South Africa revives mining nationalisation debate

Michael Dynes

There's no smoke without fire. That's the view of skeptical analysts, domestic and foreign, after the eruption in July of demands by radical elements of South Africa's ruling African National Congress (ANC) to nationalise the mining sector as an answer to the economic downturn. But is it a safety match or a raging bush fire?

ANC heavy weights lost little time insisting that nationalisation was not official party policy after Julius Malema, the ANC Youth League president, called for the measure to stop South African mining houses - the world's first largest platinum and third largest gold producers - from shedding tens of thousands of jobs as global demand for commodities - except gold - fell through the floor.

The idea was swiftly picked up by the Congress of South African Trade Unions and the South African Communist Party, the two ANC allies, sending tremors through mining circles, already anxious about what economic policies newly elected President Jacob Zuma may introduce as he tries to fulfil his election promise of distributing "the fruits of liberation" more widely.

Initial foreign investor jitters over the nationalisation demands now appear to have steadied, especially after the South African Chamber of Mines, which represents most mining houses, refused to be spooked by the demands while the ANC government maintains an official "not on our agenda" policy.

Yet there is a widespread suspicion that Malema did not come up with that idea all on his own. He may well have been put up to it by ANC power brokers seeking to gain ascendancy inside the party. Some analysts suspect that the consequence will be a revival of the nationalisation debate - a key component of the ANC's 1955 Freedom Charter that was put on hold when the party took power in 1994 - albeit in a new form.

It is already clear that black investors have given the revival of the nationalisation debate a significantly warmer reception than their white counterparts. Given Africa's generally catastrophic post-colonial history of mining nationalisations, few black investors appear to believe that traditional blanket nationalisation is the way forward.

But while black investors may have little confidence in the government's ability to run the mines, many are sympathetic to the argument that greater state involvement may be required to accelerate transformation and development goals. While all mineral rights are now vested in the state, there is a growing undercurrent of opinion that the state should assume a bigger role in extraction too.

The 50-50 joint venture between De Beers and the governments of Botswana and Namibia are increasingly being seen as models that might be relevant to the South African mining sector. South Africa does not have the financial muscle to buy 50 percent stakes in the big mining houses like Anglo American, De Beers or AngloGoldAshanti. But it could use the value of the mineral rights, which are owned by the state, as a basis from which to acquire equity interests in the mining houses.

Attitudes have moved on since the 1955 Freedom Charter. There is no guarantee that past errors will not be repeated. But African governments are much more attuned to the needs of maintaining investor confidence that was the case several decades ago. South Africa's nationalisation debate, at least in this modern form, may only be just beginning.