Addressing key issues in a complex industry.
South Africa’s mining industry remains a highly complex and contested space. Aligning competing interests has proved difficult.
To some extent this is what has resulted in the uncertainty that continues to permeate the mining sector. Mining companies, labour and government seem to have very different opinions on how things should be done, and this leads to instability.
Speaking from the side lines of the 2015 Mining Indaba, the director of equity research at Credit Suisse, Justin Froneman, said that international investors are worried about a number of serious issues in South Africa’s mining industry. And they are prepared to take their capital elsewhere as long as this uncertainty persists.
“The thing people most want is active leadership at both corporate and country level,” Froneman said. “There is a perception that not enough is being done. Things are quite unstable at the moment and investors want to see mechanisms put in place to address that. But unfortunately we are not yet seeing anything.”
He pointed out that one of the major talking points of the Mining Indaba had been the South African government’s desire to create a national mining champion. Minister of Mineral Resources Ngoako Ramatlhodi raised the issue again in his address to delegates.
“It’s something we still need more clarity about,” Froneman said. “The details are somewhat lacking, and we don’t understand the mechanics behind it. How will it be funded? Who will run it? As a result of this lack of detail, people are sceptical.”
He has also engaged in a number of discussions about BEE legislation and the question of ‘once empowered always empowered’. This is essentially a disagreement about the interpretation of the law, whether mining companies have to maintain a 26% empowerment stake, or if having reached that target once means that they have forever satisfied BEE requirements.
“BEE is a big question,” Froneman said. “Mining companies need to know what their ownership structures have to look like and whether they are going to be diluted down just to maintain their credits a good few years after the fact.
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