Nationalisation not govt policy, Gordhan reiterates

Nationalisation of South Africa’s mines and other economic assets is not government policy, Finance Minister Pravin Gordhan said on Monday in the latest government comment aimed at reassuring investors.

“From the president down, we’ve been saying nationalisation is not our policy,” Gordhan told journalists, when asked whether government should be clarifying its stance on nationalisation.

Calls from the outspoken youth wing of the African National Congress (ANC) for mines to be nationalised have worried investors, despite denials by the government. The ANC has said the issue should be open to debate.

Gordhan said failure to be clear on policies could be a barrier to higher levels of foreign direct investment that are needed to help lift growth rates to 7% a year.

He said instead of attracting higher levels of longer-term investment, South Africa has been a destination of undesirable “hot capital flows” that have led to some economic imbalances.

Manufacturing sector hurt
He said the savings climate in the country needed to improve.

“We rely on other people’s savings and that introduces the question of capital flows. It’s these that can have positive effects if they bring long-term investment.”

“[But] what we’ve observed is that we have hot capital flows.
That’s not good because it appreciates your currency. What it does is it creates volatility in flows and economic instability,” Gordhan said.

The rand currency has firmed by about 28% since the beginning of 2009 partly due to higher capital flows seeking higher yield, in the wake of accommodative monetary policy in developed nations.

The strong rand has hurt the manufacturing sector, leading to thousands of job losses in the industry. Manufacturers have also said higher-than-inflation wage settlements are a barrier to the country’s competitiveness.

South Africa’s average inflation in 2010 was at 4,3% but wage settlements were generally double that rate across the sectors.—Reuters

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