SA mining falls into deeper pit

• Country loses status as investment destination on regulatory uncertainty

Another red flag has been raised about the consequences of the continuing regulatory uncertainty in SA, which has left the mining industry and the Department of Mineral Resources at loggerheads and preparing for a bruising fight in court in December.

Another red flag has been raised about the consequences of the continuing regulatory uncertainty in SA, which has left the industry and the Department of Mineral Resources at loggerheads and preparing for a bruising fight in court in December.

SA, which should be one of the world’s mining investment magnets, has fallen out of favour. An executive recently travelled to London to raise capital for a mining project but was told in no uncertain terms not to waste the time of financial houses by asking for money to invest in SA, which is seen as a high-risk environment and unattractive.

A note from Fitch Group’s BMI Research on Monday added to the growing chorus about the consequences of bad regulation and uncertainty about the rules governing mining in SA. The BMI note drew on research done on sub-Saharan Africa, but singled out SA and Tanzania as two examples of regulatory uncertainty.

“Sub-Saharan Africa’s mining sector will remain the riskiest in the world in the coming years as a series of regulatory changes across major mining countries erodes investor sentiment and leads to policy uncertainty,” the BMI note said.

“Policy uncertainty will be a particularly pertinent theme that will hamper growth opportuni- ties in sub-Saharan Africa ... as major mining markets in the region make changes to their regulatory frameworks,” it said.

The introduction of the third iteration of the Mining Charter in SA in mid-June erased R51bn off listed companies’ market capitalisation on the day, provoking a bitter fightback from the Chamber of Mines, which has taken the department to court for a judicial review of the now suspended charter.

The charter demanded that black ownership of mining firms increase to 30%, from 26% within 12 months and that they pay empowerment partners 1% from the revenue line.

After 10 years, mining companies would have to write off any debt remaining in empowerment structures.

Roger Baxter, CEO of the Chamber of Mines, took the unprecedented step at an Australian mining conference of saying the industry had lost faith in Mineral Resources Minister Mosebenzi Zwane, who, he said, had unresolved corruption allegations hanging over him.

SA’s mining regulation score measured by BMI fell to 36.1, from 54.1.

“The 2017 year can be described as a year of policy uncertainty and real questions over the long-term sustainability of the industry,” said Michal Kotzé of PwC.

In the 2017 financial year, the market capitalisation of 29 South African companies fell by a quarter to R420bn from the end of June 2016. By August, it had been buoyed by higher commodity prices and hopes of an “amicable solution between the industry and the regulator”, reaching R506bn by the end of that month, he said.

THE 2017 YEAR CAN BE DESCRIBED AS A YEAR OF POLICY UNCERTAINTY AND REAL QUESTIONS OVER SUSTAINABILITY