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Risk analyst says mining companies dismiss the prospect of nationalisation at their peril.
(Bloomberg) The ruling party may institute some form of mine nationalisation, a step that could throttle investments in the world’s biggest producer of platinum and chrome, according to a confidential report prepared for mining executives by a risk analyst.
A drive to seize mines, banks and land is being spearheaded by Julius Malema, 30, who won an uncontested second term as the leader of the youth league of the ruling African National Congress in June. The ANC in November instituted a study into the viability of nationalisation. The findings will be the “key political issue” in party leadership elections in December 2012, Claude Baissac, the Johannesburg-based founder of country- risk consultants Eunomix, wrote in the report.
“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,” Baissac wrote in the report obtained by Bloomberg News. Mining companies “will now dismiss the prospect of nationalisation, whichever form it ultimately takes, at their peril.”
South Africa is the continent’s largest producer of gold, supplies European and Indian power plants with coal and depends on mining for half of exports. In April 2010, Citigroup valued the country’s mineral resources at $2.5 trillion, the most of any nation.
“It is only our policy conference that is going to bring some finality to the matter,” Jackson Mthembu, a spokesman for the ANC, said in an interview from Johannesburg on July 29.
“Studies are being conducted. We can’t therefore jump the gun.” Malema told reporters in Johannesburg on Sunday that the party is studying how to implement nationalization rather than whether to go ahead with the policy.
An ANC vote for nationalisation “would represent the crossing of the Rubicon for both the ANC and for the country,” Baissac wrote. 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”.
On July 26 2002, shares of Anglo American (JSE:AGL) Plc, the biggest investor in South African mining, plunged as much as 12% after the Mines Ministry said it was considering a proposal that would require mines to be 51% black-owned. The rand declined as much as 1.9% against the dollar.
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