Two South African bills intended to regulate how the mining and private security industries work were rushed through parliament ahead of May 7 elections over ANC fears of losing votes to the Economic Freedom Fighters, according to an editorial in TheEconomist.
Julius Malema, a former head of the ANC’s youth league, leads the Economic Freedom Fighters and his platform is nationalizing businesses and farms without compensation. The ANC is expected to win the election but fear of losing votes to EFF has affected recent legislation related to business, the editorial said.
The mining and private security industry bills haven’t yet reached the statute book, but in their current form they will chase away foreign investors.
One of the mining bill’s clauses says the government will take a 20-percent stake in any
new petroleum venture. Another allows it to buy a larger stake at “an agreed
price.” If the venture proved profitable, the government could end up owning it. Any business thinking of prospecting for shale oil in South Africa would think twice about doing so, the author said.
The bill also classifies minerals as “strategic,” meaning they can be used by the government for purposes other than profit as it sees fit. For example, coal earmarked for export could instead be diverted to Eskom, the government-owned electricity company, which is struggling, according to TheEconomist. The criteria that will govern such decisions are not clear.
The security bill is also concerning some people. New regulations were needed to
govern an industry that has expanded rapidly in the past decade. There are now almost twice as many security guards in South Africa as regular police officers. But the bill also
requires at least 51 percent of the companies to be owned and controlled by South African citizens. The investments of two British security firms, G4S and ADT, ought to be
protected by a bilateral trade treaty, the editorial says. “The trouble is, South Africa is also junking such treaties, to the consternation of its trading partners.”
The Economist describes the bills as “business bashing,” and part of an ominous trend. It cites a report by the South African Institute for Race Relations on all business-related legislation since the beginning of 2013. It concludes that all the bills had the following in common: “They weaken property rights, reduce private-sector autonomy, threaten business with draconian penalties, and undermine investor confidence.”
One other thing they had in common: The amendments regarding ownership stakes were inserted into both the mineral and security bills late in the process. An early draft of the mineral bill capped the state’s potential stake at 50 percent. The local-ownership clause was slipped into the security bill only as it made its way through the committee stage of parliament.
The timing suggests that the elections in general, and the EFF’s call for nationalization in particular, had a corrosive influence on their drafting, according to the editorial.
