Cape Town - The industry executives who pile into Cape Town
every year for the annual African mining conference love the sun, wine and
stunning mountain backdrop the venue provides.
But South Africa’s once towering mining industry is no draw
and investors flocking to the Indaba, as it is called, have their sights set
on alluring prizes elsewhere on the continent.
Gold and diamonds built Africa’s largest economy, which also
boasts 80% of the world’s platinum reserves, but outside investors remain wary
of sinking money into an industry that appears in a state of terminal decline.
Soaring labour and power costs which are not matched by
productivity gains, not to mention the world’s deepest shafts for those mining
gold, are all making South Africa a treacherous place for miners who are
finding less headaches elsewhere.
Political risk and policy uncertainty have also dampened the
enthusiasm of an industry that must invest millions and even billions to build
mines before it can recoup any profit.
“You look at any of the major mining companies and they are
very happy to spend billions of dollars to develop mines and related
infrastructure in countries like Mongolia, Indonesia and Guinea, and are
willing to spend billions of dollars on acquisitions, and a multi-year
investment programme in Mozambique,” said Adam Brett, a London-based investment
banker with JPMorgan who focuses on mining.
“And just next door is South Africa. There are resources in
South Africa, there are opportunities but frankly it is perceived to be easier
to go to Asia, South America or indeed other parts of Africa,” he said.
South Africa reassured investors on one front this week by
delivering a hammer blow to a nationalisation drive by radical elements within
the ANC.
A study expected to become official ANC policy said
nationalisation would be an “unmitigated disaster.” But it also proposed a
“resource rent” that would effectively be a super tax of 50% on earnings.
“It is fairly clear nationalisation is not a way forward,
and clearing that out of the system is a very good thing but it has raised
various other areas of uncertainty... and any policy uncertainty for a business
investor is not a good thing,” said Ian Farmer, chief executive of Lonmin, the
world’s third-largest primary platinum producer.
Moving out
Platinum miners have little choice outside of South Africa
because that is where the stuff is found, but others have far more choice.
At one of the lavish dinners put on for delegates, a senior
mining executive said he feared South Africa was following the statist path
taken by other African countries after they gained their independence from
colonial rule.
But he praised other African mining states like Burkina Faso
and Ivory Coast for opening their doors to mining investment.
Still, there are concerns in frontier Africa as a wave of
resource nationalism surges across the region.
Nick Holland, chief executive of South African-based Gold
Fields [JSE:GFI], the world’s fourth-biggest bullion producer, told Reuters
that “resource nationalism is my number once concern at the moment”.
Holland said in December that looming tax changes in Ghana
have put a question mark over $1bn in Gold Fields’ planned investments in the
country, and told Reuters that his company remained in talks with the
government about the issue.
South Africa does remain a mining gateway to the rest of
Africa for both investment and manpower, with the continent drawing on the
country’s executives and engineers to get projects off the ground and running.
Where there is a mine in Africa, you are bound to hear Afrikaans.
The chief executives driving the looming $90bn tie-up
between commodities giant Glencore and miner Xstrata, Ivan Glasenberg and Mick
Davis, are both South African-born.