Democratic Alliance (Cape Town)

24 January 2013

South Africa: Zuma and Gordhan Take Investors for Fools

press release

Contrary messages by leading figures in the ANC make a mockery of President Zuma and Finance Minister Pravin Gordhan's attempts to reassure overseas investors of stability in the mining sector.

Last week I released a statement identifying the toxic, job-destroying combination of an ignorant government oblivious to the realities of the mining industry, and self-interested rent-seeking unions.

The President and Minister Gordhan are currently in Davos, Switzerland preaching messages of serenity and stability about South Africa's embattled mining sector.

Utterances by their ANC colleagues at home show that these are, unfortunately, a smokescreen.

Consider these key contradictions:

First, President Zuma would have international investors believe that his government would prefer to "engage" with stakeholders in the mining industry rather than make "unilateral decisions" with regards to revoking mining licences. These comments come days after his Minister of Mineral Resources, Susan Shabangu, threatened to revoke Amplats's mining licence if they continued with plans to restructure. This statement was backed by ANC spokesperson Jackson Mthembu, who as recently as Tuesday was reported as saying that the ANC wants Shabangu to revoke some of Amplats's licenses and auction them.

Second, Minister Pravin Gordhan assured the audience in Davos that there are no immediate plans to increase mining taxes despite the resolution from Mangaung for government to extract more revenue from the industry. This resolution was reportedly reiterated on Tuesday by ANC Secretary General, Gwede Mantashe, who accused Amplats of stealing "our money" and declared their proposed cutbacks an indication that government needed to take "a bigger interest and control" of the mining sector.

The question is, who will investors believe? The sweet words in Davos or the harsh reality back in South Africa?

The decline in key economic indicators is quite telling.

Portfolio inflows into South Africa have dropped from R8.2bn on average per month between January and September 2012 to just R2.6bn between October and December.

The sell-off on the back of labour unrest and policy uncertainty in the mining sector has seen the rand fall to four-year lows. Weakness in the Capital Account does not bode well for the Rand going forward, with elevated downside risks in the mining sector likely to result in further declines.

As mineral resources account for approximately 60% of South Africa's exports, obstructions in productivity have caused the International Monetary Fund to revise our growth estimate for this year downwards from 3% to 2.8%.

Clearly, few investors believe the pro-investment message has any credibility.

The truth is that it is precisely this kind of contradictory rhetoric from the ANC that has created the sort of policy uncertainty that has and will continue to deter investment in the mining industry in South Africa.

No investment means no new jobs. The ANC needs to seriously reconsider its stance if it truly has the best interests of South Africans at heart.

James Lorimer, Shadow Deputy Minister of Mining

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