The Credibility of a Threat to Nationalize

This paper empirically estimates the credibility of the African National Congressʹs recent threat to nationalize South African mineral assets. While South Africaʹs financial press argued that the threat was negatively affecting mineral investment and asset values, mining industry executives were confident that the threat was not credible. Using financial market data, I estimate the annual probability of nationalization to have been relatively low, at 1.4%. Although specific to the South African political environment, this result can serve as a benchmark when including political risk in applied models of land and natural resource valuation, investment timing, and resource extraction