferred to the ownership of the people as a whole.” A counter argument would be that this has already been done with all mineral rights being vested in the state and companies paying taxes to mine them.

The other argument is that the government is so utterly ineffectual in running the companies like power utility Eskom and the railways that it stands absolutely no chance of running the enormously challenging mining sector and it will drive away foreign investment.

This is a particularly unwelcome issue to have hanging in the air for investors in the embattled South African mining sector, which already faces the uncertainty of a review of the mining charter governing ownership of companies and their social and labour responsibilities, and the imposition of a minerals royalty charge.

What is needed at this Indaba, the largest meeting of mining executives in Africa, is for the government to come out with a clear and unequivocal statement to put investors’ minds at ease on the issue.

Mines minister Susan Shabangu has the opportunity on Tuesday morning to address the matter, let’s see if she is able to give investors any succour. There could hardly be a better time. Senior management and financiers operating in South Africa are at the event and the media will hang on her every word. This is the time to address the issue of nationalisation so no doubt or uncertainty remains.