LONDON (Reuters) - Nationalising South Africa’s mines is not part of government policy, the country’s finance minister told Reuters on Thursday, saying he does not expect any change of policy on this issue.
Minister Pravin Gordhan also told Reuters Insider that despite frantic calls by trade unions for measures to curb the country’s rand currency, South Africa would carefully study other countries’ experience.
He was speaking ahead of a Sept 20-24 meeting of the ruling African National Congress during which the government will have to face down strident demands by powerful trade unions.
Union federation COSATU this week released a policy paper, calling for a tax on short-term capital flows, a reversal of steps to relax currency controls and nationalisation of some mines.
But Gordhan said: “(Mine nationalisation) is not government policy. Of course in a democracy you have a right to express your point of view and these issues will be debated but we don’t foresee any government policy change on this issue.”
The ANC has maintained investor-friendly policies in Africa’s biggest economy but rising unemployment and chronic poverty is piling pressure on the party to show its policies will work.
One big headache for the export-reliant country is the rand, which rose 30 percent last year and is up 5 percent so far in 2010 versus the dollar as foreign investors pile into the country’s bond markets.
The currency is up 13 percent against the euro this year, eroding export competitiveness.
Gordhan said South Africa is currently using reserve building and currency swap operations to curb the rand’s volatility.
South Africa’s international reserves rose by less than $1 billion in August to $39.2 billion, suggesting the central bank had not sold currencies aggressively to ease the rand’s gains.
“We said in February we will assist the Reserve Bank in buying reserves. At present we are using two options -- buying reserves and engaging in swaps. The SARB (South African Reserve Bank) has indicated that they are engaged in swaps and we constantly monitor the situation.”
Asked about the possibility of exchange controls via a tax on capital inflows, he said: “These debates are going on. We will study all pros and cons and evaluate.”
Countries around the world, including this week Japan, have been intervening to weaken their currencies, and emerging market superpower Brazil last year introduced a tax on hot money flows.
But the real is trading close to pre-Lehman highs.
“Those are matters we are studying at the moment,” Gordhan said. “Whether we move in that direction or not will be seen...do you think the tax has worked for Brazil?”
The rand’s appreciation is adding to the woes of South Africa whose rigid labour laws are often blamed for unemployment levels of around 25 percent, frequent public sector strikes and economic growth that is stuck in the sub-5 percent area.
Gordhan said growth rates of 6-7 percent for a sustained period would be needed to make a dent in poverty and unemployment.
“For that, a number of constraints to the economy will have to be removed,” he said but did not say how this would be achieved. “We need greater engagement around the labour market. Broadband needs to be cheaper, ports need to be more efficient.”
The government has offered new enticements to 1.3 million state workers to accept a wage offer and formally end a strike which they suspended last week. The strike is believed to have cost $140 million a day and hurt investment prospects.
Gordhan estimated the cost of the above-budget wage settlement at around 6.5 billion rand.
“That means some programmes will have to be cut. Six billion rand would have provided employment to a lot of people.”