Maravi

(MINEWEB, REUTERS) ANC to explore greater state control of mining sector

COMMENT - More fear coming from the pro-corporate MINEWEB, but interesting to see how they think they can spin this story.

ANC to explore greater state control of mining sector
The party has agreed to explore the options but no decision on the subject will be taken before 2012 at the earliest
Author: Jon Herskovitz and Peroshni Govender (Reuters)
Posted: Friday , 24 Sep 2010

DURBAN (Reuters) -

South Africa's ruling ANC agreed to explore greater state control of the mining sector, but made no shift in economic policy at one of the party's biggest meetings in years, President Jacob Zuma said on Friday.

Zuma has been under pressure on nationalisation from union allies and from the youth wing of his African National Congress. The move to study taking over mines could be an attempt to mend fences within the governing coalition, analysts said.

But no decision will be taken before 2012 at the earliest, when the ANC holds its next major meeting, and the party separately resisted pressure from left-wing allies to weaken the rand currency at its National General Council (NGC) meeting.

Zuma said studying nationalisation had become an issue for the party as a whole after being proposed by the youth wing.

"There is no policy change or shift coming from the NGC with regards to our economic policies. There should be no confusion," Zuma told the closing ceremony of the meeting in the eastern port city of Durban.

Analysts doubt whether the promise to study a stronger state role in a mining sector that represents 5-7 percent of South Africa's gross domestic product (GDP) would lead to any significant intervention in the years to come.

Mine nationalisation would place an enormous financial burden on the country, the world's largest producer of platinum and fourth largest of gold. The influential Mail and Guardian newspaper has estimated that the cost of such a move would be at least $280 billion, more than double the annual state budget.

"That is very unsettling to markets, first of all because of the very clear messages that had been given prior to the ANC conference, that mine nationalisation was not on the cards," said Razia Khan, chief African economist at Standard Chartered in London.

Delegates said the push for nationalisation was more about political jockeying for power by the Youth League than a serious policy proposal.

COSTS

One official said the ANC would look at a "balance of evidence" including the enormous costs of exerting its hand in the mining sector, indicating the party was not about to take any bold or expensive moves soon, if at all.

Anne Fruhauf, an Africa specialist for the Eurasia Group, estimated the probability of strong state intervention in mining was very low, but the industry could not discount it completely. "The debate has been deferred but not cleared off the table," Fruhauf said.

Delegates at the policy meeting said the ANC had resisted calls from left-leaning allies to sharply devalue the rand.

The rand ZAR=D3 firmed slightly after Zuma's speech, and was trading at 7.0189 to the U.S. dollar as of 1304 GMT, compared with 7.06 earlier in the session.

Planning Minister Trevor Manuel said recent comments from the ANC about the strength of the rand had had little impact and pegging the rand to the dollar -- as recommended by the powerful COSATU labour federation -- would be financial suicide.

"To us, that you peg against a volatile currency like the dollar is committing financial suicide," said Manuel, the country's former finance minister.

The rand has gained almost 26 percent since the start of 2009, unsettling policymakers and prompting unions to call for a weaker currency. A stronger rand hurts exporters by making South African products less competitive abroad.

The party also gave the cold shoulder to a call from the largest labour federation COSATU, its governing ally, to tax short-term capital inflows to stem the currency's strength. (Additional reporting by David Dolan and Marius Bosch; Editing by Matthew Tostevin and Giles Elgood)

Labels: ANC, JACOB ZUMA, NATIONALISATION

posted by MrK @ 6:35 PM