Industry’s re­silience be­gin­ning to pay off

Business Day - - INSIGHTS: INVESTING IN AFRICAN MINING INDABA -

Claude Bais­sac, MD of con­sul­tancy Eunomix, was quoted in Septem­ber last year as de­scrib­ing the South African min­ing industry as un­in­vestable.

In the four months since he ex­pressed that view, many of the fac­tors that sup­ported his as­sess­ment have been swept aside in ac­tion taken by deputy pres­i­dent Cyril Ramaphosa to com­bat the rot.

Speak­ing in mid Jan­uary be­fore the full ex­tent of Ramaphosa’s ac­tions were known, Bais­sac qual­i­fied his state­ment. “Ob­vi­ously in­vest­ment has taken place, but they’ve been mostly re­place­ment in­vest­ments through as­sets chang­ing hands, lo­cal­is­ing and large com­pa­nies dis­in­vest­ing from SA,” he said. “There have been is­sues of pol­icy, the im­pact of ap­palling macroe­co­nomic poli­cies and the down­grades and lack of growth. That has led to a his­toric de­cline of min­ing and this has led to fun­da­men­tal changes in the po­si­tion of min­ing in the econ­omy, and changes in strat­egy of the min­ing com­pa­nies and in­vestors in­ter­ested in SA.

“De­spite all of that, a lot of min­ing com­pa­nies have stuck around and done the painful job of re­struc­tur­ing. But we are see­ing ac­qui­si­tions and a re­turn to per­for­mance of a large num­ber of mines. So, I think in this dif­fi­cult po­lit­i­cal and pol­icy en­vi­ron­ment, the South African min­ing industry has fought hard and has man­aged to im­prove its ef­fi­ciency, re­duce its debt and im­prove its per­for­mance.”

He said this il­lus­trated that the min­ing industry was ex­tremely re­silient even in the face of such ob­sta­cles, and that should govern­ment fol­low through on prom­ises of re­form, the industry was well placed to at­tract new in­vest­ment.

This as­sess­ment is sup­ported by a study con­ducted late last year by the Cham­ber of Mines, which sought to de­ter­mine the industry’s ap­petite for in­vest­ment if the en­vi­ron­ment did im­prove. The out­come of the study showed that as much as R122bn could be un­locked.

Delv­ing deeper into the findings, the re­port showed that five com­pa­nies were not con­sid­er­ing any new in­vest­ments, with one con­tem­plat­ing di­vest­ing en­tirely from SA. Their de­ci­sions were driven by the lack of worth­while in­vest­ment op­por­tu­ni­ties or that other ter­ri­to­ries were more at­trac­tive due to the ad­verse lo­cal en­vi­ron­ment.

Among the sec­tor-spe­cific findings, the cham­ber re­ported that there also ap­peared to be an in­di­rect cor­re­la­tion be­tween in­vest­ment and em­ploy­ment.

The coal sec­tor, for in­stance, has the high­est in­vest­ment po­ten­tial, rep­re­sent­ing 42% of to­tal po­ten­tial in­vest­ment, but only 31% of the em­ploy­ment po­ten­tial. The gold sec­tor, how­ever, had the high­est em­ploy­ment po­ten­tial at 62% of to­tal pos­si­ble jobs, but only 31% of the cap­i­tal spend.

Th­ese fig­ures sup­port Bais­sac’s view that the best way to pro­mote trans­for­ma­tion in the industry is to help it grow.

“Mean­ing­ful trans­for­ma­tion can only oc­cur in growth. And to share the pie we need to in­crease the pie so gains are ab­so­lute and rel­a­tive for new en­trants into the econ­omy.”

Th­ese are is­sues the sec­tor has to con­front this year. With a more ac­com­mo­dat­ing at­ti­tude by govern­ment and the Depart­ment of Min­eral Re­sources, the ground ap­pears fer­tile for a new be­gin­ning to take hold.

/123RF — Ar­tur Nyk

/Rus­sell Roberts

Claude Bais­sac.

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