South Africa mine nationalization ‘closest since end of apartheid’

Businessweek quotes a confidential report prepared for South Africa’s mining CEOs as saying South Africa’s ruling party is closer to some form of nationalization than at any other time since the end of apartheid. A government takeover of mines could choke investments in a country with metal and mineral reserves estimated at 2.5 trillion and lead to a collapse of the currency, the rand.

Firebrand Julius Malema (pictured), the leader of the youth wing of the ruling African National Congress which often acts as kingmaker in the country’s politics, is spearheading the campaign to seize mines, farms and banks. Malema is never far from headlines in the country with racially charged comments but now an anti-corruption police unit is probing a trust fund owned by him allegedly being used to funnel payments in exchange for securing government tenders.

News24 reports South African police unit The Hawks, are investigating a trust fund run by the ANC Youth League president after newspapers carried reports detailing his lavish lifestyle including buying smallholdings and houses for cash and allegations from a businessman who claimed he had paid R200 000 ($30,000) into the trust’s bank account after Malema facilitated a government tender for his business. The ANC Youth League was founded by Nelson Mandela and other anti-apartheid leaders.

Businessweek quotes the author of the report Claude Baissac, the Johannesburg-based founder of country-risk consultants Eunomix: “The possibility of the ruling party voting for a major policy shift affecting security of tenure and ownership of the mines is now greater than at any point since the end of apartheid. [Mining companies] will now dismiss the prospect of nationalization, whichever form it ultimately takes, at their peril.”
Baissac also states in the report an ANC vote for nationalization “would represent the crossing of the Rubicon for both the ANC and for the country,” and shares of companies “with a large exposure to South Africa would tumble. Foreign capital would rush out of the country, bringing an immediate collapse of the rand.”

In June, MINING.com reported a new South Africa documentary engineered to make a case for nationalisation called Mining for Change: A Story of South African Mining, presents studio footage of ANC Youth League president Julius Malema, likening mining company owners to car thieves, an allegation Malema has since repeated on more than one occasion. MINING.com also reported during a youth league conference in June attempts by mining giants AngloGold Ashanti and Anglo American to sup with the leaders of the ANC Youth League and possibly sway them against nationalization flopped.

In June, the union representing the vast majority of mine workers backed the country’s Freedom Charter clause on nationalization. South Africa’s union confederation Cosatu, the Communist Party and the ANC make up the country’s ruling alliance which next year will make a formal decision on the nationalization of the resource sector ahead of its leadership conference at the end of 2012. The Freedom Charter states:

The national wealth of our country, the heritage of South Africans, shall be restored to the people. The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole.

Opinion site The Daily Maverick reports South Africa already has one nationalised mine – diamond company Alexkor – and few will be surprised by the fact that it is losing money hand over fist.

The Citigroup report compiled by its mining analyst, Craig Sainsbury, in 2010 states of South Africa’s $2,500bn worth of reserves, $2,300bn resides in the platinum group metals. In dollar values Guinea, South Africa, India, the Ukraine and Kazakhstan are the countries that under-produce the most in terms of their reserves:

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