SA, once the top gold producer in the world, is firmly among the also-rans, ranked among the least attractive places in the world for mining investment.
From being the backbone of SA’s industrialisation in the 20th century and employing about 760,000 people at its peak in the 1980s, the sector’s decline was laid bare in a report showing that SA now ranks a lowly 75 out of the 84 jurisdictions judged on attractiveness to mining investment. The finding in the Fraser Institute’s Annual Survey of Mining Companies doesn’t bode well for efforts by President Cyril Ramaphosa to entice investors to an economy that’s struggling with an unemployment rate of more than 35%.
This result was “deeply disappointing”, the Minerals Council SA said, adding that it showed the country was “headed in the wrong direction when it comes to attracting investment to the country’s resources sector”.
The 2021 survey, published on Tuesday by the Canadian policy think-tank, assesses how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment in regions and countries.
Western Australia was rated as the most attractive jurisdiction, followed by Saskatchewan in Canada and Nevada in the US. The only African country in the top 10 of the index was Morocco. Even if only judged against peers in the continent, SA’s performance was dismal, coming in at 12th out of 15.
Joining SA in the bottom 10 when considering policy and mineral potential is Zimbabwe, the least attractive jurisdiction in the world for investment.
It is followed by Spain, Democratic Republic of the Congo, Mali, Nicaragua, China, Panama, Mendoza (in Argentina) and Venezuela.
“It is worrying that the trend remains downwards rather than stabilising or improving,” Minerals Council CEO Roger Baxter said. “We must revitalise our efforts to address the underlying challenges.”
The mining industry contributes 8% to GDP in SA, but miners have been battling unreliable electricity supply, an unsafe and inefficient rail network, and labour and community unrest in mining towns. According to the Minerals Council, miners lost revenue of R35bn in 2021 due to Transnet not meeting targeted rail movements, while the opportunity cost of Transnet not matching the capacity on its rail network amounted to R50bn.
There have also been constant battles over empowerment, with the government and the industry ending up in court over the Mining Charter, though relations are much improved since the state capture years.
Other issues that are hampering investment in exploration included a backlog of more than 4,000 mining and prospecting rights as well as mineral rights transfer applications in the department of mineral resources & energy, as well as slow progress by the department in replacing the failed SA Mineral Resources Administration (Samrad) cadastral system.
On Monday, the mineral resources & energy department released the long-awaited exploration strategy for the mining industry. It outlines plans to “revive the share of SA’s global exploration expenditure to a minimum of 5% over the next three to five years”.
Exploration activity in SA has systematically declined from its peak of 5% of spend in 2003 to its lowest point, where it is now at 1% of global investment.
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