The world’s largest mining company has a problem. Australia’s BHP has set out its intention to snap up the rival miner Anglo American in a multibillion-pound deal that would reshape the global industry. Its proposed £31bn takeover plan has already been rebuffed as a lowball offer that undervalues the company. But Anglo’s deep roots in South Africa could be a far more sensitive issue to address.

Africa’s most advanced economy was built on mining. For more than 150 years since the first discovery of diamonds, gold and coal, the industry has remained South Africa’s economic lifeblood. Today it is the world’s fifth largest producer of coal and diamonds and the 10th largest producer of gold.

As a result, Anglo American has held a role at the centre of South Africa’s fortunes, affording the company enormous soft power in the country’s economic and political development. In return, South Africa’s government is Anglo’s largest shareholder, with a 7% stake held via its Public Investment Corporation. A takeover would in effect strip South Africa of a 100-year bond with one of the world’s biggest companies.

“Nobody here views this deal favourably,” said James Lorimer, the shadow minister for mining and natural resources. “Anglo American’s business here was once the jewel in the crown of South Africa’s economy. Under this deal it could be sold off for parts from someone else’s company.”

BHP has made clear that its interest lies in copper. Anglo American’s vast copper reserves in Chile and Peru would make BHP the world’s largest producer of copper at a time when it has never been more profitable.

It is in the extraction of copper – a vital building block in the development of renewable energy projects and electric vehicles – that the mining industry can see a clear path ahead into a low-carbon future.

By contrast, South Africa’s assets are considered a risk rather than a reward. BHP plans to exclude shares in Anglo’s Kumba Iron Ore and its Amplats platinum businesses to reduce its exposure to the South African market, which it exited in 2015 by spinning out the mining company South32. Its subsidiary De Beers, the world’s largest diamond miner, has revealed a slump in production as luxury spending slips and lab-grown diamond alternatives begin to erode its market share.

BHP’s reluctance to forge fresh ties with South Africa appears mutual, if comments made by Gwede Mantashe, the country’s mining minister, are anything to go by. Mantashe, an ANC veteran and former trade union leader, told the Financial Times that he was opposed to the deal because South Africa’s previous experience with BHP was “not positive”. The company “never did much for South Africa”, he said.

Anglo occupies a unique position within the country: it was built on the backs of cheap black labour during decades of institutionalised racial oppression, but its founders also acted as a driving force behind the dismantling of the apartheid state.

Today it uses its considerable lobbying power to urge the government to overhaul its floundering public services, for example by pushing for investment to put an end to rolling electricity blackouts, in an attempt to salvage the country’s economic growth. It has spent more than $6bn (£4.8bn) in the country in the past five years, including investments in South Africa’s underfunded education system – De Beers has for decades sponsored students through university scholarships.

“So many of us have grown up with the idea of ‘rapacious’ mining companies,” Lorimer said. “But in many ways these large listed companies make for better corporate citizens. As big international companies leave South Africa, we run the risk of attracting piratical players who are after profit and not much else.”

Anglo was founded in 1917 by Ernest Oppenheimer, a German immigrant to London who first moved to Johannesburg at the turn of the century as a young diamond broker. He used £1m from UK and US investors to establish Anglo American and within 40 years it was the world’s largest producer of gold, while its twin, De Beers, commanded 90% of the world’s diamond trade.

At the height of Anglo’s industrial power the business magnate also played a role in nudging South Africa’s apartheid government towards constitutional reform. Shortly before his death he offered discreet financial backing to the 156 anti-apartheid activists, including Nelson Mandela, who faced South Africa’s 1956 Treason Trials.

His son, Harry Oppenheimer, assumed leadership of the company and took up his father’s brand of pragmatic liberalism in the late 1950s. He backed proposals for constitutional reform that would water down the ruling National party’s agenda of racial oppression – but he stopped short of supporting the ANC-led liberation movement’s calls for universal franchise.

Still, the company was “indelibly connected” to South Africa’s political reformation, according to Michael Cardo, the author of a biography of Harry Oppenheimer and South Africa’s former shadow minister of employment until his resignation from politics in February.

“Anglo is enmeshed with the history of South Africa in the 20th century – its industrial-economic development as well as its political evolution from a white supremacist state to a non-racial democracy,” he said.

“It would be a matter of some consequence if this deal went through. It would be a significant loss for South Africa which could diminish its status as a major mining player on the world stage. It would speak to the state of South Africa today. The government could well see this deal as a massive blow to the dignity and self-worth of the country. It’s politically significant and speaks to South Africa’s status on the world stage.”

With South Africa just weeks away from what is expected to be the closest democratic election in its history, the loss would be keenly political, too. Lorimer, who is part of the Democratic Alliance, said the deal exemplified the collapse of the economy under the ANC. “We used to have a world-leading mining industry, but now nobody wants to invest here,” he said.