| Mine deals tarnish SAfrica's Zuma, worry investors | Send to a friend |
| Monday, 23 August 2010 23:13 |
 Two questionable mining deals and two proposed measures to curb the media have posed a questionmark about how South African President Jacob Zuma's government has been running the country.The deals and proposed media curbs in and of themselves may not be hugely significant, but they have triggered a volley of criticism directed at Zuma's government, suggesting it may suffer from a leadership vacuum where cronyism can thrive. The risk for investors is that with few safeguards in place, a constrained media and a weak administration, sweetheart deals could increase in the remaining four years of Zuma's term. "This is all nauseating enough in a moral sense. It is also the kind of conduct that destroys economies, decimates employment and isolates countries," the leading Mail and Guardian newspaper wrote in an editorial. Most prominent in the headlines is a mining squabble involving the local unit of global giant AcerlorMittal, major player Kumba Iron Ore and the obscure Imperial Crown Trading that resulted in one of Zuma's sons and the Gupta family that backs him walking away with bigger bank accounts. When Zuma took office a year ago investors worried that the left-wing supporters who helped him ascend to the country's top post would derail pro-business measures in favour of massive welfare spending and policies that benefit organised labour. But little happened on the economic front due to what analysts saw as dithering, with a muddle-through approach coming as a relief to the mining companies, financial service firms and manufacturers which power Africa's largest economy. The main worry now is the pace of controversial deals could accelerate, if safeguards and checks are not applied. "If I ran a display indicating threat levels to the South African democracy, the readings would be higher now than at any time since the successful establishment of majority rule in 1994," Nic Borain, an independent political analyst, wrote on his blog. Some of the greatest threats are measures the ruling ANC set up to help a broad section of the black majority win a greater stake in the economy but which instead have enriched a narrow sliver of the political class, he said. "There are a lot of corrupt, politically connected groups and individuals that are making hay, who are riding roughshod over the government and the state," he said in an interview. ArcerlorMittal and Kumba cried foul after South Africa's mining regulators cited a licensing filing problem and then awarded a portion of their mineral rights to a site they had been working on for years to Imperial Crown Trading, a black empowerment enterprise that has a nearly blank record in the sector. ArcelorMittal reached a deal to buy back the stake, benefitting ICT shareholders, including Zuma's son and some of his political allies. Groups that support Zuma, including organised labour, criticised the government for putting the interests of a few above the interests of the state. Lonmin, the world's third-biggest platinum producer, had similar licensing application problems for a mine it had been exploiting that resulted in another minor firm with ties to political leaders receiving a piece of the action. No criminal charges have been brought in any of these cases, which critics say may not have violated legal standards but certainly violated moral ones. In response to the criticism, the ANC wants to set up an "integrity committee" to look for conflicts of interest and weed out unscrupulous elements in its ranks, an official said. "The investor community has been following the two cases and has been taking a very dim view. There is a lot of opportunism on all sides," Eurasia Group Africa analyst Anne Fruhauf said. "Some of the ministries, such as the Treasury, are known for their standards of excellence, but the more you look down the system, the more the capacity dwindles," she Investors and media are worried that the problems caused by an apparent lack of government oversight could be compounded by the two ANC-proposed media measures. The ANC-dominated parliament is debating a new classified materials bill it says will better protect state secrets but critics say will give the government broad powers to keep information hidden from the public. The draft bill protects information on regulators and state-owned enterprises, which critics said could cut investors off from information affecting equity, treasury and foreign exchange markets. The other measure is a media tribunal aimed at investigating complaints and punishing irresponsible reporting. It has been slammed by editors as a bid to crush investigative reporters who regularly expose corruption and hold the government accountable in a country where there is effectively one-party ANC rule. "These so-called leaders want to shut down the medium that exposes their corruption, looting and hypocrisy," influential political commentator Justice Malala wrote in an op-ed piece. Jon Herskovitz filed this analysis from Johannesburg Add this page to your favorite Social Bookmarking websites           |
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