South Africa, which continues to be challenged to build a more robust and sustainable mining industry, is rolling out the red carpet today to reassure investors regarding opportunities in the sector.
But even if it is able to convince the world that it is open for business, the country is unlikely to provide adequate answers about whether it will muster enough resolve to end the mounting power crisis, which risks sending much needed investment elsewhere.
The 2015 Investing in African Mining Indaba, the industry’s biggest gathering, gets into full swing today in Cape Town, amid weak commodity prices, a slowing global economic environment, high labour costs, potential job losses and power cuts.
Another issue it faces is a shortage of water.
Scrutiny
Economists and analysts have warned that South Africa is under intense scrutiny as the industry assesses its prospects at one of the largest gatherings of the most influential stakeholders and decision-makers vested in African mining.
Peter Major, a mining specialist at Cadiz Corporate Solutions, said this week was the biggest of the year in South Africa for the mining sector.
The country had done well to attract investors.
“We need to get them to write cheques, that’s always the toughest part. But the fact that they have gone through the first two steps and they have told us what it takes to write cheques, we need to capitalise on that,” he said.
Today, Mineral Resources Minister Ngoako Ramatlhodi will try to sell South Africa to foreign investors when he takes to the podium.
Flanked by Trade and Industry Minister Rob Davies, Ramatlhodi will address about 7 000 delegates and around 250 foreign and local journalists.
Taking a cue from President Jacob Zuma’s visit to Davos last month, Ramatlhodi will probably try to paint a picture of a stable country and allay investors’ fears.
Zuma said stability in mining was critical as it would help bolster South Africa’s appeal to global investors, while Major said it would take all stakeholders to fix the struggling industry.
Ramatlhodi will also have to shed some light on Zuma’s decision to refer the Mineral and Petroleum Resources Development Amendment Act back to Parliament, just before the start of the indaba.
Insiders warned that it created more uncertainty about the regulation of the industry.
The mining sector contributes about 7 percent to the gross domestic product and is said to employ 500 000 people.
The stage is set; now it is up to the country to rise to the challenge.
Carel Smit, a KPMG mining analyst, said during a pre- indaba briefing that investors wanted a return on their money.
He said they looked for what he termed a good neighbourhood – a location that included reliable electricity, a stable labour environment and infrastructure to mine.
“The good neighbourhood must have power, water, stability and clear policy and legislation and good infrastructure to extract the deposits profitable. You need a competent skilled labour force to mine that deposit, otherwise you don’t have a mine.”
Yesterday, Standard Bank released a report confirming that African mining prospects remained intact despite a cautious 2015.
“The broad fundamentals of the African mining narrative are still firmly in place,” said Rajat Kohli, the head of international mining and metals.