The Mining Indaba in Cape Town is over… for now, but what should we really take from it? Let’s take a step back and look at the bigger picture.
While many of us tend to look at the detail, the nuts and bolts and the figures, there are bigger dynamics a play. Not just in South Africa, but in the whole world.
Alex Grose, MD of Investing in African Mining Indaba, was right when he stated during the opening address that “mining is back up”. But back up in what sense? The keynote speaker, economist Dr Dambisa Moyo, gave a clear indication of things to come, mentioning that the outlook for populist movements arewas looking good. I can only agree as we see how governments all over the world are capitalising on it.
Apart from this, the most important element from the indaba was the emphasis on the principle of shared prosperity and responsible investment.
Partnering with black people, communities and workers in general is the backdrop for a more equitable future for all of Africa. A new era looms for business, and companies will have to be smarter and not just concentrate on the nuts and bolts.
Africa is about relationships and it will have to be managed very carefully.
In the past, mining and governments in Africa got along just fine due owing to various factors, including the relative ease with which it was possible to “have it your way”. It was cheaper to pay $1 million (R13.3 million) USD to a government official than it was to invest $50m in infrastructure development, social upliftment and equitable sharing of the profits. Money could easily buy approval.
Mining companies also function in remote areas of Africa or in highly unstable environments, including rebel-held territories, conveniently away from the public eye. The absence of social media allowed for a “no one really cares” attitude towards social, environmental and governance needs.
In addition to the aforementionedAlso, international scrutiny and stringent measures in place to punish those implicated in bribery did not really exist. Companies were immune to the shifts in international geopolitical dynamics. All this has changed as a magnifying glass is placed on the industry.
The banking sector was standing on the sidelines, supplying much of the needed funding. This, too, has changed and in a scathing attack, Claude Kabemba, director of the Southern Africa Resource Watch and himself a veteran in understanding the impact of mining on his home country, the DRC, and now from Southern Africa Resource Watch in a recent article lashed out at the banking industry in South Africa.
He concludes that although all banks subscribe to the Code for Responsible Investment in South Africa, the UN Principle for Responsible Investment and the Equator Principle, there “is no compelling evidence that the banks undertake due diligence before funding mining projects”.
Gone are the days of business as usual. The industry should be concerned about the new developments and how it will affect them. In South Africa we have the ANC’s “nine-point plan” for economic transformation.
Finance Minister Pravin Gordhan stated that there were concerns that some companies were still implicated in illicit financial flows, erosion and tax avoidance.
President Jacob Zuma alluded referred to the fact that the “scale of inequality and exclusion in the country had to be confronted urgently”.
On the other side of the equation, there are rumours that US President Donald Trump is planning to issue an executive order targeting the controversial Dodd-Frank rule that requires companies to disclose whether their products contain “conflict minerals” from a war-torn part of Africa.
Detail is not known, one can only imagine. This could counter Africa’s efforts to take control of the mining industry and fuel greater instability.
Perhaps the scuffle between Anglo American’s CEO, Mark Cutifani, and Mineral Resources Minister Mosebenzi Zwane sums up the mood in the industry up. The one refers to “false and misleading images of the industry”, while the other is convinced that he governs the country as he said so in reaction to Cutifani. Cool heads should prevail and there is a need for a win-win situation. What would be the outcome of that, the one is supported by populist movements that are growing rapidly internationally and the other is supported by financial interests. These are the geopolitical dynamics at play.
Are we sitting with the perfect example of the “prisoners' dilemma” – the one will eventually betray the other – or will we reach a win-win situation? What is there to do?
The smart company of the future will embrace these challenges, but on its terms. Although legal frameworks will allow for certainty, it is no guarantee for success. The geopolitical dynamics could rapidly alter the way business is conducted in Africa.
For business, it will not be wise to “make it up” as one goes along but, the wiser option will be trather, to adapt to change through proper geopolitical risk due diligence that underpins a solid corporate foreign policy.
● Rautenbach is a former UN chief of staff, the chief executive of Africa Business Experts and the director of the International Institute for Corporate Foreign Policy.