Debate alone does serious harm

The fact that the African National Congress (ANC) agreed after persistent demands from the ANC Youth League (ANCYL) to place a discussion around the issue of the nationalisation of South Africa’s mines on the agenda of the forthcoming National General Council (NGC) may be little more than a ploy to make the debate go away, if some sources in the ANC are to be believed – but it is nevertheless causing some real harm to the industry’s investment prospects at a time when the country can ill afford it.

It is being suggested that the senior ANC agreed to put the issue on the agenda and debate it with a view to rejecting it, thus limiting the scope for the ANCYL to again raise this demand in the future. This may well be in line with previous assertions by senior ANC and government leaders that nationalisation is not presently ANC policy.

At the same time, however, it appears a back door is being kept open to incorporate some aspects of nationalisation at some future point, should it seem expedient. And, that is where the rub lies.

At the Terrapin Mining Congress in Johannesburg on 26 July, there was a warning that the debate had created great uncertainty for potential investors and it could see some projects being put on hold until after the ANC’s policy review conference in 2012 if the NGC does not finally resolve the issue at its meeting in September.

In such an event, South Africa runs the risk of missing out when commodity demand picks up when the global economy again gathers proper momentum. Although the signals on such an eventuality in the short- to medium term are very much mixed at the moment, the long lead times for mining projects to come on line should not be forgotten.

Peter Leon of Webber Wentzel said at the Terrapin congress that uncertainty around regulatory issues could often be detrimental to a country’s mining industry. South Africa’s mining industry has already dropped from the 50% of preferred investment countries in Africa to the bottom 10% in the latest Fraser Institute report.

The flipside of the nationalisation debate, however, is that direct benefit of mining in certain countries often do not flow through to the local population and is an issue that needs to be addressed. The executive secretary of the Tanzananian Chamber of Minerals and Energy concurred with this sentiment, saying that often mining companies from abroad leave local communities with marginal percentages of that which is realised.