Geoffrey York

CAPE TOWN, SOUTH AFRICA — From Tuesday's Globe and Mail Published on Tuesday, Feb. 02, 2010 12:00AM EST Last updated on Tuesday, Feb. 02, 2010 11:18AM EST

A powerful wing of South Africa's ruling party is pushing for the nationalization of at least 60 per cent of the country's mining sector, sending jitters through Canadian investors in Africa's richest economy.

Analysts say the proposal is unlikely to become government policy, but the persistence of the nationalization idea among factions of South Africa's ruling party is causing nervousness among Canadian and other foreign miners here.

"It makes investors skittish," said Ferdinand Dippenaar, president and chief executive officer of Vancouver-based Great Basin Gold Ltd., which is developing a $230-million gold mining operation in South Africa.

"Whenever comments like that are made, I get a lot of e-mails, a lot of calls and a lot of questions. ... People say, 'You know what, until they sort that out, I'm going to invest somewhere else, I'm going to buy other stock.' "

The ruling African National Congress needs to settle its internal conflicts over issues such as nationalization because the tensions are causing uncertainty and dampening investment, he said.

South Africa is the world's third-biggest gold producer and the leading producer of other commodities such as platinum and manganese.

The details of the nationalization proposal were released yesterday by the Youth League of the African National Congress, which has been promoting the idea for months.

The nationalization of mining companies "will involve expropriation with or without compensation," the ANC Youth League said in a statement yesterday.

The government should set up a state-owned mining company to "control the country's mineral resources and bring together all the country's mining interests," the statement said.

"The ANC Youth League will in the next few months engage all stakeholders in the country to persuade them about the program towards mines' nationalization. ... We will also visit countries that have greater control of strategic sectors of their economies."

It argued that nationalization would increase the government's revenues, create new jobs, improve working conditions, and safeguard the country's sovereignty.

Youth League leader Julius Malema, speaking to reporters yesterday, warned that any foreign investor who flees South Africa because of nationalization will be quickly replaced by Chinese investors or others.

South African President Jacob Zuma is perceived as more populist and left-leaning than his predecessors, and many observers worry that his government could be influenced by Communist and labour leaders who serve in an alliance with the ruling party. Mr. Zuma insisted last week that the ANC and the government have not discussed the idea of nationalization, but Mr. Malema said the Youth League has already discussed its proposal with Anglo American PLC, the biggest investor in South African mines.

The Youth League has traditionally been a powerful force in choosing ANC leaders and influencing its direction.

Many Canadian mining companies are active in South Africa, including First Uranium Corp. and Uranium One Inc.

A Canadian government official, speaking on condition of anonymity, said the South African mineral resources department has given private assurances to Canada that the nationalization scheme will never happen.

"These noises come from the left, the populists, the unions, but it doesn't mean that it's going to be implemented," the official said. "It creates horrible noises that people are terrified of, but it's all part of the carnival, part of the décor."

Despite talk of nationalization, Great Basin Gold is proceeding with plans to begin production in June at its Burnstone mine, 80 kilometres southeast of Johannesburg, Mr. Dippenaar said.