Zambia's nationalisation woes: ANC
2010-07-30 19:39
Johannesburg - The Zambian experience with nationalising mines points to some of the risks, the ANC said in a discussion document placed on its website on Friday.
"Zambia nationalised the copper mines, which supplied 90% of its exports, in the early 1970s. It ended up hiring back the multinational copper companies to manage them," the ANC said.
As international copper prices fell, the companies enjoyed guaranteed management fees while the State had to bear the losses to the mines, the ANC added.
The ANC Youth League's leader Julius Malema has repeatedly called for the nationalisation of SA's mines while President Jacob Zuma has made it clear that nationalisation was not on the cards.
However, the ruling party said debate on the nationalisation of mines was "vexed" by the fact that nationalisation took many different forms.
"We need to ensure that proposals become more specific about who would end up owning the assets, who would manage them, and with what purpose, what would be the costs to the fiscus and the economy, and what would be the risks of failure as well as the benefits of success."
The nationalisation mines will be discussed at the ANC's national general conference in September.
Monetary policy
On monetary policy, the ANC said debates remained as to whether monetary policy had been sufficiently supportive of equitable growth.
Specific debates included whether interest rates were too high, stalling investment and consumption.
"It is true that both nominal and real interest rates are higher than in the global North so what is the impact on the economy, employment creation and equity?"
Another debate centred around the issue that rates were high to target inflation.
"This policy requires the Reserve Bank to use its policy instruments - mostly the interest rate - to keep inflation within the 3% to 6% band set by the National Treasury.
"Arguments for inflation targeting are that it stops the Reserve Bank from holding down inflation at any cost, while signalling private investors that inflation will be controlled."
The ANC said critics had argued that inflation targeting inherently prioritised inflation over equitable development and employment creation, in contrast to the ruling party's stated aims.
It also questioned whether the state should intervene to stabilise or reduce capital inflows.
"Short-term capital inflows permit increased and lower-cost imports, both for consumption and investment."
The consumer goods imported included low-cost clothing, petrol and food as well as a significant share of luxuries, especially cars.
Investment goods included inputs for the infrastructure build programme.
"In either case, the capital inflows help sustain imports at a lower cost, holding down inflation ... but they also push up the value of the rand, which makes exports more expensive."
In addition, the increase in imports constrained demand for local production, and consequently employment creation, the ANC added.
- SAPA