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Cablegate: Minerals Minister Says No Mine Nationalization for South

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ZNR UUUUU ZZH
R 161344Z FEB 10
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 1248
INFO RUCPDC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
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RUEHFR/AMEMBASSY PARIS 1691
RUEHSG/AMEMBASSY SANTIAGO 0020
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 02 PRETORIA 000316

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E.O. 12958: N/A
TAGS: EMIN ELAB ENRG EINV PGOV SF
SUBJECT: Minerals Minister Says No Mine Nationalization for South
Africa

REF: 09 PRETORIA 393

This cable is not for Internet distribution.

1. (SBU) Summary: South African Minister of Mineral Resources Susan
Shabangu stated publicly and clearly that nationalization of the
country's mines is not government policy and is not on the
government's agenda, speaking at the opening of the Africa Mining
Indaba in Cape Town on February 2. She was responding to repeated
calls for nationalization of the mines from African National
Congress Youth League (ANCYL) President Julius Malema, who
stridently criticized the Minister's announcement. Many SAG
officials have confirmed that nationalization is not government
policy, but allowed that there could be a debate in the future. The
Minister's emphatic statement of policy was positively received by
the mining community, which has a number of challenges to deal with
in South Africa, including power, safety, mature geology, labor, and
black economic empowerment and transformation. Despite its
political overtones and lack of backing in facts, the sustained
carping from ANCYL about mine nationalization continues to worry
some would-be investors in the mining sector as a political risk.
End Summary.

-------------------------------------
Mining Indaba - Minister Emphatically
Counters Calls for Nationalization
-------------------------------------

2. (SBU) In a press conference at the opening of the Africa Mining
Indaba (conference) in Cape Town on February 2, Minister of Mineral
Resources Susan Shabangu stated clearly that nationalization of the
mines in South Africa is neither government policy nor on the
government's agenda. She said, "I can say in my lifetime there will
be no nationalization. Maybe when I am dead and rest assured I'm
not dying next week." Over the last few months, President Jacob
Zuma and Deputy President Kgalema Motlanthe have said there will be
no change in the country's policy and nationalization is not in the
cards. Chamber of Mines Economist Roger Baxter told Minerals/Energy
Officer that government policy was clear that nationalization was
not viable. Mining executives in general have dismissed the calls
for nationalization as hot air. Even the SA Communist Party called
the proposal inappropriate for the country's state of development.
In a presentation at an Eskom power plant, Deputy Minister of Public
Enterprises Enoch Godongwana was dismissive of the reaction to the
calls for nationalization. He said, "The debate has been going on
for my lifetime, why should it scare investors now?"

3. (SBU) ANC Youth League President Julius Malema has been
stridently beating the drum for nationalization of mines for months.
Minister Shabangu apparently aimed to give a clear and emphatic
response to quiet concern on the issue. The ANCYL nastily escalated
the row by saying Shabangu did not understand the ANC and accusing
her of lying. The ANCYL said Shabangu should stop "misleading
Qher of lying. The ANCYL said Shabangu should stop "misleading
investors" and "sucking up to monopoly capital", and questioned her
fitness for office. Malema also criticized De Beers Chairperson
Nicky Oppenheimer, who dismissed the call for nationalization.
Malema said it is up to the ANC "to take from his (Oppenheimer's)
family what belongs to the people of South Africa." (Comment: The
ANC leadership lets the ANCYL freely attack targets with gusto and
without care for facts, thereby letting off political steam. End
Comment.) The row appeared to quiet down in the press as reports of
President Zuma's latest offspring took over media space.

4. (SBU) Speaking on the margins of the Indaba, Department of
Minerals Resources Deputy Director General Jacinto Rocha stated that
government and ANC policy documents are clear in not supporting
nationalization. However, he allowed that there could be a debate
about nationalization at the next ANC policy conference in 2012.
Cutting the ANCYL some slack, Rocha noted that "youngsters" are
idealists and older people are pragmatists. Rocha went on to say

PRETORIA 00000316 002 OF 002


that democracy and nationalization do not fit together. He
emphasized that "a mine is not part of the national patrimony; a
mine is private property, which is why the concept of
nationalization would have to be thoroughly analyzed and a decision
ultimately made on its feasibility, following correct legal routes."
(NOTE: On February 4, Jacinta Rocha announced that he was stepping
down from his position after 13 years. End Note.)

----------------------------------------
Mining Charter and Constructive Approach
----------------------------------------

5. (SBU) Shabangu's speech at the opening of the Mining Indaba was
perceived by the mining industry as constructive and consultative.
This contrasted with the tough tone she took when she first took
office, when she laid into the mining industry for its failure to
live up to the spirit and intent of the mining charter, as well as a
failure to achieve transformation in the sector. At the Indaba,
Shabangu promised to consult with industry in reviewing the Mining
Charter and establishing related codes of conduct. She promised to
halve the time it takes to grant a mining license to six months and
a prospecting license to three months. The Minister appeared to be
signaling a concern about the industry's growth and expansion, along
with her traditional concern about transformation (to support
development in the country).

6. (SBU) COMMENT: It is not clear what drives the ANCYL's obsession
with nationalization of mines. The Government has been cautious in
its response, ultimately stating that nationalization does not make
any sense or have any basis in policy or law. However, some foreign
investors remain concerned and do not necessarily distinguish
between serious proposals, debate, and hot air. The Mineral
Resource Department's tardiness in processing license applications
during the conversion to the new Minerals and Petroleum Resources
Development Act has been cited as a factor that undermined South
Africa's ability to take full advantage of the commodities boom.
Other challenges that impede new mining investment in South Africa
are worries about power, safety, labor, water, transformation,
requirements for domestic beneficiation, and black economic
empowerment, as well as increasingly deep and mature geology and
reserves.

GIPS

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