Shabangu to calm US investors

Published Nov 19, 2012

Share

Dineo Faku

Minister of Mineral Resources Susan Shabangu plans to travel to the US this week to meet investors and allay their fears about investment in the country’s mining sector following wildcat strikes that have crippled production.

“Next week I am going to road shows in the US to take forward the process of repositioning South Africa’s mining industry,” she told Business Report in an interview in Diepsloot near Johannesburg on Thursday at the launch of a waste management site sponsored by Pretoria Portland Cement.

On Friday, Finance Minister Pravin Gordhan reiterated that the country’s credibility with investors had been hurt by the strikes that were limiting growth and have led to two credit rating downgrades

.

The strikes “have damaged the credibility of South Africa, it has created doubt in a certain class of investors”, he said.

Walkouts had cost more than R10 billion in lost mine production and would probably shave about 0.5 percentage points off economic growth, Gordhan added.

But Shabangu was optimistic the mining sector would stabilise next year.

She poured cold water on the Johnson Matthey report that highlighted a “deficit” in platinum production.

The focus would be on doing more to improve operational issues, addressing labour relations, boosting literacy among miners and developing skills, she said.

The department would also look at overhauling the migrant labour system to address its effect on communities.

Shabangu, however, has her work cut out for her, especially after the recent front-cover article by the influential Economist magazine, which said South Africa was a country on a backward slide while the rest of Africa was clawing its way back up.

Shabangu said officials were expected to visit Australia to undertake a fact finding mission to assess how migrant labour was managed.

“We are looking at Australia whose mining operations are in remote areas to establish what form of migrant system is utilised. For example, workers can go home to their families once in two weeks,” she said.

The mining sector is increasingly being viewed with skeptism by investors. One indicator being the downgrading of Gold Fields on Thursday by Standard & Poor’s (S&P) to BB+/B with a stable outlook, from BBB-/A-3 for its long-term and short-term credit.

“We believe that South African gold mining firm Gold Fields faces increased country risk in light of increasing social and political tensions,” S&P said in a statement.

The negative impression of local mining abroad was underscored by Paris-based Exane BNP Paribas analyst Raphael Veverka who said the high level of risk due to the geopolitical climate, labour unrest and inflationary pressure made it hard to operate. “When investors assess the potential of investing in South Africa, Chile, Brazil or Australia for example, the South African environment is negative,” he said.

Shabangu said the platinum deficit issue had to be viewed in the context of the performance of the sector prior to the Marikana violence. She said the sector was already facing a glut, with rising input costs, shafts being closed down and workers retrenched because of the weakening of commodity prices and slack demand due to trouble in the euro zone.

“As a department we are reviewing the platinum industry and we will be able to make pronouncement (thereafter),” she said.

The review also looked at alternative uses of platinum in a bid to stem the loss of jobs.

She said the process would continue next year.

But the damage to the sector was confirmed as platinum output fell to an 11-year low, pushing the global market into a deficit as a result of the strikes, safety stoppages, and the closure of uneconomic operations, analysts at Johnson Matthey said last week.

Additional reporting by Bloomberg

Related Topics: