Indaba wallflower

2012-02-10 07:46

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.


  • wilana.olivier - 2012-02-10 08:54

    "Where there is a mine in Africa you are bound to hear Afrikaans. " Hoe dra die stukkie inligting by tot die artikel? Dit klink vir my of die skrywer net weer onnodige sinne indruk om die ruimte vol te maak. Wat 'n morse van spasie! Ek het myself nou skoon vervies. Dit klink amper of die skrywer dit as 'n negatiewe aspek sien. As dit dan die geval is, moet die skrywer uitbrei op sy/haar stelling. Niks kan deesdae berig word sonder om ras/taal of kultuur in te werk nie. Sies vir julle - ek is hoogs teleurgesteld in julle! Ek skryf uit pure nydigheid in Afrikaans - ek hoop julle kan dit lees EN verstaan! 'n Baie Omgekrapte Leser!

      Rob - 2012-02-11 16:39

      Boy, have you got a chip on your shoulder which is blinding you to the facts! What the writer is implying is that South Africans are in such demand that they are being employed and to be found in mines in the rest of Africa because of their expertise which is being used to great effect on the new mines in Africa while jobs are becoming scarce here due to obvious reasons. I know, because I was in a couple of countries in Africa in the last 10 years myself. So you can get off your high horse, calm down and apologise and read the article properly.

  • appietrader - 2012-02-10 09:14

    SA mining share not expensive but not worth the risk. Found much good value less risk in Canada.

  • Rob - 2012-02-11 16:45

    Zuma and his cronies have realised that they have ruffled the feathers of the goose that laid and is still laying the golden egg. If it wasn't for platinum, coal and iron ore we would be in trouble. Time will tell if it isn't too late.

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