If you stand at a view site that overlooks the giant processing complex at Exxaro’s Grootgeluk coal mine, you see Eskom’s Matimba and Medupi power stations in the distance.
The coal from Grootgeluk, SA’s largest coal mine and the world’s third largest, is carried by conveyor belts to the power stations, which together supply a big chunk of SA’s electricity. Exxaro partnered with the government to take a party of journalists up to the mine last week, ahead of President Cyril Ramaphosa’s fourth annual investment conference on Thursday.
It’s a strangely appropriate spot to stage a curtain-raiser for the investment conference, touching as it does on so many of the issues around it. Companies have pledged about R744bn of investment since Ramaphosa embarked on his drive to raise $100m, or R1.2-trillion over five years, not long after he took office as president early in 2018. About R314bn (40.6%) of that has been spent.
Mining accounted for R150bn of the pledges, and these clearly are turning into projects. Exxaro pledged R20bn and has spent R17bn to expand and modernise its operations, with more than half of that at Grootgeluk. Anglo American, which is a sponsor of the investment conference, as is Exxaro, pledged R100bn. Of that more than 80% has been spent on projects, including expanding its iron ore and diamond mining operations.
Arguably those investments would have happened with or without Ramaphosa’s showpieces. That touches on the big questions of whether these conferences serve any purpose — and whether they are moving the dial at all on growth.
That’s an inevitable question given that investment spending was hardly growing even before the Covid-19 pandemic, despite the president’s efforts, and though it picked up in 2021 is still well down on pre-pandemic levels, with the ratio of fixed investment to GDP at less than half the National Development Plan’s 30% ambition.
Exxaro’s executives argue that the first 2018 conference did help get them over the line, at a time when there was little mining investment happening and shareholders were reluctant to lend their support to big commitments. The president’s economic adviser, Trudi Makhaya, notes too that investment was not assured and the outcome since 2018 could have been worse without efforts to turn sentiment around and provide a platform for private sector investors to engage with the government.
Makhaya counts a turnaround in mining investment as one of the successes of the president’s drive. The Minerals Council SA believes there would be a great deal more of it if the government cleared the huge backlog of mining and prospecting rights applications, and approved the industry’s R60bn of renewable energy projects.
That touches on a second issue, which is that plans and pledges can go only so far without a policy environment that enables and encourages investment. That is still not there, even though at least this year Ramaphosa will be able to showcase long-promised reforms that have actually happened — such as last week’s conveniently timed auction of broadband spectrum.
A visit to Grootgeluk highlights how high quality and hi-tech SA mining can be, but also how constrained miners are by an ailing state. The company aspires to sweat its newly expanded assets to lift production for Eskom and for export, especially at a time when the war in Ukraine and the resulting energy crisis have ramped up global demand for export coal. But an ailing Transnet can’t get coal from Exxaro or any other coal miners to port, and the same goes for exporters in other sectors looking to invest.
Eskom isn’t taking more coal and it can’t supply the electricity the country needs to make it an attractive investment destination. At the same time, the many and varied regulatory hurdles to investing in new renewable energy projects aren’t coming down nearly fast enough to get lift-off on these and satisfy the private sector’s huge appetite to invest in new green energy. That’s even though Ramaphosa will be able to point to reforms that have happened over the past year — and will no doubt highlight the pipeline of potential renewable energy projects.
That in turn touches on a third issue that the Grootgeluk view site so compellingly evokes — SA’s energy transition. Exxaro itself is pivoting towards “green” metals and renewable energy, as is the rest of the industry — and the country.
There are a couple of big new investment themes that Ramaphosa can be expected to highlight on Thursday. One is the way in which Covid-19 has revived investment in SA’s pharmaceutical industry, with SA expat billionaire Patrick Soon-Shiong coming in to invest in vaccine technology, and investments by Biovac in a new mRNA hub adding to that of Aspen, which was one of the companies that pledged in 2018, and delivered.
The second big story is SA’s big COP26 climate commitment — and the $8.5bn climate finance package it agreed with the US, UK, Germany, France and the EU in November. That’s a lot of green investment supposedly coming our way, but there’s a long way still to go.
To the reported frustration of the international partners, SA has yet to clarify exactly what projects the money will be spent on, though Makhaya says the focus will be on energy projects such as repurposing old Eskom coal stations and strengthening the grid, as well as on hydrogen and on electric vehicle manufacture. Diplomats also report that SA has done itself no favours with the international partners with its ambivalent attitude to the war in Ukraine — but Makhaya says the international counterparts are “raring to go — we have not sensed any change”.
Energy security and the energy transition are important to SA’s attractiveness as an investment destination into the future. For now, though, the investment envoys Ramaphosa appointed to take the drive forward spend much of their time on the microdetails of unblocking investments companies want to get done — but can’t because of intransigent or incompetent regulators or municipalities or departments.
Along with setting out his reform stall, the president will be getting companies to the stage to make more pledges. But even assuming they deliver, and that they are persuaded to do more than they would have otherwise, the investment target he has set himself is still arguably too low to move the dial on growth. Doubling the investment ratio by 2030, in line with NDP goals, would require a lot more than R1.2-trillion — and it would require a lot more action from the government to address its own dysfunctional policies and processes and make it attractive to invest.
Instead of plans and pledges, what the president needs to be doing at the investment conference is to tell investors what SA is doing to make it easier for them to do business.
• Joffe is editor at large.
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