Tough times for mining sector

THIS week’s Mining Indaba in Cape Town comes at a challenging but opportune time for our struggling mining industry.

The challenge arises partly from the fact that the strikes in the platinum belt are a nuisance that any country can do without, especially when potential investors and global mining opinion makers are coming to town.

The strikes need to stop, especially as South Africa is competing with other resource-rich countries for global mining investment.

Labour stability is key to any country’s attractiveness.

Enlightened trade union leaders in the 21st century have to strike a fine balance between short-term gains in high wage increments and potential long-term losses in job creation — a threat if new investors stay away or existing investors opt for

We’ve seen an upsurge in ‘resource nationalism’ in these emerging markets

mechanisation instead of labour-intensive mining.

It’s a tricky balancing act because collective bargaining is a constitutional right that all workers should have in any democracy. But it has to be exercised responsibly with the country’s and industry’s global competitiveness in mind. South Africa needs the growth that comes from sustained inflows of FDI.

But mining faces another headwind — this time from external sources.

Growth is slowing in China — the world’s major market for commodities — so the outlook for gold and platinum can only be seen in the context of this dark shadow.

For the first time in nine years, China will not be the major contributor to global growth. Rather, America will.

There is a global shift under way in growth patterns, which does not augur well for resource-rich emerging markets such as Brazil, Indonesia and South Africa.

This week, expect much of the discussions on the sidelines of the indaba to be dominated by this. The implications are immense: Business models that were predicated on an everexpanding demand for commodities and precious metals from China may now need to be revisited.

Many of the resource-rich emerging markets such as South Africa, India, Brazil and Indonesia will hold elections soon.

Given the electioneering taking place, we’ve seen an upsurge in “resource nationalism” in these emerging markets.

In response, global mining companies need to craft efficient and prudent business models to withstand the pressure from resource nationalism.

As emerging markets become more assertive, they will want an increasing share of the wealth from their mineral resources. So, it will mean global mining companies will need to adapt or perish.

Investors will most certainly stay away from countries with extreme forms of resource nationalism, deploying their capital elsewhere.

This doesn’t mean that countries shouldn’t look for fair models to share the gains — it just means it should be done sensibly, and based on informed conversations.

No matter which way you spin it, there is one inescapable fact: countries with mineral resources need investors to turn what is underground into tax revenue, which then creates economic growth, jobs and, ultimately, foreign exchange earnings.

Striking Amcu workers must ensure operations remain viable.

Kuseni Dlamini is chairman of the Times Media Group