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Mine nationalization seen failing at S. African party meeting

Section: Daily Dispatches

By Agnieszka Flak
Friday, September 17, 2010

JOHANNESBURG, South Africa -- Leaders of the ruling African National Congress are unlikely to bow to pressure from unions and within the party by agreeing to nationalise South Africa's mines during a policy review conference next week.

Julius Malema, the outspoken leader of the African National Congress' Youth League, has argued that mines in the world's biggest producer of platinum and the fourth-largest producer of gold should belong to the state to benefit the country and its people rather than foreign companies or a selected few.

... Dispatch continues below ...


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But Minerals Minister Susan Shabangu, keen to calm investors weary of greater state involvement in the sector, has repeatedly said nationalisation was neither ANC nor government's policy, and she is unlikely to change her stance next week.

"There is going to be a lot of hot air, but I don't think we are going to see anything material emerge from that meeting," said Gary van Staden, a political analyst at independent economists NKC.

The mining sector's influence on the South African economy may have declined, but it is still one of the country's top employers, and accounted for 5.2 percent of the country's gross domestic product in the first quarter.

Finance Minister Pravin Gordhan said on Thursday he did not expect any changes in the nationalisation debate, but Stephen Roelofse, an analyst at Metropolitan Asset Managers, said the fact that it was up for discussion was worrying.

"Just the fact that it's tabled as a discussion point makes the world jittery. Investors are very much concerned about that," he said.

Nationalisation is yet another worry for a sector already battling with power shortages, rising electricity and wage costs, a strong rand, and much stricter safety measures following a series of deaths.

A review of the mining charter published this week also showed that whites still dominated the industry and changes were slow despite a decade of affirmative action, fuelling Malema's argument for state ownership in the sector.

Only 8.9 percent of mines were owned by blacks in 2009, well below a target of 15 percent, leading the government to threaten that it would revoke mining licences if companies did not comply with a revised plan to speed up the process.

Meanwhile President Jacob Zuma's government also imposed a six-month halt on new mining prospecting bids to amend the minerals law after damaging disputes with two firms over rights.

"It's a mini disaster zone and could become a major disaster zone if they don't do anything soon," Van Staden said.

A state-owned mining company is seen as a step towards nationalisation, with one likely to be formed before the end of this year, although analysts doubt the government has the cash or risk appetite such a venture would involve.

The industry believes the government needs to come out with a clear message to reaffirm to investors once again that there is no change in policy on the horizon.

"There should be a concise statement coming from Zuma and the ANC about nationalisation ... to alleviate fears and concerns internal and international investors might have," said David Davis, an analyst at Credit Suisse Standard Securities.

Yet analysts and industry believe the ANC is unlikely to do that in fear of losing its two major support groups in labour and the Youth League who have threatened not to support Zuma for another term.

"They are so scared of alienating any part of their support base, I doubt that they would come down harsh on anyone, " Van Staden said.

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