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Malema Censure Derails South African Nationalization Drive

ANC Youth League Leader Julius Malema
The ANC yesterday suspended Youth League leader Julius Malema for five years, saying he had undermined party unity and damaged its reputation. Photographer: Alexander Joe/AFP/Getty Images

Julius Malema’s suspension from South Africa’s ruling Africa National Congress may reduce the risk the government will nationalize mines, bolstering investor confidence in the world’s biggest producer of platinum and chrome.

The ANC yesterday suspended Youth League leader Malema, 30, for five years, saying he had undermined party unity and damaged its reputation. The group’s spokesman Floyd Shivambu was also cast out of the party for three years. Both may appeal the decision. Four other league officials were given suspended sentences for disrupting a party meeting.

“Julius Malema had become synonymous with everything investors didn’t want to see,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in a telephone interview yesterday. The ANC’s action addresses “a source of significant political risk in South Africa.”

Chief executives of the largest companies operating in South Africa, including Anglo American Plc and AngloGold Ashanti Ltd., had said that Malema’s nationalization drive was deterring foreign investment and curbing growth in Africa’s biggest economy. The ANC Youth League, which helped Zuma oust his predecessor, Thabo Mbeki, as ANC leader in 2007, successfully pressured the ruling party to investigate the viability of nationalization last year.

Credit Rating Outlook

Moody’s Investors Service lowered its outlook on South Africa’s A3 credit rating to negative from stable on Nov. 9, citing “heightened political risk,” including calls from within the ANC for more interventionist economic policies.

Any appeal would be heard by an ANC panel whose members include businessman Cyril Ramaphosa, who owns coal mines, and Trevor Manuel, a former finance minister and the current head of the National Planning Commission. Both have rejected nationalization.

Even if the panel shows leniency, Malema’s nationalization drive is unlikely to gain traction, said Mark Rule, a mining analyst at BOE Private Clients, a money manager for wealthy individuals.

“Malema and his supporters are being very publicly vocal about it, but they have been wrong-footed because they haven’t got any support from the mother ship,” Rule said by telephone from Cape Town yesterday. “There is quite a firm stance against it from the ANC.”

White Minority Rule

BHP Billiton Ltd., Xstrata Plc and Lonmin Plc also operate mines in South Africa, which supplies European and Indian power plants with coal and depends on mining for half of export earnings. In April 2010, Citigroup Inc. valued the country’s mineral resources at $2.5 trillion, the most of any nation.

Malema has lobbied the ANC to seize mines and banks, saying South Africa’s black majority hasn’t benefited adequately from those riches in the 17 years since the end of white-minority rule. Last month, he led thousands of young supporters on a 62-kilometer (39-mile) march between Johannesburg and Pretoria, calling for nationalization and jobs. A quarter of South Africa’s workforce is unemployed.

“The key proponent of nationalization has been reined in,” Anne Fruhauf, Africa analyst for Eurasia Group, said yesterday in telephone interview from Bogota, Colombia’s capital. “The suspension will be seen in a positive light.”

The rand gained for a second day, rising as much as 0.7 percent to 7.9156 against the dollar and trading at 7.9281 as of 4:07 p.m. in Johannesburg.

Nelson Mandela

The ANC took disciplinary action against Malema after he called for the ouster of neighboring Botswana’s government, which he called a “puppet of the West,” insulted ANC leaders and disrupted a meeting where Zuma was present.

Malema was unrepentant yesterday, vowing to fight the ruling in the spirit of former President Nelson Mandela, who also disagreed with senior ANC leaders when he led the Youth League in the 1950s.

“I am going to fight with whatever we have because this is the legacy of former president Nelson Mandela, and it is worth fighting for,” the Johannesburg-based Sowetan quoted Malema telling supporters in the northern town of Polokwane yesterday. “The ANC is the only home we have, and if those with power kick us out of our home, there is nowhere to go.”

Malema also has legal problems. He’s being investigated by the police’s Hawks anti-corruption unit and the tax agency for possible wrongdoing after companies linked to him won government tenders, the Johannesburg-based Sunday Times and Sunday Independent newspapers reported on Oct. 30.

Suspension Justified

Seventy percent of 601 people who responded to a mobile-phone survey conducted by research company TNS South Africa and FSMS, a free communications service, said Malema’s suspension was justified, while the 30 percent felt the ANC acted too harshly, TNS said in an e-mailed statement today. Thirty-three percent of respondents said Malema should form a new political party, while the balance said he should serve out his sentence, it said.

Just 6 percent of 27,174 people who responded to an online survey by media website said the ANC action was “unnecessarily harsh.”

Malema’s exit won’t solve the pressing social problems confronting South Africa’s youth, more than half of whom are unemployed, the South African Institute of Race Relations said.

“A country with South Africa’s inequalities will always be a breeding ground for political radicalism,” the Johannesburg-based institute said in an e-mailed statement. “If the country is not able to sustain significantly higher levels of economic growth, new Malemas will come to the fore.”

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