Johannesburg, South Africa — MININGREVIEW.COM — 04 August 2011 – Demands for the nationalisation of South African mines are deterring investment and would make the country ‘off limits’ to investors if it the policy was put into effect.
Stating this during a debate hosted by the South African Chamber of Commerce and Industry here, Chamber chief economist Roger Baxter said handing mines to the government would cause capital flight and bring down the credit rating of Africa’s biggest economy.
The ruling African National Congress Youth League says that nationalising mines and banks would help redistribute wealth in a country where inequality is little changed since the end of white-minority rule 17 years ago. Yet both ANC treasurer-general Mathews Phosa and minister of public enterprises Malusi Gigaba have in the past week come out against nationalisation.
“The seizure of mines will actually set South Africa back hugely in terms of solving the problem of poverty,” Baxter said. “In my view, it will kill the patient.”
An ANC-mandated research group is studying the options for state involvement in the economy and is expected to report to the party before the end of the year.
“The Chamber of Mines is taking the debate seriously”, Baxter said. “It’s an important national debate which we need to get out of the way. We are also having a certain degree of introspection.”
Mining assets listed on the Johannesburg stock exchange are worth US$278 billion, Baxter stated.
With favorable macro-economic conditions in place, a “youth unemployment and poverty crisis” can be righted by opening bottlenecks in electricity supply and freight transport, which have been restricted, Baxter said.
“We can solve a lot of the constraints,” he added. “We can increase our manganese and iron-ore output. We can bring more electricity into the system. If we tackle the micro constraints, the economy’s growth potential is closer to 5 than it is to 3.”
South Africa is the world’s biggest platinum and chrome producer.