The South African nationalisation debate

As it often happens in South Africa, the ANC Youth League leader Julius Maleme started it all. At the beginning of February 2010 he said that the ANCYL committee had a detailed perspective on the nationalisation of the mines and went on to call on government to amend the Minerals Act to include a clause that would compel all mining companies to enter into a partnership with the state before they were granted mining licences. In the meantime, according to him, the government should place a moratorium on the issuing of licences.

South Africa is the world’s biggest producer of platinum and the world’s third biggest gold producer. The share of mining in the gross domestic product has declined, particularly as gold reserves become exhausted, but the industry is still the backbone of the economy and one of the country’s major employers. It is therefore understandable that the words uttered by governing party’s “enfant terrible” caused quite a stir in the country. After all, Maleme is credited as being the governing ANC’s litmus paper for testing the reaction to various seemingly outlandish proposals. (He was the one who first issued the call for recalling the former SA president and ANC leader Thabo Mbeki.)

The latest call for nationalisation of mines comes about half a year after the last one, also orchestrated by Julius Maleme. Just like then, this time too the SA Students Congress, Young Communist League and COSATU echoed Malema’s call, although the ANC Secretary-General Gwede Mantashe said that the nationalisation of mines is not on the ANC agenda.

Speaking at a media conference, the Mineral Resources Minister Susan Shabangu said that there will be no nationalisation “in her lifetime”. The following day, the minister was effectively given a figurative slap on the wrist when ANC issued a statement “welcoming” the discussion document on the nationalisation of mines submitted to it by the ANCYL, noting that it would engage with the ANCYL through proper ANC structures, following which it would express its opinions on the issue.

Some commentators trust that the voices of moderation within the ANC will prevail. Some are ready to panic and say that nationalisation has become a real possibility. Some see the entire debate as a tried-and-tested tactic used by governments around the world when seeking to divert public attention from real issues that may cause embarrassment. In the case of South Africa, those real issues include: poverty; non-functioning parastatals, led by Eskom, the electrical energy provider; high unemployment; high HIV/Aids rates of infection; high crime rates; non-delivery of services on municipality level; wrangling at the top of ANC; corruption at all levels; extramarital affairs at highest levels; etc.

There is no doubt that South African mining companies and (potential) investors from abroad are closely following the debate. They may not join in to throw their two cents, but they are certain to have their say in the most effective way: with their money.

According to the latest Fraser Institute survey, South Africa’s attractiveness as a mining investment destination improved slightly in the past year compared to the previous two years, but the country still ranks among the three least attractive countries in Africa for mining exploration. Zimbabwe and Congo are the only two countries on the whole continent that are even less attractive to investors that South Africa. Potential investors view uncertainty over interpretation of existing regulations, inconsistency in regulations, uncertainty over land claims, labour relations and security as the main deterrents for doing business in South Africa. Another challenge is the uncertainty over energy supply; gone are the days when low-cost energy used to be one of South Africa’s main selling points.

Even if the newest nationalisation rumours do turn out to be a mere diversion, it could cost SA economy dearly. But then, many political leaders throughout the world have been willing to pay such a cost (and more) for the sake of preserving their position.

Image source: MediaClubSouthAfrica.com