beyondbrics

Julius Malema, president of the influential African National Congress Youth League and the enfant terrible of South African politics, has become a wearisomely familiar name to investors in the country.

For months Mr Malema – who praises Zimbabwe’s “courageous and militant” land seizures – has been calling for the nationalisation of South Africa’s mines, forcing ministers into repeated denials that it is government policy. But at a major meeting of the ruling ANC this week, he seemed to make some headway in his crusade.

Opening the party’s national general council in Durban last Monday, President Jacob Zuma condemned “indiscipline” in the youth league, and insisted that no new policies would be discussed during the five-day event. But the youth league continued to lobby behind the scenes during the week, and managed to persuade ANC leaders to allow a debate on nationalisation in a closed session.

They will have cheered Friday’s announcement by Trevor Manuel, planning minister and a stubborn economic liberal during 13 years as finance minister, that the party had passed a resolution “to devise a mining sector strategy within 12 months which takes into account the country’s developmental needs and one that clarifies the state’s role”.

The review would mean “consequential amendments in mineral and petroleum resources development acts,” Mr Manuel added.

Mining companies with major operations in the country include Rio Tinto, Xstrata and Anglo American, the country’s biggest private sector employer with 83,000 permanent staff.

But wholesale nationalisation of the mines will almost certainly not happen in the foreseeable future. For one thing, it would simply be too expensive, as Gavin Keeton and Greg White of Rhodes University explained last week:

… the market value of listed South African mines is about R850bn. If the government were to borrow this sum at current interest rates, its interest bill would rise by about R72bn a year – which is more than 40 per cent of the current education budget and almost 8 per cent of total state spending.

Even if – as the league has proposed – the constitution were amended to allow the seizure of property without compensation, bilateral investment treaties would still require the state to reimburse foreign shareholders.

Furthermore, there is no evidence of a strong leaning towards nationalisation among ANC leaders. Senior figures who support the policy include Fikile Mbalula, the high-profile deputy police minister, and Tokyo Sexwale, human settlements minister, according to the Mail & Guardian newspaper.

But there are more big hitters in the opposing camp – including Mr Zuma, Kgalema Motlanthe, deputy president, and Mr Manuel. Even the Communist party sounds dubious about the youth league’s proposals, warning that it would not support nationalisation if it was aimed at “rescuing” politically connected mining companies that were “in trouble”.

So investor nightmares of a mass expropriation of mining assets look unfounded. The review of mining strategy is more likely to lead to a step such as consolidating the various existing state-owned mining entities into a single unit that would be better placed to compete with private companies.

This looks more like a case of the ANC leadership trying to channel the youth league’s disruptive calls into a calmer debate that is less likely to frighten foreign investors – who are already spooked by a row between Anglo American and the state over mining rights.

As Mr Manuel put it on Friday: “The problem is that if you have to take decisions based on who shouts the loudest, you can’t get into the details.”

Related reading:
Mining code troubles South Africa investors, FT
S Africa mines union to join strike, FT