South Africa a Hard Sell at Mining Bash (Reuters/Voice of America – February 5, 2014)

CAPE TOWN — South Africa hosts the annual Africa mining conference but the country is a hard sell at its own party.

Outside investors are increasingly wary of South Africa’s mining sector and extra salt is being rubbed into its reputational wound as the conference coincides with a massive strike in its platinum shafts. Foreign flight is a huge concern, not least because the industry needs outside investment to sustain itself.

“Because of the capital-intensive nature of the mining industry and the fact that South Africa doesn’t have sufficient domestic savings, the industry relies heavily on foreign investment,” said Paul Miller, investment banker for mining and metals at Nedbank Capital.

“In order to attract that investment we need to provide a competitive return,” he said. The hardening perception is that the returns in South Africa’s mines are too low and the risks too high. Around 45 percent of the country’s platinum operations are losing money, according to the industry.

Bankers and executives interviewed by Reuters at the conference all said foreign investors uniformly raised a number of concerns about South Africa, starting with labor.

South Africa’s over century-old mining industry has always needed not only huge amounts of capital but has also been highly labor-intensive.

And labor right now is scaring the wits out of capital.

The hardline Association of Mineworkers and Construction Union (AMCU) has been on strike for almost two weeks at the world’s top three platinum producers, Anglo American Platinum , Impala Platinum and Lonmin, hitting over 40 percent of global output.

The two sides remain poles apart over wages, with no resolution in sight.

AMCU’s rise on the platinum belt has also been marked by violence as it poached tens of thousands of members from the once-unrivaled National Union of Mineworkers in a bloody turf war that killed dozens of people.

Marikana tipping point

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