Anglo American – Haunted by history – by Rex Gibson (Financial Mail – January 31, 2013)

What’s in Mark Cutifani’s in-tray

What kind of company will Mark Cutifani inherit? Every move Anglo American makes provokes an intense response from its myriad local stakeholders. This despite its moving its primary listing to London 14 years ago . Rex Gibson reflects on the role mining, and in particular Anglo American, has played in the SA economy.

It may be one of the most inept public relations performances ever by a government not renowned for its PR skills. President Jacob Zuma went to the World Economic Forum in Davos intending to reassure the world that SA welcomed investors in mining. But it appears that nobody told some of his top lieutenants.

A few days before, mineral resources minister Susan Shabangu launched a broadside of remarkable ferocity and insensitivity against Anglo American and its subsidiary, Anglo American Platinum (Amplats). The two culprits had had the nerve to announce their business proposals without talking to her.

Though clearly directed at these two, her bullying approach carried a disturbing message for the industry as a whole: “I’ll show you who’s the boss.” The result was that Zuma felt obliged to repudiate Shabangu, insisting that investors were welcome. But that didn’t do much for the confidence and sense of security of those looking to store their money for the long term in a safe place.

What prompted the Shabangu onslaught? The announcement by Anglo and Amplats that they were considering plans to enhance long-term sustainability by mothballing some shafts and retrenching about 14000 workers. They hadn’t even bothered to discuss the matter with her. She had a mind to reconsider all Anglo’s mining rights, perhaps put them out to auction if they didn’t comply with legislation. The companies were reckless destroyers of jobs. As for Anglo’s promise to create a similar number of new jobs in its other operations, that didn’t even warrant comment.

Labour observers were dismayed by her criticisms, some of them irrational, others ill-considered and intemperate. To whom was she proposing to auction the mining rights? The sort of ANC buddies who acquired Aurora and hastened its death? The Chinese or Russians? She didn’t say.

Labour analyst Loane Sharp’s response was unequivocal: Shabangu needed to pull herself together.

“Government has stumbled from crisis to crisis without paying attention to the possibility that it might have caused the problem itself,” he told a newspaper. “The real casualty of government policy and attitude is mining employment.” More than 500000 mining jobs have disappeared since 1994.

Mining expert Peter Leon said the minister’s reaction to the Amplats restructuring plans was “unhelpful, emotional and regrettable”.

But that didn’t silence Shabangu’s supporters. It was as if Zuma might never have bothered to go to Davos at all; as if, suddenly, the battle was not between government and Anglo, but between Zuma and his own followers.

The bout of ministerial petulance was quickly followed by more provocation from ANC secretary-general Gwede Mantashe. In an SABC radio debate, he offered this conciliatory thought to “welcome investor” Anglo: “You come in here and steal our money and treat us like visitors, like second-class citizens … you treat us with utter disdain.”

Poor bemused Davos investors. If this was what constituted a welcome to SA, what would a deterrent be?

It was becoming crystal clear that the ghost of nationalisation was stalking the corridors of power again, a manifestation of a barely suppressed hostility long nurtured. It opens up a whole new field of debate.

How much harassment will a foreign investor endure before deciding to call it a day? And would it be an economic disaster for SA if Anglo American, say – one foot out of the door already – were to decide that the disincentives were beginning to outweigh the inducements? Once the question was unthinkable, but things have changed.

SA no longer commands the world mining scene. Some expertise has seeped away. Mining’s contribution to GNP is down to 5%, far lower than in its heyday. And the country missed out on the 10-year boom in minerals other than gold, which lifted several international competitors like boats on a spring tide.

For the rest of this article, please go to the Financial Mail:—haunted-by-history