A day after being re-elected as leader of the ruling African National Congress (ANC) party on Tuesday, South African President, Jacob Zuma kicked off five days of discussions over the country's economy, including the possible introduction of a mining tax and greater state intervention in the sector.
Zuma's re-election means a second term for the him as South Africa's president after the 2014 elections now looks inevitable, given the ANC's popular majority in the polls. But his leadership has not been without criticism. Zuma has been accused of overseeing a moribund economy, the currency has weakened 7 percent against the dollar this year, and investors are concerned at the possibility of more
A policy document released earlier this year recommended new windfall taxes on mining companies that could help fund much-needed social welfare programs in South Africa. In an attempt to assuage investors and a mining sector that accounts for 6 percent of the country's gross domestic product, the deputy finance minister, Nhlanhla Nene, insisted earlier this year that the country would not be "reckless" in deciding on a mining tax.
Robert Nathan, head of fund management at Fat Prophets, told CNBC that it was difficult to assess what Zuma's re-election heralded for business interests, but that it was not necessarily negative.
"One would expect that a continuation of Zuma in office, backed up by Cyril Ramophosa [the ANC's deputy president, a labor unionist-turned-businessman] means that any policies would not necessarily be unfriendly to business interests," though he added that any mining tax would, at first glance, appear to be the wrong move.
"I think it's fair to say that a mining tax is fairly regressive. Perhaps he's been taking advice from Julia Gillard," Nathan told CNBC Europe's "Squawk Box", alluding to the Australian prime minister's Julia Gillard's introduction of the minerals resource rent tax that applies to iron ore and coal mining.
Unemployment, which is already at 25 percent, labor strikes,two credit rating downgrades and slowing growth – down from 3.3 percent in 2011 to an estimated 2.4 percent in 2012 – have shaken investor confidence in Africa's largest economy.
Though the ANC has promised not to be "reckless" over a mining tax, and is reported on Wednesday to have ruled out outright nationalization of its mines, there are worries certain minerals could be hit by new rules.
"The state must capture an equitable share of mineral resource rents and deploy them in the interests of long-term economic growth, development and transformation," a draft document of the ANC's economic policies revealed on Wednesday, according to Reuters.
Bob Parker, senior advisor at Credit Suisse, told CNBC that it would be difficult for Zuma's government to justify the introduction of a mineral tax, despite the fact that the 70 year-old leader looks set to be un-opposed in government until 2019 due to a weak opposition called the "Forces of Change."
"The political rationale for a mining tax is only there when you have a commodities boom," Parker told CNBC Wednesday.
"If you have a year like 2012 most commodity prices have actually traded sideways. We've seen very little movement in gold,for example, which is a critical commodity for South Africa [and which] peaked in August and September in 2011. So the case for a mining tax when you have commodities prices moving sideways is, frankly, difficult to justify."