After years of damaging debate, South Africa’s ruling party has finally vetoed the idea of nationalizing its mining sector.
The announcement is part of a broad defeat for the left-wing factions in the African National Congress, reassuring investors and allowing more influence for pro-business leaders in the party.
But in a compromise with the left-wingers, the ANC agreed to impose some form of higher taxes on the mining sector, and it promised a bigger role for a state-controlled mining company.
As the world’s biggest platinum producer and the fifth-biggest gold producer, South Africa should be attracting interest from mining investors from around the world. But many companies are scared away by its poor labour relations, heavy government involvement in the sector, and the continuing talk of nationalization.
Many Canadian mining companies have avoided South Africa, preferring to invest in other places, especially West Africa, where governments are seen as friendlier. Canadian mining companies are among the biggest investors in West African countries such as Burkina Faso, Mali, Niger and Senegal.
South African government ministers have often expressed opposition to nationalization, but the issue remained on the table for years because the ANC did not take an official stand, and the supporters of nationalization have remained vocal and active.
The ANC, which has ruled South Africa since the defeat of apartheid in 1994, finally recognized that its mining industry was being severely damaged by the persistent talk of nationalization, and it took steps to kill the issue this week at a major elective conference in the provincial city of Bloemfontein.
“The issue of nationalization … is off the table,” South Africa’s public enterprises minister, Malusi Gigaba, said in a media briefing at the end of the five-day conference, the biggest ANC decision-making event since 2007.
“We are providing final clarity. There shouldn’t be any expectation that from here we will come out and say we are going to nationalize.”
On the issue of state ownership, Mr. Gigaba said: “The ANC affirms its historical position on this topic – strategic ownership where deemed necessary.”
But senior ANC officials were unable to give any details on the level of state ownership or the increase in mining taxes. The new tax could be a “windfall” tax on “super-profits.” Another idea floated by ANC officials is an export tax on “strategic minerals” to encourage companies to do more processing and manufacturing within South Africa.
“Yes, there will be a tax,” said Enoch Godongwana, head of the ANC’s economic transformation committee. “What form it will take is a matter for the administration.”
The vagueness of the tax and ownership proposals will leave a shadow of doubt over South Africa’s mining policies, despite the clear defeat for the left-wing forces at the ANC conference. South African mining companies have expressed deep concerns about the tax proposals, and they will be only partly placated by the announcement that nationalization is off the table.
Most of the conference’s decisions were bad news for the supporters of mining nationalization. The biggest proponent of state control, former ANC youth league president Julius Malema, was barred from the conference and failed in his bid to be reinstated to the ANC after being expelled earlier this year.
Mr. Malema and the youth league have campaigned for nationalization for the past three years, and until now the ANC had always failed to stamp out the campaign, causing nervousness among South African mining companies and foreign investors.
The ANC youth league members were strong supporters of the “forces of change” – a faction that challenged President Jacob Zuma at the conference. But the anti-Zuma forces were soundly defeated, gaining only 25 per cent of the delegate votes. And a wealthy businessman, Cyril Ramaphosa, was elected as deputy president of the party, signalling a more pragmatic approach to economic policy.