* ANC plans state mining firm
* Party says will not nationalise mines
* Mine safety a big ANC priority
By James Macharia
JOHANNESBURG, April 14 South Africa's ruling ANC plans to set up a state mining firm after next week's election, but nationalising mineral assets is not on the agenda, a top official of the African National Congress said.
Led by presidential frontrunner Jacob Zuma, the ANC is expected to retain its dominance in the April 22 general election with a promise to do more for the poor in the major metals producer but also to maintain business-friendly policies.
ANC Secretary-General Gwede Mantashe, a former mine workers leader who also chairs the ANC's Communist Party ally, said a state mining firm would create jobs and help Africa's biggest economy benefit more from its mineral wealth.
"Having a state mining company is distinct from nationalisation. It will compete with other companies in mining," he told Reuters, adding it would also renew a focus on local processing.
"To sell gold or iron ore in raw form undermines our mining industry. We sell less value like raw iron ore and buy products such as steel at a higher cost."
But signs of greater state involvement in the sector, which accounts for 7 percent of gross domestic product and nearly half a million jobs, could raise concerns among investors wary of any shift to the left under Zuma. South Africa is the world's top source of platinum and No. 3 gold producer.
Mantashe said the new firm might focus on strategic minerals such as coal, uranium or platinum, and operate in a similar manner to state-owned PetroSA, which competes with private oil firms, particularly in exploration.
The mining sector is subject to intense scrutiny by big foreign groups such as Anglo American (AAL.L), South Africa's biggest mining player, which want the sector handled carefully.
The global economic slowdown has already knocked metals prices and put thousands of jobs on the line.
Paul Walker, chief executive of London-based metals consultancy GFMS, said state involvement was a bad idea.
"My instincts tell me as a general rule state miners are less efficient than private miners. Making a return on capital for shareholders focuses the mind like nothing else," he said.
"Talk of beneficiation has been around for some time, but they have to realise there is a limit as to how quickly you can turn this country into a jewellery maker," he said.
"It requires training, investment, infrastructure and there is competition out there with countries like India and Turkey."
Mantashe did not say what the cost of setting up the state firm would be or how it would obtain mining rights. The state holds mining rights taken from smaller mining companies that have been unable to exploit them.
Another priority for the ANC after the election will be ensuring mining companies do more to build roads, schools and hospitals in the communities where they mine.
"The government can achieve these welfare goals by requiring mining companies to design social and labour plans when seeking to convert their mining rights into new ones," Wonder Nyanjowa, a Cape Town-based Frost & Sullivan mining analyst said.
The ANC, allied to unions including the powerful National Union of Mineworkers (NUM), has also pledged to address South Africa's dire mine safety record, one of the worst in the industrialised world.
Shoddy maintenance, earth tremors and human error led to 168 mine deaths last year and 221 in 2007. The government routinely halts production after each fatality.
Mantashe backed legal amendments passed by parliament last year, but yet to be signed into law, which would enforce higher fines and make mine executives criminally liable for deaths. The industry fears the laws would mean an exodus of mine managers.
"When the price of a commodity is strong, some producers take short cuts to push for more production. In such cases, they should be punished," said Mantashe. (Editing by Matthew Tostevin and James Jukwey)
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