Sec­tor needs cer­tainty to be able to flour­ish

Business Day - - INSIGHTS INVESTING IN AFRICAN MINING INDABA -

“Li­cence to op­er­ate” (LTO) re­mains the top risk fac­ing the global min­ing in­dus­try, ac­cord­ing to the 12th edi­tion of EY’s min­ing risks sur­vey.

LTO topped the list for a sec­ond con­sec­u­tive year, with 44% of sur­vey re­spon­dents con­sid­er­ing it the big­gest risk to their busi­ness.

This was largely at­trib­uted to ris­ing un­cer­tainty in the global po­lit­i­cal en­vi­ron­ment fol­low­ing an ex­tended pe­riod of key elec­tions and global trade ten­sions. The re­sul­tant gov­ern­ment changes and tighter reg­u­la­tions have made loss of li­cence a ma­jor threat.

And few global mar­kets have suf­fered from the con­se­quences that un­cer­tainty cre­ates more than SA’s min­ing sec­tor.

“The un­der­ly­ing is­sue in the lo­cal in­dus­try is a lack of cer­tainty re­gard­ing land ex­pro­pri­a­tion, pro­posed new reg­u­la­tions and elec­tric­ity sup­ply amid load-shed­ding, the com­bi­na­tion of which is de­ter­ring for­eign in­vest­ment,” ex­plains Lili Nu­pen, a di­rec­tor at bou­tique law firm Nu­pen Staude de Vries In­cor­po­rated.

The sec­tor is also work­ing to bridge the trust deficit that was cre­ated un­der for­mer min­eral re­sources min­is­ter Mosebenzi Zwane.

“Thank­fully, the re­la­tion­ship be­tween gov­ern­ment and the pri­vate sec­tor im­proved con­sid­er­ably af­ter min­is­ter Gwede Man­tashe was ap­pointed to of­fice. He has fa­cil­i­tated a more open depart­ment of min­eral re­sources & en­ergy (DMRE), which is will­ing to en­gage and com­mu­ni­cates more clearly with all stake­hold­ers,” she adds.

How­ever, reg­u­la­tory and bu­reau­cratic red tape con­tin­ues to ham­string the sec­tor, which is cre­at­ing dif­fi­cul­ties, par­tic­u­larly within a strug­gling ju­nior min­ing sec­tor that is des­per­ate for fund­ing.

“There has been sig­nif­i­cant in­ter­est ex­pressed by in­ter­na­tional in­vestors who see the op­por­tu­ni­ties in SA’s ju­nior min­ing sec­tor. Many have also iden­ti­fied op­por­tu­ni­ties to pick up as­sets as the in­cum­bent min­ers di­vest to con­sol­i­date their port­fo­lios,” says Nu­pen.

How­ever, the reg­u­la­tory com­pli­ance hur­dles, es­pe­cially around em­pow­er­ment and environmen­tal re­quire­ments, and ad­min­is­tra­tive in­ef­fi­cien­cies cre­ate de­lays and un­cer­tainty.

Wa­ter scarcity has also been a ma­jor hin­drance in this re­gard, ac­cord­ing to Nu­pen, not only in terms of ac­ces­si­bil­ity to the re­source but also the reg­u­la­tory com­plex­ity of align­ing the depart­ment of en­vi­ron­ment, forestry & fish­eries and the depart­ment of hu­man set­tle­ments, wa­ter & san­i­ta­tion with the DMRE to stream­line the ap­provals process.

“Wa­ter-use li­cences, for ex­am­ple, are not be­ing pro­cessed at the depart­ment level, which causes de­lays. In our ex­pe­ri­ence, some in­ter­na­tional in­vestors have waited for years to re­ceive these and other ap­provals.”

This has been most dev­as­tat­ing to ju­nior min­ers, which gov­ern­ment has ear­marked as a ma­jor eco­nomic growth driver and job cre­ator.

Lili Nu­pen … trust deficit.

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