Reform will deliver boost for SA miners

Olivia Kumwenda-Mtambo, Reuters

South Africa’s embattled mining industry could be first in line to benefit from a boost in foreign direct investment (FDI) if new ANC leader Cyril Ramaphosa implements measures seen as vital to draw in more cash, analysts say.

The ANC needs to water down black ownership targets in mining, roll out mobile broadband access and cut red tape in the labour market to revive investor interest, they said.

South Africa has failed to attract significant direct investment in recent years due to slow economic growth, policy uncertainty and higher labour costs. SA recorded FDI inflows of $2.3 billion in 2016 against outflows of $3.4 billion, UN trade and development agency UNCTAD data shows. A decade ago, it had average annual inflows of $4.5 billion against outflows of $3.3 billion. The agency said that SA’s FDI still remained low by historical standards in 2017 at $3.2 billion.

Ramaphosa has promised to deliver economic policy change.

“Mining is definitely one area where we could do more to attract foreign investments. We have a lot of potential,” Old Mutual multi-managers’ Izak Odendaal said.

Investors in particular want Ramaphosa to end an impasse over the Mining Charter, introduced as part of a wider drive to rectify the lingering disparities of apartheid. A revised charter drawn up under President Jacob Zuma raised the target for black ownership in mining to 30% from 26%, which the industry is challenging in court.

Changes to the Mineral and Petroleum Resources Development Act, yet to be passed by parliament, have added to uncertainty.

Amendments include a move to give the state a 20% stake in any new gas and oil ventures, a level the industry said was too high to encourage investment. Ramaphosa said at the Davos global forum that “if the Mining Charter is holding us back we must deal with that” and that SA didn’t want to miss out on a commodity boom.

Mining firms are encouraged. Anglo American said it’s looking forward to engaging with the ANC leadership to build a competitive industry to attract investment. Harmony Gold said it’s committed to SA and welcomed efforts to boost investor confidence.

“The embattled mining industry is one of the lower hanging fruit which is ripe for reform, with the need to urgently address the policy uncertainty,” BNP Paribas SA’s Jeff Schultz said.

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The Banking Association South Africa (Basa) is warning that legislated debt relief would create instability in the credit market and reduce access to credit for poor and low-income consumers.

This comes ahead of public hearings on the Draft National Credit Amendment Bill, to be hosted by parliament’s Trade and Industry Portfolio Committee next week.

The Bill seeks to provide capped debt intervention for poor and low-income consumers, with those eligible for the proposed debt relief earning a gross monthly