Given the talk about nationalising SA's mines, events in Zimbabwe are "certain" to make investors even more nervous than they already are about what to expect in SA, according to Free Market Foundation economist Jasson Urbach in an interview with BusinessLIVE.
Zimbabwean authorities announced this week that they had given foreign mining companies six months to sell majority stakes to local black investors. The calculation of the value of assets was yet to be agreed on by the mining companies and the minister of youth development, indigenisation and empowerment.
Debates about whether or not South African mines should be nationalised have been taking place, supported mostly by the African National Congress Youth League (ANCYL). The government, including President Jacob Zuma, has said that it would allow the debates to continue, but told markets that nationalisation was not a government policy.
Urbach said, however, that there needed to be stronger statements from the government. "The SA government therefore needs to put out a strong statement that it will uphold and respect property rights in SA, lest we face the consequences of appearing complicit in the debacle unfolding to our north," Urbach said.
JSE CEO Russell Loubser recently told a function that investors often raised concerns with him about nationalisation and also urged the government to be more assuring.
The government's role in the economy should be to create an environment conducive to doing business, Urbach said. This, he added, was best achieved by upholding the rule of law, creating a stable and predictable regulatory environment and respecting property rights.
Urbach said he was against government intervention in the economy. "When any government involves itself in business, the result is a conflicting mix of social and efficiency objectives. The result is generally poor, if not catastrophic," he said.
History has demonstrated that once nationalised businesses were re-privatised, output and productivity increased and resulted in higher wages for employees, profits for the company and tax income, Urbach concluded.
Source: Ntsakisi Maswanganyi Investors in SA eye Zimbabwean nationalisation Business Live, March 29, 2011
For text: http://www.businesslive.co.za/Feeds/inet/2011/03/29/investors-in-sa-eye-zimbabwean-nationalisation
First published by BusinessLIVE
FMF Policy Bulletin/ 29 March 2011