Glencore bets big on SA market
INVESTMENT: $1BN TO BUY CHEVRON’S OIL REFINING, FUEL STATIONS AND BID FOR OPTIMUM COAL
While other miners have scaled back their operations in SA, the mining giant has kept its investments.
Miner Glencore has set its ambitions on expanding in South Africa, the homeland of its chief executive Ivan Glasenberg. As the company’s former business partner and now president, Cyril Ramaphosa promises an economic recovery and Glencore is reaping profits from coal and chrome assets as prices rise.
Glencore announced in October a $1 billion (R14 billion) deal to buy Chevron’s oil refining and fuel service stations in South Africa and considered a bid for the Optimum coal mine.
The oil bid “was a pretty strong vote of confidence in the South African environment”, said Martin Kingston, chief executive of NM Rothschild & Sons SA, which is advising Chevron on the sale.
“Glencore understands the environment very well,” said Kingston. “They are effective behind the scenes and they have their finger on the pulse.”
In 2014, Ramaphosa sold his mining stakes as he returned to politics and promised to revive the economy, clamp down on corruption, and attract $100 billion in new investments.
Professor Anton Eberhard of the University of Cape Town said: “While he is obviously keen to attract more investment and will be more private-sector friendly than [president Jacob] Zuma, he will be extra careful in not granting any favours to businesses or people with whom he had previous business relationships.”
Glencore already has a large presence in South Africa – it’s one of the leading exporters of coal in the country and ranks as the world’s biggest producer of chrome. While other miners such as Anglo American have scaled back their operations in South Africa, Glencore kept its investments.
“They have a record of thriving where others can’t or won’t go,” said Hanre Rossouw, a fund manager at Investec in Cape Town.
In 2015, Glencore was pressured into selling the Optimum coal complex to a company partowned by the Gupta family. Allegations of corruption against the Guptas helped bring down Zuma’s presidency.
Still, Glencore was shaken by the episode, which led to the departure of Clinton Ephron, who was head of its South African operations and seen by many as Glasenberg’s protege. – Bloomberg