Feb. 7 (Bloomberg) -- Anglo American Plc, the fourth-largest diversified mining company, said South Africa must end a debate about nationalizing mines “once and for all” this year as it’s damaging the country as an investment destination.
South Africa, site of the world’s biggest platinum, chrome and manganese reserves and about 40 percent of Anglo’s assets, has been riven by arguments over whether the state should take over mineral resources. A study commissioned by the ruling African National Congress recommended against the policy, saying nationalization would be an “economic disaster.”
“It is clearly important this year to resolve once and for all, in the right way, the lingering uncertainty created by the nationalization debate,” Godfrey Gomwe, executive director for Anglo American South Africa, said today in a speech in Cape Town. “Nationalization does not work.”
Anglo’s platinum unit, with mines in the north of the country, is the world’s largest producer of the metal, while BHP Billiton Ltd., the biggest mining company, and Xstrata Plc dig for coal and produce aluminum and ferrochrome in the nation.
The ANC commissioned a study into nationalization following demands for the state to take over mining assets by the party’s youth wing, which says the country’s black majority isn’t benefiting enough from the industry. Economists appointed by the ANC to investigate nationalization recommended against the policy, a copy of the proposal obtained by Bloomberg News shows.
Exert Greater Control
The government should consider partnering with labor unions to exert greater control over key mining companies and should boost mine taxes and use the additional proceeds to establish a sovereign wealth fund, the study said. Mining rights should be auctioned, it said.
While the study “proposes very extensive changes to the fiscal and administrative regime of the mining industry,” it’s “light years” away from becoming policy, said Nic Borain, a political analyst at Religare Capital Markets (EMEA) Ltd.
Nationalization isn’t viable and the government may take a different view to the tax-raising proposals in the study, Mines Minister Susan Shabangu said today in Cape Town. National mining policy must be competitive and encourage growth, she said.
“We look forward to the policy debate reaching a clear conclusion that nationalization would be the wrong path for South Africa to follow,” Gomwe said. “As well as removing the doubt hanging over the mining industry, that conclusion will enable us all to concentrate on the real priority of working in partnership to tackle unemployment, poverty and inequality.”
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