State’s indifference to criminal vultures is costing SA heavily

What must offshore mining companies make of the investment environment in SA when they hear their peers give a forthright assessment of how tough it is to operate a business in the country?

At the risk of sounding repetitive, Sibanye-Stillwater CEO Neal Froneman once again used a public platform this week to vigorously wave red flags about the problems in SA and why it simply is not attracting as much investment as it could in one of the world’s biggest mineral treasure troves.

There was nothing new in what he said, and that was what was so sad. Nothing has changed despite the government’s anger at his honest assessment of its failings.

Among SA’s mining executives, Froneman is one of the few who tells it precisely as it is. His blunt assessment is not universally popular as other executives prefer a more subtle approach or point to their co-operation with government officials to keep the regulator sweet. Some opt to simply not talk about the state of the local mining industry in public.

For this reason, Froneman is an often-quoted source of what the ills are for the local mining industry, as well as the economic and political landscape in which it operates. If there is ever a day of reckoning, he will be able to say he did all he could to raise fundamental concerns.

He shines a rare light into the dark recesses of what must be tense discussions behind closed doors between the mining industry and the department of mineral & energy resources as well as other ministries.

BOILED OVER

Another CEO who expresses concerns is Orion Minerals’ Errol Smart, who is not only trying to bring the mothballed Prieska copper and zinc mine back into production after three decades of lying fallow, but also heads the junior desk at the Minerals Council SA.

Smart’s frustrations boiled over with the disruptions at Prieska in the Northern Cape as failed bidders for contracts at the R5bn mine project whipped up parts of the local communities to put pressure on or intimidate Orion into giving them lucrative deals.

He made two astonishing statements. One was that executives regularly reached out to each other to commiserate about these mafia-type activities, seeking support and advice from their peers because of the rampant prevalence of this type of activity affecting so many companies. The second statement was that the state had not intervened through its policing structures to stop these events, which included heavily armed men accompanying protesters marching through the town of Prieska.

Whipping up communities, which have fraught relationships with nearby mines and the companies that operate them, is a short-term and extremely dangerous selfserving thing to do. One has to look no further than the events of 2012 at Marikana where 45 people were killed in labour unrest that spilt into the impoverished community.

Any right-thinking person would assume a proactive government would step in as quickly as possible to avert an escalation of community tensions, especially in cases where businessmen, politicians or criminals are extorting favours, cash and contracts from mining companies by inflaming community grievances, real or imagined.

POLICE APATHY

In a country where poverty is widespread, jobs are few and opportunities scarce, it’s not hard to fire up anger at mining companies, paying off certain influential people in communities, luring unemployed, bored youths and adults into marches, road blockades and scuffles with mine security to raise the heat and put the company in as poor a light as possible.

There are any number of stories from mining executives that these activities are met with apathy from the police when they are reported. On-mine security companies can only do so much. It really needs a concerted effort from the police. When it doesn’t come after repeated requests, it inevitably raises the cynical question on whether some in the police stand to benefit from whatever these groups wrest from mining companies.

For a prospective investor from Australia, Canada, the US or somewhere in Europe to hear of these situations, their immediate concern must be about the rule of law and the state’s ability to protect an investment under threat from criminal enterprises.

If SA’s government is unable to show any efficacy or intent to stamp out these rackets, then President Cyril Ramaphosa’s drive for R1-trillion of investment in the economy will be difficult.

There are other places in the world investors could safely put their money without the exasperation and risks associated with putting it in SA.

These investors would also carefully weigh comments from people as influential as Froneman when he says the reason Sibanye, one of SA’s largest miners, remains in the country and is investing R6.3bn in growth projects in the country, is that it has large cojones and doesn’t stand for nonsense.

FIRM POSITIONS

Sibanye has started receiving veiled threats from groups demanding a slice of the R6.3bn in the form of supply contracts and supplying jobs. These new groups purport to represent the community with which Sibanye has long held discussions and formed relations.

“We know how to prosper in this type of environment. We do not mislead investors. We tell them how it is. We tell the government and organised labour how it is,” he said.

“We’ve levelled the playing field for our businesses in SA by not allowing any particular stakeholder to abuse their position. You’ve seen clear evidence of that, whether it relates to the government or organised labour. We take very firm positions,” he said.

Imagine the message that comment sends to companies considering foreign direct investment in SA, putting aside the electricity supply and pricing crisis, rampant corruption, the failure of stateowned entities, regulatory uncertainty and hostile organised labour.

For foreigners to stomach all these risks, the reward must be large. That means a lot of smaller potential projects or investments with slim profit margins won’t come to fruition because it’s simply not worth it. No investor will put money into SA just because of heartfelt pleas from Ramaphosa.

These are not charities or white knights making investment decisions for sentimental reasons. There’ sa hard economic reality and pragmatism that transcends all ideology espoused by the government. Talk counts for nothing. Only decisive, investorfriendly action will open the investment floodgates.

This government really must wake up and realise how much is at stake in its dismal handling of the economy and broader societal problems.