Now More than ever, South Africa’s mining industry will have to find a way to present a united front to the plethora of global players attending the 20th annual Investing in African Mining Indaba, which starts in Cape Town tomorrow.
For four days, the government and mining firms will have to convince investors in the sector that the backdrop of protracted labour unrest, high wage demands, steep production costs, uncertain demand for local minerals and a worrisome legislative environment are an unfortunate veneer.
A number of businesses are making losses, many are cutting costs while others are disinvesting in non-core assets to stay afloat. Commodities are caught up in a vicious spiral.
Demand has weakened for gold as investors anticipated the tapering of the US quantitative easing amid signs of improvement in the US economy. There is uncertainty over coal exports to China, the biggest consumer, while the price of iron ore has declined due to restricted purchases from China amid weak steel prices and tight cash flows.
The Mining Indaba takes place as a strike enters its 12th day in the platinum sector, while a similar fate for gold mines was temporarily interdicted by the courts last week. This makes for an unenviable task for stakeholders, particularly the government, which has the burden of attracting and reassuring investors.
Mineral Resources Minister Susan Shabangu will set out to promote the country as an attractive investment destination and the government as a sleek, well-oiled machine attuned to the needs of investors. This, days after she had a public spat with Anglo American’s senior coal executive Ian Hall over delays in the granting of mining licences, will be a tall order.
Questions will abound over the government’s failure to deal with problems in the sector and Shabangu will be hard pressed for answers. Any assurances she might seek to make on the government’s ability to rein in rampant labour unions will be weighed against events dating back to August 2012 when 44 people died as a result of industrial relations gone awry.
The 77-day strike at Northam Platinum’s Zondereinde mine in Limpopo, in which the company lost R500 million, is a case in point.
Peter Leon, a law expert at Webber Wentzel, wants Shabangu to restore investor confidence in the mining industry by sending clear and positive messages on the regulatory and the labour front. “Key is making mining a win-win outcome for investors, firms, the government and workers
Last year’s mining framework to restore investor confidence, which was facilitated by Deputy President Kgalema Motlanthe, is a positive start, Leon adds.
He notes that the absence of the Association of Mineworkers and Construction Union (Amcu), which has a majority in the platinum sector and is responsible for the unrest, is a missed opportunity.
An event such as the indaba is split in two: all the public events that the media has access to are talking shops, Peter Attard Montalto, an analyst at Nomura, says. Behind the scenes is where the real meat is.
“In particular, discussions around labour relations in the broadest sense and the new Mineral and Petroleum Resources Development Act amendments will be key between miners and governments and investors.”
Meanwhile, Human Rights Watch will release a report on how the Ugandan government has promoted private investment in mining in the remote northeastern Karamoja region without the consent of the indigenous people. The 140-page report, “How Can We Survive Here? The Impact of Mining on Human Rights in Karamoja, Uganda”, examines the conduct of three companies in different stages of the process.
“Human Rights Watch found that companies have explored for minerals and actively mined on lands owned and occupied by Karamoja’s indigenous people. But the Ugandan government, in partnership with the private sector, has excluded customary land owners from making decisions,” the body said.
The Mining Indaba is a one-stop shop to meet potential investors from countries including China and Australia seeking to tap into the potential of Africa’s vast resources, including copper and gold.
About 7 500 delegates, including the world’s mining elite and mining ministers, would attend the event, Jonathan Moore, the executive director of the Mining Indaba, said. He said the conference was aimed at promoting investment opportunities on the continent.
“This event is a platform for chief executives to ascertain value propositions where they can put their money. It is for connecting investors to potential sources of capital to grow the African mining sector.”
The speakers include Tom Butler, the global head of mining at the World Bank, Graham Briggs, the chief executive at Harmony Gold, and Robert Friedland, the executive chairman at Ivanhoe Mines.