It is not often that I find myself agreeing with mineral resources & energy minister Gwede Mantashe. But when he chose the AGM of the Minerals Council as an opportunity to share his special brand of wisdom, I found myself clapping enthusiastically in my lounge/studio, all by myself.
Mantashe blamed the mining industry for SA’s falling stock with international mining investors. Leaning into the admittedly flawed Fraser Institute rankings, he decided to let rip. The thing is, he is right. The Fraser Institute is an anonymous opinion survey of mainly international exploration company CEOs. When Mantashe bemoaned the fact that the survey is not rating the department but the sector, which languishes in the lower reaches of a list ranking overall attractiveness for investment, and has for years now, that is true.
Of course, the survey’s compilers would find more attractive views from Canadian or Australian CEOs of their respective countries because those countries still have junior exploration companies. In SA a junior explorer is about as common as an inside centre that can pass right. So common, in fact, that the Minerals Council has changed its definition of junior miners, contrary to international practice, to include small and emerging producers such as quarry operators and survivalist alluvial diamond diggers, just to have something to put in the junior category.
Mantashe is spot on. Who are these CEOs to highlight the fact that SA is the only country in the survey to still have a paper-based mining cadastre from the 1970s, when porno pop was ultrachic and apartheid was in full swing? Can they not see that this time, after the right honourable and venerable — and definitely sober — minister’s fifth deadline miss, he will definitely (pinky promise) meet the next one, to introduce a modernised off-the-shelf cadastre to rival the Democratic Republic of the Congo (DRC) or Uganda?
Have these CEOs no shame in calling for reliable uninterrupted power supply? When was the last time they tried to mine in North Kivu, DRC? And don’t they know Eskom is actually helping to increase the supply deficit in platinum group metals, so crucial to our listed platinum counters’ future prospects?
Can’t these CEOs just be satisfied that SA’s mining environment was once the world’s best? Who cares if you have to trawl through a labyrinth of Vogon red tape to obtain a prospecting right, when major mining companies with money to spend have waited a decade or more to still not get a prospecting right?
Applications backlog
Once they have actually explored, undertaken all the detailed prospecting work, produced an environmental management plan and secured detailed financial provisions at great cost, and been persuaded exactly who is acceptable as a 30% BEE partner, why are they complaining that their capital providers don’t understand it takes up to five years to finally get the go-ahead from the department of mineral resources & energy to actually mine?
The fact that the backlog of mining rights applications has shot back up to more than 5,000 is just a sign of how oversubscribed our mining sector is. Aren’t we fortunate. Who cares that our share of global mining exploration spend has dropped every year since the Mineral & Petroleum Resources Development Act was promulgated. From about 5% to just under 0.8% currently.
From the Reserve Bank’s quarterly bulletin, using the SA government’s own numbers, in actual 2015 rand, spending on mineral exploration and evaluation last year of R1.12bn was its lowest since the measurement’s inception in 1960. This is a 30% decrease from 2018, the year the current minister’s tenure began. Yet by 2025 he plans to attract 5% of global exploration investment, about R13bn annually. To reach this goal, exploration funding must climb 11 times in just two years, and all without any apparent change in policy.
It is clearly and patently false to imply correlation equals causation. Are these CEOs wilfully disingenuous? How dare they question the ability of our omnipotent rail monopoly? Transnet Freight Rail (TFR) is railing coal to the Richards Bay Coal Terminal at a rate of about 40-million tonnes a year (Mt/year). That compares with the 50Mt/year TFR achieved in 2022, its worst performance in 30 years. Its stated target is 60Mt/year, which is already down on the 72Mt/year nameplate capacity for the line.
Iron law
Who needs printer ink and toner cartridges at regional departmental offices when we have the stirring intellect of local officials who can memorise applications offhand and recite them off the top their heads? Just ask the good folk at Imperial Crown Trading.
The pursuit of foreign capital was an iron law of Harry Oppenheimer’s construction of Anglo American into the world’s greatest mining finance house. He understood that since the discovery of gold on the Witwatersrand the beloved country relied on a steady flow of foreign capital to convert resource to reserves to money in the bank.
SA simply does not have the savings base to sustain its own mining industry. Perhaps the National Treasury should explain this to the department. Why would these unpatriotic CEOs not understand this?
While many in the ANC government like to anthropomorphise the market, imbuing it with feelings towards countries or sectors, capital is nothing but a risk-calculating, return-seeking machine. It discriminates, but never unfairly.
Perhaps the evidence is suggesting something? Or maybe we just need to be a bit more optimistic, eh Tiger? Let’s not rely on what the remaining few exploration CEOs at the Junior Indaba have to say this week in public, in the presence of activist, often vindictive, government officials.
Rather corner them at the cocktail party after a few drinks have loosened their tongues, or consider why anonymous surveys are important at all.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at badger@businesslive.co.za.
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