S. African Business Reacts Cautiously to ANC Proposals

ECONOMIC policy guidelines adopted by the African National Congress (ANC) at a recent conference here have moved closer to the principles of a free-market economy. But the policies have yet to win the full confidence of a nervous business community.

Proposed restrictions on potential foreign investors - both on their range of access to some sectors of the economy and on local borrowing - have drawn a negative reaction from a business community striving to foster a climate conducive to foreign investment.

Financial analysts say a drop in stock prices on the Johannesburg Stock Exchange June 1 was prompted by the ANC's threat of mass national protests to break a deadlock in negotiations for a political settlement rather than by its economic policy guidelines.

"But its proposed restrictions on foreign investors can only further dampen investor confidence and delay the predicted upswing for mid-1993," says one stockbroker. "ANC President Nelson Mandela had raised expectations earlier in the year that outmoded concepts like nationalization were on the way out." Finance minister hopeful

Finance Minister Derek Keys says he is hopeful that a program of economic growth is possible based on the ANC's policy guidelines. "Compared to what the ANC was saying two years ago, there is a considerable advance in their new position," he says.

The ANC, once wedded to doctrinaire socialist policies, has proposed that economic growth and a redistribution of resources - to correct imbalances of the apartheid era - should go hand in hand. It proposed a "mixed economy" to foster constructive relations among the state, the trade union movement, and the business sector. Antitrust and antimonopoly legislation would be introduced to curb "the continued domination of the economy by a minority." But the ANC committed itself to the protection of property rights with the promise of "just compensation" where land was appropriated.

The organization adopted a more flexible approach to nationalization of industry, insisting that, although it remained a "tactical option," the deciding factor would be economic conditions.

In a separate investment code, the ANC assures investors of fair compensation in accordance with international principles of law in the event of a corporation being nationalized.

Although the ANC stresses that foreign investors are welcome to invest in South Africa, it says they will be blocked from investing in certain "strategic" areas of the economy - like land and natural resources - and could have limits placed on local borrowing.

The ANC also makes clear that potential investors will be screened according to the extent of their commitment to the training and employment of disadvantaged sections of the community.

The proposed restrictions on foreign investors were criticized by industry leaders and both liberal and right-wing politicians in the minority Parliament. Foreign investment a concern

Ben van Rensburg, chief economist of the South African Chamber of Business, says the proposals show that the ANC is "unaware of the forces which drive investors to invest offshore."

But the Business Day newspaper said in a June 2 editorial: "It is difficult to take serious exception to the ANC's proposed economic policies, ... and that in itself is a measure of how far the ANC's leadership has shifted from its earlier unflinching support for socialism."

The influential daily added: "The ANC wants some affirmative action in employment practices ... but its requirements seem tolerable."