Bloomberg quoted Mr Roger Baxter chief economist with the Chamber of Mines as saying that demands for the nationalization of South African mines are deterring investment and would make the country off limits to investors if it was put into effect.
Mr Baxter said that handing mines to the government would cause capital flight and bring down the credit rating of Africa’s biggest economy. South Africa is the world’s biggest platinum and chrome producer.
The ruling African National Congress's Youth League said that nationalizing 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. ANC Treasurer General Mr Mathews Phosa and Minister of Public Enterprises Malusi Gigaba have in the past week come out against nationalization.
Mr Baxter said that the seizure of mines will actually set South Africa back hugely in terms of solving the problem of poverty. He added that "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.
Mr Baxter said that the Chamber of Mines is taking the debate seriously. He added that "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 companies in South Africa such as Anglo American Plc and Exarro Resources Plc provide coal for European and Indian power plants. Mining assets listed on the Johannesburg stock exchange are worth ZAR 1.9 trillion.
South Africa's unemployment rate rose to 25.7% in the second quarter from 25% in the previous three months, setting back government’s promise to create 5 million jobs by 2020. Gross domestic product grew 4.8% in the first quarter, its biggest gain in a year.
Mr Baxter said that 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 output.
He added that "We can solve a lot of the constraints. 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."
(Sourced from www.bloomberg.net)
