10/02/2012.ANCYL President Julius Malema sings before start of the ANCYL NEC Lekgotla that was held at the St. George's hotel. Picture: Masi Losi

President Jacob Zuma on Friday squashed more than two years of talk about the nationalisation of South Africa’s mining sector, saying state control or ownership of the mines could not work.

Asked during a televised breakfast briefing if the government planned to nationalise mines, Zuma said emphatically: “We’re very clear. It is not our policy. We’ve been saying this inside the country, outside the country. It cannot be.

“We have answered this question many times. We are very clear,” he added. “Our policy is a mixed economy.”

Coming at the end of a week in which two senior ministers dismissed nationalisation as unviable and the ANC released a study describing it as an “unmitigated disaster”, Zuma’s comments lay to rest two years of debate that hit South Africa’s image as an investor-friendly emerging market.

Radical elements within the ANC are still likely to float an idea first raised by ANC Youth League leader Julius Malema, especially as the party approaches major conferences in June and December.

However, Malema’s suspension from the party at the end of last year and the growing ranks of declared and heavyweight opponents of nationalisation mean the idea is not going anywhere.

“You cannot ask for greater clarity,” said political consultant Nic Borain. “If you look at the words the document uses, and you take what Zuma said (on Friday), I think we can put this issue to bed.

“Read altogether, this is the ANC very clearly saying ‘Our task as government is to get the most out of these resources.’ Nationalisation would be a catastrophe.”

Malema remained defiant over the nationalisation issue on Friday, telling a meeting of the league’s leadership: “We will never retreat”.

Criticising “pure disregard and disrespect” of what he said were ANC guiding principles, the party’s youthful rebel said the study recommending against mines nationalisation contradicted the movement’s 1955 Freedom Charter.

“The Freedom Charter said the mineral wealth beneath the soil, banks and monopoly industry shall be transferred to the ownership of the people as a whole,” Malema said in comments which also rejected the ANC’s disciplinary proceedings against him.

Even though the threat of nationalisation has been removed, South Africa’s mining sector – the fifth biggest in the world by value – faces the prospect of higher taxes and royalties as the government tries to squeeze out better returns for the country’s 50 million people.

The ANC has always had a testy relationship with the mines and affirmative action policies since 1994 have struggled to transform the industry.

The mining research released this week proposes a hefty 50 percent tax on profits once a “reasonable return” has been achieved, although it offsets the impact with a promised reduction in mineral royalties.

Economists said hiking taxes for a sector that also faced rising labour and power costs should not be done lightly.

“We keep looking over our shoulder at the legacy issues, when the rest of the road ahead is full of potholes,” said Colen Garrow, an economist at investment firm Brait.

“Taxation has to be taken very sensitively because the industry locally is in recession.”

The government is also busy building a state mining company to ensure cheap domestic supplies of minerals such as coal and iron ore that are essential to a developing economy. Some analysts believe this may yet evolve into significant state control of specific areas of mining.

“While I am convinced that general nationalisation is not on the cards, I don’t believe targeted nationalisation is no longer a consideration,” said Allan Reid, a director at Cliffe Dekker Hofmeyr. – Reuters