SA mines stand ground in rankings
SA’s mining industry stayed steady in the eyes of investors, with a slight slip in the way policies are perceived, according to the latest data from the Fraser Institute.
SA’s mining industry stayed steady in the eyes of investors, with a slight slip in the way policies are perceived, according to the latest data from the Fraser Institute.
Canada-based Fraser Institute has released its annual survey of mining companies conducted at the end of 2019. The survey was based on 263 full and partial responses to 2,400 questionnaires sent to mining and exploration companies.
The 73 jurisdictions included in the latest survey include Canadian provinces, US and Australian states, and a handful of countries in Africa, Asia, Europe and South America. This is the smallest number of jurisdictions yet in the survey, and it is down from 83 measured in 2018, showing a steady decline from 122 jurisdictions in 2014.
The survey is closely watched by companies, mining lobby groups such as the Minerals Council SA, and mining ministries like the department of mineral resources & energy, which uses the metrics as a measure of the efficacy of its actions.
In the latest survey, SA ranks 40 out of 76 jurisdictions, barely changed from the 43 out of 83 jurisdictions when measured in the catch-all general investment attractiveness index.
Its score fell to 59.7 out of the best possible 100, down from 64.6 a year earlier in this broad category.
When it came to perceptions about labour militancy, work disruptions and labour regulations, SA came in at 11th from the bottom.
For the local industry, the policy perception index is important, given the state of flux in the regulatory environment where the Minerals Council SA has lodged papers in court opposing elements in the third iteration of the Mining Charter, thereby prolonging uncertainty. SA came 56th out of 76 jurisdictions in the policy perception rankings compared with 56 out of 83 a year earlier, but its score fell to 59.7 from 64.4.
Under former mines minister Mosebenzi Zwane, who unilaterally imposed a deeply unpopular and damaging charter on the industry in 2017, SA ranked 81 out of 91 jurisdictions that year, its lowest point in the survey, with a score of 42.7. Since 2017, SA has improved sharply in the rankings. The council refused flatly to work with Zwane, citing concern about his allegedly tainted political past and involvement with the Gupta family. Zwane actively participated in securing the rights to the Optimum Colliery by visiting Glencore CEO Ivan Glasenberg in Switzerland to argue the family’s case.
State power monopoly Eskom was alleged by former public protector Thuli Madonsela in her state-capture report to have made life impossible for Glencore at Optimum and to have bent over backwards to fund the Guptas’ ownership and running of Optimum.
Under ANC stalwart and veteran Gwede Mantashe, who took over as minister early in 2018, SA has risen in the Fraser Institute rankings as he scrapped years-old proposed amendments to the Mineral and Petroleum Resources Development Act and unceremoniously ditched Zwane’s version of the Mining Charter. Based purely on mineral potential, given all other elements about policy and secondary factors being equal, SA ranked 34 out of 76 on its resources endowment, weaker than its 30 out of 83 jurisdictions a year earlier.
Strangely, under Zwane in 2017, SA ranked 21 out of 91 jurisdictions when its mineral endowment was assessed.
The Fraser Institute’s latest survey of mining companies’ perceptions of the countries in which they operate and explore has raised questions of relevance — unlike in the past.
The Canadian organisation, which has done this informal survey since 1997, has a small number of respondents relative to the number of surveys sent out annually and the number of jurisdictions has dropped steadily since 2014. The inclusion of Canadian provinces and states in the US and Australia gives heavy exposure to the jurisdictions in those countries.
In the latest survey, countries such as Ghana, which is Africa’s largest gold producer, have fallen out of the rankings because there weren’t enough respondents. Neither Russia nor China is in the survey.
It’s difficult to give weight to the opinions expressed for SA, not knowing if the respondents are small companies or large ones. The junior sector in SA is very difficult, with onerous regulations and labour issues combining with regular blackouts by Eskom, which would certainly taint the perceptions of how attractive the country is.
Larger companies, with the same difficulties, may have a slightly different perception, particularly if they’re operating in other countries which have their own problems, putting SA into context in the mind of the CEO and the board.
Maybe it’s time for the department of mineral resources & energy to look inward rather than relying on the Fraser Institute’s survey to assess how well its policies and regulations are doing in creating investments, jobs and growth.
PRUDENTIAL
After Prudential demerged its M&G UK business, someone was bound to demand that it split off its remaining Asian and US divisions. That someone is US activist Dan Loeb.
Pru, a venerable Londonlisted insurer, may not resist very hard. Others surely will. UK investors hold about 44% of Pru’s shares. Many of them would bridle at a break-up that could involve listing the fastgrowing Asian business in Singapore while a laggardly US division gets a quote in New York. Some UK funds would be unable to hold either equity.
The move will be politically unpopular. Look at it this way. In the aftermath of Brexit, a 172year-old UK company flees abroad, closing its head office in the process. Its inspiration would be a US hedge fund manager who built an opportunistic 5% exposure during the coronavirus outbreak.
Set against that the simplicity of the case made by Loeb’s hedge fund Third Point. The fastgrowing Asian savings business has been the jewel in Pru’s crown for years. The US division is a drag on the group valuation.
Like an unhappily married couple, the pair should be better off apart. /©