Sibanye Gold would not invest in any new projects in SA because of the turmoil in government, policies and growing rhetoric against big business that was frightening off investors, CEO Neal Froneman said.
Speaking just minutes after shareholders gave him approval on Tuesday for the $2.2bn cash purchase of the US palladium and platinum producer Stillwater Mining, Sibanye’s first investment offshore, Froneman said his shareholders in SA, China, the US and Europe had become increasingly unhappy with SA.
Government's focus is shifting towards "radical economic transformation" and its ministers frequently lambast what they call "white monopoly capital", singling out business for criticism over a lack of transformation.
The uncertainty caused by political upheavals and corruption had a detrimental effect on SA’s economy and shareholders would not give the board their backing for further large investments in the company’s domestic base, Froneman said.
President Jacob Zuma removed Pravin Gordhan as finance minister, replacing him with Malusi Gigaba, who is seen as acquiescent to the president’s demands. Two ratings agencies then downgraded SA’s debt to subinvestment grade, or junk status, citing concerns that the country’s economic policy could be changed.
Asked whether Sibanye was still interested in buying assets that Anglo American might sell in SA after the globally diversified miner agreed to sell its Eskom-tied mines to Seriti Resources, Froneman said that until SA sorted out its regulatory and political issues it would be "very careful" with further investments. "That is a fact."
He said: "To preserve cash, we’ve cut back on some of our capital projects. A secondary issue is that we don’t know what the cost of doing business is here or if there will be business to be done here. Until this country gets its house in order I don’t see any company being able to make further investments."
Sibanye will issue $1bn worth of shares equivalent to about half its market capitalisation and raise $1bn via a corporate bond toward the purchase of Stillwater.
But it has frozen a large gold and uranium tailings retreatment project west of Johannesburg, citing the narrow margins in the gold-price and exchange-rate environment. "Until there is clarity on the future and proper governance in place I cannot convince shareholders to invest there anymore. We really don’t know if we have a future here.
"We are not leaving SA, but we will be very careful with investments we make. Yes, we will look for investments outside the border, in jurisdictions where we can defend our decisions to shareholders," he said.
Trade and Industry Minister Rob Davies said on Tuesday he would not comment on Sibanye because he had not spoken to the company and encouraged Froneman to raise his concerns with Invest SA where he would be offered support.
"Investors are looking at our political environment as we’ve seen in the case with Standard & Poor’s and Fitch downgrades, but where we operate in foreign direct investment, our department is working to make the investment environment much easier for investors. Investors will say there’s a lot going on in the economy, but with whatever problems we may have, we still have positives," Davies said.
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