South Africa: Countdown To Mangaung: Towards Greater Or Lesser Certainty For The South African Mining Industry?

The National Executive Committee (NEC) of the African National Congress (ANC) held its bi-annual strategy meeting or lekgotla from 27 to 29 July 2012. Among a number of exigent issues, the NEC addressed the question of greater state intervention in the South African mining sector. It announced that it would finalise a list of strategic minerals by September that will become the target of domestic beneficiation quotas and potentially even targeted nationalisation.

State intervention in the mining sector has arguably been central to the country's economic transformation debate since December 2007, when the ANC elected its new leadership in Polokwane and resolved that the state should "intervene strategically" in the mining sector "to drive the growth, development and transformation of the structure of our economy".

This debate intensified in 2009, when the ANC Youth League, led by its then President Julius Malema, called for the nationalisation of the South African mining industry without compensation. The NEC responded in November 2010 by commissioning a research report into state intervention in the minerals sector (the SIMS report). The report was released in February 2012 and summarised in a discussion document for the ANC's national policy conference at the end of June 2012.

While the SIMS report rejects the wholesale nationalisation of mining companies as unaffordable and unconstitutional, it retains the option of nationalising specific companies, "particularly for strategic monopolypriced mineral feedstocks". It also recommends a formidable array of interventionist regulatory "reforms". The SIMS report has been widely criticised, not only by the mining industry and the investment community, who contend that it goes too far and will harm growth, but also by the ANC Youth League, who protest that it does not go nearly far enough.

It appears that the ANC itself is divided on the merits of the SIMS report's proposals, leading to an unusual delay in the public release of the resolution agreed upon by the economic transformation committee at the party's June policy conference. Six of the nine provincial delegations to the policy conference reportedly favoured a model of "strategic nationalisation" of targeted mining companies when justified "by the balance of evidence"; arguably the most extreme of the SIMS report's proposals.

Although the adoption of the strategic nationalisation policy has been publicly confirmed by several party officials, it is not clear what would determine the "balance of evidence" nor which minerals might be deemed "strategic". However, at the end of last week's strategy meeting, ANC Secretary-General Gwede Mantashe announced that a list of strategic minerals (to be the target of greater state intervention) would be finalised by the next NEC meeting in September. According to Mr Mantashe, a starting point for this is the SIMS report, which identifies coal, iron ore and platinum group metals, among others, as strategic minerals. These minerals may become subject to export tariffs, infrastructure tariffs and other measures to ensure their secure supply to state-owned entities, as well as cheaper supply to domestic industry to stimulate job creation and greater industrialisation.

At its strategy meeting the NEC also agreed that South Africa's mineral regulatory approval system should be simplified; that a portion of strategic minerals should be "set aside" for local beneficiation; and that mineral feedstock input costs should be reduced "with the state playing a critical role in this regard". No detail was provided about any of these interventions, and it is not yet clear whether the list of strategic minerals or the details of any of the other proposed interventions will be made public once it is finalised in September.

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