MICHAEL AVERY: What government must tell Mining Indaba to jack up investor outlook

As the world’s suits in hard hats descend on the Cape Town International Convention Centre for the first in-person Mining Indaba in two years, much has changed in the commodity landscape. But sadly, in SA not much has changed. Does mineral resources & energy minister Gwede Mantashe have a good story to tell investors?            

Not, it seems, if we go by the recent Fraser Institute annual survey of the global mining outlook. In its findings the Fraser survey reduced SA’s investment attractiveness to 75th from 40th in 2019, out of 84 countries. SA now ranks only 12th out of 15 African jurisdictions. The JSE has fewer mining companies listed today than it has had at any time in its history — from its inception in that tent in the mining camp in 1887. 

What must the government, in particular President Cyril Ramaphosa and Mantashe, tell the indaba that will change the investor outlook for the better? The business of mining is front-loaded and capital-intensive, with long time horizons and longer dated cash returns. The industry carries an above-average business risk in a complex environment. Mining is so much more than digging holes in the ground.

That’s why policy matters. A lot. It’s also why SA, despite all its cumulative policy missteps, still has an opportunity to leverage its natural mineral endowments to catalyse a new age of sustainable growth, desperately needed employment and improving overall societal prosperity.

The Financial Mail has questioned whether the immediate commodity party might be over for SA, but over the medium to long term the world is running out of stuff at an alarming rate; the sort of stuff that lies under our soils in abundance that is the envy of the world (“Is the party over for commodities?”, May 5).

Speaking recently to Martyn Briggs, director of thematic investing at Bank of America Securities, about a bank study, “The world is not enough”, he said the bank believes global scarcity is the theme that will shape the 21st century. We are running out of everything. And it’s not just natural resources like water, biodiversity or metals, it’s also human capital like skills, education and health.

This all has an impact on the environment, economics, geopolitics, social mobility and the rate of technology acceleration. Did you know that the weight of human-made stuff now exceeds that of natural biomass? That we produce enough plastic to cover the entire earth’s surface? That if you live in the West you use 57kg of newly mined mineral every day? 

The frustration is that SA could turn the economic malaise around with relative speed if we just managed to get the policy ducks quacking neatly in a row, according to mining lawyer Jonathan Veeran of Webber Wentzel. Establish a proper, functioning cadastral system to administer the granting of rights and permits. This has been promised for over 10 years now.

Review the Mineral and Petroleum Resources Development Act and bring the local ownership requirements in line with global best practice; and make it easy for mines wishing to procure clean power from independent power producers.

Large-scale private energy projects should be designated as “strategic integrated projects” under the Infrastructure Development Act, which would make it quicker for them to obtain environmental and land permits and licensing or registration with the National Energy Regulator of SA. And update the Integrated Resource Plan, which only takes SA’s power planning to 2030. It needs to be updated as a matter of  urgency with climate change in mind and to look beyond 2030.

The department of mineral resources & energy, the Council for Geoscience and the Minerals Council SA have for the past three years worked on a new exploration strategy for SA’s mining industry, which was recently gazetted by Mantashe. It appears that the objective of the strategy is to take the country from below 1% of global exploration investment to at least 5%. 

Depending on who you talk to, that’s between R8bn and R13bn in capital investment in mineral exploration annually. That’s a huge slug of capital to mobilise annually, and one would imagine there would be an expectation that public markets could be tapped for at least part of that. 

But it was revealed at the JSE’s annual general meeting last week that the exchange has not been consulted in the development of the strategy. These are the sorts of own goals that we cannot afford to concede. 

But most importantly, SA’s policymakers should be painting a bold vision, galvanising business, labour and the civil service around what can be achieved if we focus on, and play towards, our strengths, built up over 150 years of digging holes in the ground. 

*****

Can anybody tell me what’s happening with the long-anticipated Steinhoff settlement? The market purchase claimants, including collective investment schemes and individual shareholders, have until May 15 to submit their claims for a share of the R13.5bn payout. But there are more hoops to jump through than a three-ring circus.

My sense is that following the money to who benefits from making a process so legally cumbersome and onerous that a certain amount of attrition is built in, might yield the answers.

• Avery, a financial journalist and broadcaster, produces BDTV’s Business Watch. Contact him at Badger@businesslive.co.za.