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In this interview he said (and this comes from someone on the "conservative", investor friendly wing of the party) that the ANC should ignore the warnings of Moody's and S&P and impose taxes and more aggressive redistributive policies on the mining sector at Mangaung, to then be implemented more rapidly by the government.
Till now Nomura had highlighted the risks of post Mangaung downgrades due to "deleterious" policies being enacted and the agencies latching onto these (as per Moody's downgrade statement last time).
However we had always thought the ANC would shy away from such specific acts in terms of conference policy outcomes, instead, expecting broad generalities and inclusion of terms like economic nationalism.
As such the possibility of downgrades on fluffy generalities was more uncertain. However if what Godongwana says is actually enacted (and with its discussion will probably come much more active discussion of nationalisation than might otherwise occur) then downgrades in the first quarter of next year actually now become more likely again.
Redistribution from the mining sector is certainly necessary though we should not forget it already does occur under the existing tax framework to some degree. The issue here is if monetary redistribution is really acceptable if it risks jobs and investment in the industry (when added to the existing non-competitiveness and labour unrest). My gut instinct would be no and that it should be phased in very slowly over the longer term and offset by jobs growth or investment incentives... but that's exactly the debate the ANC will have at Mangaung.
I still think the ANC may struggle to reach agreement on specifics though the lack of specifics from the June policy conference was more of a function of the leadership battle as opposed to policy. Equally we should be careful that even a final policy statement couched in generalities might still have implicit direction to government behind the scenes.
Other areas to watch for that are rating negative are greater use of state owned banks, proscribed assets (though we disagree this is a bad thing with ratings agencies) and possibly very aggressive targets around NHI or wider restrictions on the private sector in order to construct a developmental state.
Minimum wages will be a hot topic but probably not overly
ratings negative given there are already numerous sectoral minimum wages.
*Peter Attard Montalto is an emerging markets economist at Nomura, all opinions are his own.
