Mandela Nationalization Call Shakes Markets
SOUTH AFRICA: ECONOMIC POLICY
NELSON MANDELA'S reaffirmation of the African National Congress call for nationalizing mines and banks has shaken the confidence of foreign investors. ``The question of nationalization of mines is a fundamental policy of the ANC. I believe the ANC is quite correct in this attitude and we should support it,'' Mr. Mandela said at a news conference Monday.
After the statement, the financial rand dropped 7 percent. Under South Africa's two-tier exchange rate system, the financial rand is a special exchange rate for foreign investors that is regarded as an accurate barometer of foreign perceptions.
Stocks, which rose steadily in the weeks preceding Mandela's release, fell 2 percent after the nationalization statement.
Stockbrokers said stocks had been expected to open higher Monday but interest was dampened by Mandela's remarks.
Banking analyst Gerald Prosalendis, from the stockbrokers J.D. Anderson, says, ``Unless it is corrected unequivocally in the short term, Mandela's statement will have long-term structural implications for the South African economy.''
Exiled South African Communist Party chief Joe Slovo, in what was apparently a damage-limitation exercise, told the BBC last weekend that nationalization was not necessarily the answer and would be part of negotiations.
The gold price, which had been falling, rose by $3 to close at $418.65 after Mandela's statement was published.
Gold analysts said the gold price had risen because of fears that future gold supply could be disrupted if gold mines were nationalized. South Africa mines nearly half the world's gold.
The Anglo American Corporation, the giant mining conglomerate which produces most of the country's gold, has reacted uneasily to Mandela's remarks.
Clem Sunter, chief executive of Anglo's Gold and Uranium division, discussed nationalization with Mandela during a visit to his prison home last month.
Mr. Sunter - the only white businessman invited to see Mandela - is strongly opposed to nationalization but recognizes that market mechanisms must be found to achieve a ``far wider share ownership.''
``The major issue which we cannot escape is the gap between white and black wealth and incomes,'' he said.
``Rather than knocking down nationalization we should be offering constructive alternatives which address the problem.''
Sunter says that nationalization stifles entrepreneurship and economic growth, drives away foreign investors, and undermines accountability. ``When the arrow - in the rest of the world - is moving away from state control, it doesn't seen sensible to move in the opposite direction.''
Market analysts said foreign investors were taking Mandela's statement at face value and had reacted by selling stocks.
``The market is being driven by sentiment rather than economic fundamentals,'' says banking analyst Prosalendis. ``As long as the specter of socialism hangs over this country, no foreign money will come in.''
Anglo American economist Aubrey Dickman says there is no such thing as ``a little socialism.'' Any measure that interferes with the working of the free market is counterproductive, he says.
President Bush, reaffirming his invitation to Mandela and President Frederik de Klerk, has criticized Mandela's nationalization position.
``I don't see that nationalization - the socialization of industry with goods and services belonging to the state - is particularly helpful toward democracy.''
But Mr. Bush ruled out any easing of economic sanctions against South Africa without discussion with both Mandela and Mr. De Klerk.
The Comprehensive Anti-Apartheid Act of 1986 lays down conditions for the lifting of sanctions, including the end of a nationwide emergency and the release of all political prisoners.
Mandela has called on the international community to continue imposing sanctions.
Analysts say that sanctions have played a significant role in persuading De Klerk to launch reforms.
The ANC's guidelines on negotiation are set out in the Freedom Charter, a 1955 treatise for a moderately socialist, nonracial South Africa.
In more recent policy statements the ANC has endorsed the idea of a ``mixed economy'' with some nationalization of mines, banks and ``monopoly industries.''
Mandela's views were first restated last month after press reports appeared quoting an old friend who had visited him, wealthy black businessman Richard Maponya.
Mr. Maponya claimed that Mandela had modified his hard-line views on nationalization and now fully supported the concept of black economic empowerment.
In a subsequent statement (issued by the United Democratic Front in Mandela's name) Mandela restated his commitment to nationalization and said that any change in the ANC's position would be ``inconceivable.''
Mandela had a tumultuous reception from more than 100,000 jubilant supporters yesterday when he addressed a rally in his home town of Soweto. Hundreds of thousands thronged Soweto's streets for two days in anticipation of his return.