(Updates with comments from Gordhan starting in second paragraph.)
Sept. 2 (Bloomberg) -- A debate over nationalizing mines may affect investor confidence in South Africa if it’s not carried out properly, Finance Minister Pravin Gordhan said.
“The danger is that the nationalization debate is mishandled, which could affect sentiment, undermine confidence and raise uncertainty regarding policy and policy direction,” Gordhan said in response to a parliamentary question, dated Aug. 24 and e-mailed today. Still, a “robust” discussion should be welcomed and investors understand the difference between government policy and a debate on the subject, he said.
The ruling African National Congress’s Youth League is lobbying for the nationalization of South Africa’s mines and banks, arguing it will help redress the economic imbalances between whites and blacks that have remained since the end of apartheid 17 years ago.
Chief executives and ANC officials including Treasurer- General Mathews Phosa and Minister of Public Enterprises Malusi Gigaba have come out against the notion, arguing it would destroy Africa’s biggest economy.
The calls for nationalization stem from “frustration at the slow pace of economic transformation,” Gordhan said. Mining companies have “fallen short” of commitments to increase black participation in the industry, he said.
Lack of Diversity
“There has been minimal diversification of management and core-skilled workers and a failure to adequately acknowledge the needs of poor communities in the areas it operates,” Gordhan said.
South Africa, where companies like Anglo American Plc and AngloGold Ashanti Ltd. operate, has the world’s largest reserves of platinum, chrome ore and manganese. Citigroup Inc. has valued its total mineral resources at $2.5 trillion.
Mining companies also haven’t invested sufficiently in South Africa even as commodity prices boom, Gordhan said.
“Since the early 2000s, both mining investment and mining production in South Africa have remained relatively flat, while investment and production in other mineral-rich countries have increased substantially,” he said, citing an annual rate of mining industry growth of 7 percent in the 2000s, compared with 24 percent in Australia.
--Editors: Jennifer M. Freedman, Eddie Buckle
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