Investment boycott to intensify

IMPLEMENTATION COULD DRAG ON Mining minister says he consulted widely. Who with?

The latest iteration of the Mining Charter is a torpedo that will shatter already fragile investor confidence. It’ll also intensify the current private sector investment boycott, with negative knock-on effects on other sectors of the economy.

This is unfortunate, as government had an ideal opportunity to not only remove significant policy uncertainty and attract desperately needed investment to the mining sector, but also to repair the ever-growing distrust between private sector and government.

It’s puzzling as to why Mineral Resources Minister Mosebenzi Zwane didn’t fully engage the industry during the drafting process.

This charter could’ve been a benchmark for all sector charters and was the ideal platform to prove government’s concrete commitment to support economic growth and job creation.

Unfortunately, the exact opposite transpired.

Zwane seems to have acted in the worst possible faith, and it would appear that attitudes on both sides are now hardening. The mining industry’s certainly no longer inclined to engage.

This is where the plot thickens. Zwane said he consulted widely. But if so, who with? Jacob Zuma? The Guptas? Chris Malikane? Maybe the leaked Gupta e-mails could provide some insight. Industry’s reaction shouldn’t be regarded as a stance against transformation. Every mining executive I’ve spoken to is committed to transformation. Most have complied with previous iterations of the charter under difficult business conditions. The latest charter and the reaction from the industry will politicise an already explosive relationship, which is counterproductive to SA.

The mining industry isn’t the enemy. Unemployment and poverty are. Any transformation charter must be implementable within a reasonable commercial framework.

A charter would serve no purpose if it “destroys” the industry. The net result will be the continuation or amplification of the current investor boycott: many private sector companies have delayed investment decisions in the face of continued policy uncertainty. This has already seen the private sector accumulate over R1 trillion on balance sheets - a large chunk of which could find its way overseas.

This process already has momentum. BHP Billiton is sold out of SA, while Anglo American is reducing its local assets. Others will follow. Note that these disinvestment decisions weren’t based on empowerment legislation, but on the opportunity cost of doing business in what appears to be an unfriendly climate.

If there were any potential mining investors who waited for the launch of the charter before making an investment decision, my bet is that they are on their horse already.

The consequence is that the courts will become the final arbiter. It also means the charter’s implementation will be delayed, which will in turn delay potential shortterm investment in the sector.

So, mining’s short- to medium-term future remains repressed with the green shoots of growth brutally cut off at the base.