Counting cost of policy uncertainty, political meddling
SA’s mining industry is losing out on an estimated R122bn in investment due to the debilitating environment created by policy uncertainty and political meddling.
This figure was produced from a study by the Chamber of Mines published late last year in which it polled its members. The study aimed to quantify the industry’s investment and employment potential should the regulatory and policy environment improve.
“The findings of the survey illustrate that if the leadership focus in SA is shifted to creating an attractive policy, regulatory and governance environment — through ethical leadership, good governance and the adoption of competitive, stable and predictable policies — considerable new investment in mining can take place,” said Roger Baxter, Chamber of Mines CEO.
“This would create huge economic and transformation benefits for the country and the multiplier effects would be profound. Not only would this result in a significant growth in annual investment, but there would be a sizable increase in jobs, export earnings, GDP and, importantly, transformation.”
The chamber estimated that 48,000 additional, direct jobs would be created, which would be supplemented by another 100,000 indirect jobs.
The report said the bulk of currently planned investment was “stay in business” investment, with investment in new mines having halved between 2012 and 2016. This picture would worsen should the Department of Mineral Resources’ Reviewed Mining Charter be implemented in its current form.
One other finding is that five of the 16 respondents said they were not considering any new investments, and one company contemplating divesting unless conditions improve this year.
Unrelated to the findings of this study, Cadiz Corporate Solutions’ mining analyst Peter Major proposes an alternative view for stock investors’ motivations. “Commodity prices overwhelm even bad governance and bad policy. But only temporarily,” he says.
“When prices are high, guys will close one eye and look the other way. Just because Ramaphosa is head of the ANC and commodity prices are high, the spin doctors are saying there’s a new renaissance for SA mining. But experienced investors know better.
“I say all this hype is triggered by the metal price. If the metal price is right, country risk is secondary. But only until the metal price turns down. Then it’s back to reality. Fast!”
FIVE OF THE 16 RESPONDENTS SAID THEY WERE NOT CONSIDERING ANY NEW INVESTMENTS