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South Africa’s tough choice: Land redistribution or mining investment?

South Africa’s government faces a tough balancing act as it tries to attract foreign investors into the key mining sector while also pledging to seize land without paying compensation.

South African president Cyril Ramaphosa
South African president Cyril Ramaphosa

President Cyril Ramaphosa, who is pushing “expropriation without compensation” land reform, last week tried to quell investor fears when he spoke at an annual conference of international mining industry executives in Cape Town.

“The measure we are proposing will apply… within a clearly defined set of circumstances,” Ramaphosa told delegates. “Understandably, concern has been raised about the proposal… as we seek to address what we have termed the original sin committed against black South Africans during colonial and apartheid days.”

Forced land redistribution has become a central policy for the ruling ANC ahead of elections in May as the party tries to win back poorer black voters who still suffer harsh racial inequalities 25 years after the end of apartheid rule.

The Minerals Council, which represents mining companies in South Africa, gave a cautious welcome to Ramaphosa’s words, but said radical land reform posed the risk of scaring off investors. “The mining industry recognises the need for progress on the land issue in South Africa,” Charmane Russell, spokeswoman for the Minerals Council, told AFP.

“It is hoping that any policy change is carried out in a manner that is not negative for investor confidence.” Last year, rating agency Moody’s said in a research note that “uncertainty over how (land reform) will be achieved continues to limit near-term investment.”

The party of Nelson Mandela has vowed to change the constitution to allow land to be taken — largely from minority white owners — without payment. However it is also seeking to revive the sluggish economy by attracting foreign investment to increase the mining sector’s contribution to gross domestic product from 7% up to ten%.

Mining gold, diamonds, chrome, platinum and other minerals has long been a major source of wealth for South Africa, and the sector — though declining — is one of the largest employers in a country where more than a quarter of the population are jobless.

The battle between local communities and mining companies looking to make long-term investments has been laid bare by an ongoing tussle between the mines ministry and the community of Xolobeni in the Eastern Cape province.

Last year the courts ruled that the ministry had to obtain consent from the Xolobeni community, as the holder of rights on land, before granting a mining licence to Australian-owned Transworld Energy and Mineral Resources.

The ruling was seen as a major victory for local communities — but a blow to mining confidence. In his state-of-the-nation address on Friday, Ramaphosa said reform would start with state-owned land in urban areas being released for housing.

That reinforced the belief among some analysts that seizure of farms or mining land is not on the cards.

“It won’t happen,” Amaka Anku, head of the Eurasia group’s Africa practise, told AFP. “They are saying it due to the political pressure they are facing because (the EFF opposition party) is gaining traction by saying ‘expropriate our land’.

“It’s forcing the political elite to say the same things to get votes. But there is no real intention. “Ramaphosa might expropriate some public land that nobody is doing anything with — low-hanging fruit. But it would not be economically productive for him to go and start seizing productive land.”

The far-left South African Economic Freedom Fighters (EFF) party made its mark with voters by pushing for radical land redistribution — a policy now adopted, at least in name, by the ANC. With the battle set to rage between the ANC, EFF and the centralist Democratic Alliance ahead of election day on May 8, the mining industry will be closely monitoring for clues on whether to invest.

Mark Cutifani, head of mining giant Anglo American, said in November that the country must “rise above the understandably emotive issues around land to find solutions that are sustainable and inclusive“. “South Africa’s drive for greater investment can only be enhanced if the government clearly articulates what excellence looks like in the land issue,” he added. AFP