Nationalisation back-and-forth damages the economy
As the ANC debates the merits of nationalisation, investors are losing their appetite for the local mining market.
Continued confusion over the implementation of nationalisation in South Africa is doing untold damage to the South African economy.
This is the sobering view of analysts monitoring the economic aftermath the ANC's national policy conference in Midrand.
Chris Hart, chief economist at investment Solutions told the Mail & Guardian the lack of clarity on the issue, and the missed opportunity to "kill the nationalisation debate" have undermined the South African economy.
"Keeping the debate alive by not saying outright that nationalisation is off the table is causing major damage to possible investment," said Hart on Thursday.
At its national policy conference in Midrand last week, the ANC promised "radical policy change" would be in the offing, particularly with regard to nationalisation and the minerals sector, but the meeting closed with no especially radical proposals in sight.
The conference did discuss a range of drastic options, including proposals to demand that majority stakes in mining companies be handed over without compensation, but in their final formulation, policy proposals made no such calls.
"Whether or not to keep nationalisation as an option was discussed at length. The consensus was that there should be a greater state intervention," ANC national executive committee member Enoch Godongwana told reporters at the conference.
The final policy discussion document on economic transformation proposed a 50% super-tax on profits exceeding about 15%. Such a tax could be expected to yield about R40-billion a year at current prices.
Godongwana could, however, not elaborate on the exact intentions the ruling party had.
In President Jacob Zuma's final address,he claimed ANC members agreed that state intervention in the minerals and mining sector was urgently required.
"Conference has agreed that the state intervention with the focus on ... industrialisation is urgently required in the minerals sector," Zuma said.
Adding further fuel to the fire, the ANC Youth League – the main proponents of the push for nationalisation since 2009 – called last week's policy conference a victory as they and the ruling party were now speaking with a "unified voice" on the matter.
"There is not much difference between what we've called for and what the ANC is now saying. We have won the debate, but it's not a victory for the youth league – it's a victory for the nation," league spokesperson Magdalene Moonsamy told the M&G.
Moonsamy said nationalisation remains at the centre of ANC policy discussions and as such "there is no running away from it".
"When the ANC talks about this radical policy changes that need to be phased in, what else could you be talking about?" Moonsamy asked.
The ANC, however, remains unconvinced of the league's assertions, saying it opportunistic for any affiliated body to claim any policy forward from last week's gathering as their own, as all matters continue to be debated.
"The NEC is the custodian of those resolutions and they are the ones who will facilitate the interaction with out branches on any matters emanating from the policy conference," ANC spokesperson Jackson Mthembu told the M&G. "For anyone to claim a victory for any policy would be jumping the gun at this stage."
But as the conversations continue, South Africa is missing out on possible investment.
Hart said that investors remain fearful of long term investment in the mining sector as long as discussions around nationalisation remained in play.
"It's difficult for anyone to put up money for a project that will only bear fruit in over a decade, in an environment with such uncertainly,' he said.
As things currently stand, the country's mining output retreated 14.5% in February 2012 as compared with a year earlier, indicating the highest drop in mining productivity since March 2008.
Nonetheless, it may not be all doom and gloom for the mining sector in foreseeable future.
Cadiz mining analyst Peter Major said that while it would be hard to gauge the economic damage the nationalisation debate is inflicting on the economy, the continued uncertainty could be down to political posturing.
"Official ANC policy has always been very mature in its approach to mining. What we are seeing now is mere pandering to various factions in the run-up to party elections. The whole world sees this type of thing, so we shouldn't be that alarmed," Major said.
However, Major added that the proposal surrounding the contentious mining approach is a "worrying factor", as ANC leaders continue "walking a tightrope" in the hopes of re-election.
"If we didn't have an example like Zimbabwe just north of our border, investors would simply shrug this off. The ANC continues to have strong ties to Zanu-PF and until there is absolute clarity it remains an issue," he said.