South Africa is ramping up spending on railways and roads to lure mining investment as the government fights off threats from within the ANC to nationalise mines.

Transnet would spend R300 billion over the next seven years to expand capacity, particularly on its iron ore, coal and manganese export lines, President Jacob Zuma said in his State of the Nation speech on Thursday.

Mining “plays a critical role in the socio-economic development of the country”, Zuma said. “We remain committed to the creation of a favourable and globally competitive mining sector and to promote the industry to attract investment.”

The government is battling to lure investment in mining as the ANC Youth League is pushing for the nationalisation of mines.

An ANC-appointed task team to investigate the matter said nationalisation would be a “disaster”, while recommending higher taxes.

“The mining industry has been battered by a lot of uncertainty with regards to policy, mostly centred around nationalisation,” Stanlib chief economist Kevin Lings said on Friday. “They are trying to eliminate that uncertainty.”

Major diversified mining firms operating in the country include Anglo American, Xstrata, Rio Tinto and BHP Billiton.

Anglo American, the largest investor in local mining, and AngloGold Ashanti are among companies that have said the nationalisation debate was deterring investment.

“There are no mixed signals about this,” Zuma said in an SABC interview on Friday. “Nationalisation is not the ANC’s, or the government’s, policy.”

South Africa needed to boost the contribution of mining to gross domestic product to more than 10 percent from about 6 percent, Planning Minister Trevor Manuel, who chairs the National Planning Commission, said last week.

Meanwhile, mining production volumes declined 5.1 percent in the fourth quarter of last year from a year earlier, Statistics SA said on Thursday.

Zuma is betting that increased spending on infrastructure projects will help offset slower growth and reduce the jobless rate.

High port costs and a lack of rail and power capacity have been cited by the government as one of the major obstacles to faster economic growth.

“The massive investment in infrastructure must leave more than just power stations, railway lines, dams and roads,” Zuma said. “It must industrialise the country, generate skills and boost much-needed job creation.”

The government was planning to send officials to the Middle East this week to seek funding from the region’s sovereign wealth funds to help pay for projects, Performance Monitoring and Evaluation Minister Collins Chabane said in an SAfm radio interview on Friday.

Transnet’s balance sheet was “strong enough” to fund the projects over seven years, Sapa reported, citing the Minister of Public Enterprises, Malusi Gigaba.

Finance Minister Pravin Gordhan has pledged to cut the budget deficit to 3.3 percent of gross domestic product in three years from 5.5 percent in the current year.

Economic growth was expected to slow this year to below 3 percent from 3.1 percent last year as Europe headed toward recession, Gordhan said last month. That is less than half the 7 percent annual expansion that is needed to cut the jobless rate to 14 percent by 2020 from 23.9 percent now.

Upgraded rail, road and water systems in Limpopo would help unlock coal, platinum, palladium, chrome and other mineral deposits in the region and encourage investment, Zuma added.

Rail systems in Mpumalanga would be expanded to connect coal fields to power stations, while transport links between Gauteng and the port of Durban would also be improved, he said.

Transnet would spend R200bn on rail projects over seven years, including links that would enable it to transport 82 million tons of iron ore a year, up from 60 million tons, Zuma said. Transnet will build a railway line to carry 16 million tons a year of manganese to the Coega port on the Eastern Cape coast.

The government would reduce port costs for exporters of manufactured goods, saving them R1bn, Zuma said. He has also asked Eskom to curtail planned electricity price increases.

“We see our role as being to lead and guide the economy and to intervene in the interest of the poor,” Zuma said.

The rand weakened against the dollar on Friday, trimming the gain for the year to about 4 percent.

At 5pm, it was bid at R7.7478 to the dollar, 15.74c lower than at 5pm on Thursday

. – Bloomberg