Glow of optimism at indaba
Delegates to the Mining Indaba were upbeat, but the acid test is yet to come
● When President Cyril Ramaphosa addressed the Mining Indaba this week, the first sitting president to do so, it was a historic moment in more ways than one.
Sitting in the packed halls were three former general secretaries of the National Union of Mineworkers — Ramaphosa himself, who founded the NUM in the 1980s, Frans Baleni and Gwede Mantashe, who is now minister of mineral resources and who has made an unprecedented six appearances at the indaba.
The Investing in African Mining Indaba was very different to last year’s event, when then mineral resources minister Mosebenzi Zwane was clearly on his way out and neither he nor anyone else in the government were much in evidence. This time, the government was very much there, pushing a consistent message of wanting to engage and work together to grow the industry, make it more competitive and attract investment. It signed a “mining leadership compact” with business and labour.
“The focus has changed to get the industry growing again — and that’s a very big shift,” said Minerals Council SA CEO Roger Baxter.
Ramaphosa’s New Dawn and progress on policy certainty, along with better times in commodity markets, saw a big lift in interest in the gathering this year, with attendance up 12% on last year at more than 6,000 people. The number of investors, foreign and local, was up 15%.
Mergence analyst Peter Major says there were more investors with real money at the indaba than at any time in the past decade.
The mood was upbeat all round, but the question is whether the mood and the money will translate into higher rates of investment and growth in SA’s troubled mining industry, which contributes about 7% of GDP and 40% of export earnings.
The big changes since last year are in the policy and regulatory environment, with Ramaphosa and Mantashe having responded to the perennial calls for policy certainty. But though everyone agrees that the new Mining Charter is much better than Zwane’s original disaster, industry executives say it remains “uninvestable’’.
Though the new charter gives credit to companies for past empowerment deals — the so-called once empowered, always empowered principle — and ensures existing mining licences are secure as long as they comply with the old 26% ownership requirement, the problem is with renewals.
Licences are typically for no more than 20 or 30 years, but this is an industry that invests based on the life of an ore body, and when companies have to renew their licences they will have to re-empower to the new 30% ownership level.
There are other outstanding regulatory issues too, but Mantashe emphasised his department would be “responsive”.
Fixing Eskom is also crucial for the industry, with investment unlikely to flow unless there is a reliable and competitively priced supply of electricity. Ahead of his state of the nation speech, Ramaphosa promised the Mining Indaba audience a package of measures to stabilise and improve Eskom’s operations, finances and structure.
Baxter points to challenges with the licensing process and transport infrastructure, as well as the cost of doing business, as deterrents to investment in mining. But the indaba’s positive tone in part reflected the “robust” discussions industry has been having with the government, Baxter said.
One important new focus is on mining exploration, which has been on the decline for the past two decades in SA despite its rich resource base. Ramaphosa said it must now be encouraged and galvanised.
Exploration has been exempted from the new charter’s requirements and Baxter said the industry and the government are working on a strategy to boost exploration.
The JSE has 20 listed exploration companies whereas Toronto has 600, Baxter notes.
But if Ramaphosa emphasised that the government was determined to create a climate conducive to investment in the mining industry, he also set out a 10 commandmentstyle list for mining companies. This included fostering inclusive growth in the areas where they operate, partnering with local government, investing in workers’ living conditions, spending on education, training and beneficiation, the development of young women, and giving shares to workers.
In most of these areas the industry has already made progress, but the pressure is clearly on to do more.
But as always at the indaba, many of the participants are there as much for the sunshine and free-flowing booze at the side events as they are for mining issues.
And the formal proceedings in the rather cavernous convention centre halls are less important than the meetings and discussions on the sidelines — and this time not only among mining folk but between the industry and the government.
Delegates included 57 ministers from around Africa, as well as two heads of state — Ramaphosa and the president of Ghana, Nana Akufo-Addo.
So successful was this event, says Mining Indaba MD Alex Grose , that he has had approaches from several other African heads of state wanting to attend next year. Behind the showcase events, however, the test of this indaba’s success will surely be whether the historic occasion helps shape a better future for the industry. The verdict from many: a good start, but it will take time.
The big changes are in the regulatory environment, with Ramaphosa having responded to the perennial calls for policy certainty