Mine workers emerge from the pithead at the Harmony Gold mine in Carletonville, west of Johannesburg,
Workers under agency contractors in Australia receive significantly poorer pay and employment conditions than those under direct-hire arrangements, according to a new study. REUTERS

Despite mining minister Susan Shabangu's reluctance to say it, South Africa is not going to nationalise its mines.

Even a cursory glance at the numbers is enough to show that the call from Julius Malema, the silver-tongued leader of the ruling ANC's Youth League, has its roots in the frustrations and anger of millions of young blacks rather than practical reality.

Since Malema pushed the issue to the fore 18 months ago, several attempts have been made to put a price tag on the state taking over what is the world's fifth-biggest mining industry despite its poor performance since the end of apartheid in 1994.

All the estimates are more than enough to bankrupt the government of Africa's biggest economy.

As a rough guide -- and the one put forward by the industry -- the market capitalisation of listed mining firms in South Africa, including dual-listed giants such as Anglo American and BHP Billiton, is $270 billion, nearly half the value of the Johannesburg stock market and two thirds of South Africa's gross domestic product.

Even if the government was only to take a 50 percent controlling stake, that would still imply an outlay of $135 billion, roughly equivalent to the entire 2011/2012 budget.

Furthermore, threats to tweak laws in order to expropriate shares for a fraction of their value are rendered empty by international investment guarantees that would almost certainly trigger severe backlashes from South Africa's trading partners.

"Quite frankly, the figures are irrelevant because the compensation bill will be absolutely staggering," said Peter Leon, a mining expert at Johannesburg law firm Webber Wentzel.

"Malema's answer that you just have to amend the constitution is not going to cut any ice because most of these companies are protected by bilateral investment treaties which provide for full market-value compensation."


Despite the compelling numbers stacked up against it, Malema's crusade has become South Africa's most talked about topic, eliciting fierce passions on both sides of the fence.

On one side have been advocates of the status quo, who are terrified of the idea of more state control, especially given South Africa's less-than-stellar history of running public firms.

"If the nationalisation debate grinds on for many more months, there will be fewer new businesses, fewer new jobs, more poverty and less development for decades to come," Sim Tshabala, CEO of Standard Bank South Africa, wrote last month.

On the other side are the legions of unemployed and poor who have seen little change since white-minority rule ended 17 years ago and for whom the African National Congress's 56-year-old Freedom Charter -- in particular its pledge to transfer "the mineral wealth beneath the soil... to the ownership of the people as a whole" -- retains a utopian allure.

This latter group puts Nelson Mandela's former liberation movement in a bind and helps explain why Shabangu is loath to go beyond the mantra, repeated once again on Tuesday, that "nationalisation is not government policy".

Increasingly, however, senior ANC officials are acknowledging the damage being done to the country's reputation as a promising emerging market investment destination.

"We know the harm this acrimonious and reckless debate about nationalisation is doing to investments, to the good image of our country," public enterprises minister Malusi Gigaba said this week.


Some say it is also becoming apparent that Malema's motives may not be entirely pure, with a chorus of increasingly important figures saying he is a front for vested black business interests rather than some modern-day South African Robin Hood.

In particular, the finger of suspicion falls on affirmative action investors who have hit hard times since buying stakes in mining firms under a "Black Economic Empowerment" (BEE) drive to redress the imbalances of apartheid.

Many such deals were based on hefty borrowing, which made sense before the collapse of commodity prices and mining shares in 2008 that left dividend revenues well short of debt repayments.

BEE investors pumped more than 100 billion rand into mining-related deals between 2004 and 2008, according to Empowerdex, a consultancy, and those in trouble now want a state bailout, the theory goes.

"The call for nationalisation by elements within the ANC Youth League is to save the black economic empowerment elements in crisis and not to address the interests of the workers and the poor," Communist party chief and Higher Education Minister Blade Nzimande said last month.

"Ten years from now, they will be calling for privatisation, after the state has inherited the debt."