For the second year in a row, South Africa has been judged one of the world’s 10 worst countries for mining investment.
This is according to the Fraser Institute’s latest “Annual Survey of Mining Companies”, which polls global mining executives to get their perspective on the investment potential of global mining jurisdictions based on mineral potential, ease of doing business and government policies.
The Canadian think-tank’s comprehensive report ranks 62 mining jurisdictions based on their geological attractiveness (minerals and metals) and government policies that regulate and administer mining activities.
The 2022 survey was distributed to 1,966 managers and executives around the world who work in companies involved in mining exploration, development and other related activities.
Its policy perception index, which measures the attractiveness of state mining policies, placed South Africa at 53 out of 62 jurisdictions last year. The country scored 44.76 in the attractiveness index, down from 65.30 in 2018. This, however, is a slight improvement from 2021 when South Africa scored 37.88.
Zimbabwe is again the least-attractive jurisdiction for mining investment in the world, according to the survey, which named six other African countries among the bottom 10: the Democratic Republic of the Congo, Angola, Zambia, South Sudan, Mozambique and Tanzania. China and Papua New Guinea were the only non-African countries in the group.
Policymakers across the globe should understand that mineral deposits alone are not enough to attract investment. A sound regulatory regime coupled with competitive taxes make a jurisdiction attractive to investors
— Elmira Aliakbari
Nevada in the US is the most attractive jurisdiction in the world for mining investment, followed by Western Australia and the Canadian province of Saskatchewan.
Botswana is the highest-ranked African jurisdiction, and 10th in the world. Respondents cited decreased concerns over political stability, labour regulations, employment agreements and infrastructure.
“Policymakers across the globe should understand that mineral deposits alone are not enough to attract investment,” said Elmira Aliakbari, co-author of the report. “A sound regulatory regime coupled with competitive taxes make a jurisdiction attractive to investors.”
South Africa was ranked 11th in terms of investment attractiveness in Africa, after Botswana, Morocco, Ivory Coast, Namibia, DRC, Tanzania, Guinea, Mali, Ghana and Burkina Faso.
The survey said investors had expressed increased concern over the availability of labour skills and poor mining infrastructure in South Africa. Respondents also flagged regulatory duplication and uncertainty concerning the administration and enforcement of existing regulations as a continued deterrent to investment.
Comments on South Africa cited in the report from unnamed executives of major companies included “onerous ownership requirements for exploration and operation deter investment”, and “there is a lack of transparency in the mineral cadastre system that deters investment”.
A minerals cadastre lists available mining or prospecting rights, properties currently under a mining or prospecting right, expiry of currently held rights and ownership.
Commenting on Angola, another exploration company president said nationalisation was a major deterrent to investment in that country.
On Namibia, the manager of a mining consultancy company said while there were good foreign investment policies for mining, “there is a lack of mineral rights security”.
A senior manager at one of the large global miners cited property rights and arbitrary state seizure of mining equipment as investment deterrents in the DRC.
The department of mineral resources & energy said on Friday it noted the Fraser Institute report, particularly the two comments from anonymous respondents.
“Contrary to the views expressed by two anonymous respondents, South Africa’s sound legislative framework, the Minerals & Petroleum Resources Development Act of 2002, provides unambiguous requirements for mining operations,” it said.
With regards to fast-tracking applications for mining rights, the department said it was working with the State Information Technology Agency and has issued a request for bids in respect to the design, implementation, maintenance, and support of a mining licensing system.
A source within the department, who asked not to be named, questioned the survey’s research methodology.
“Our issue is their research method; it does not give a good picture of what the state of mining in South Africa. We are working to address some of the issues they put forward, including those we have been honest about such as load-shedding. We have issues in terms of the logistical arrangement, the rail network and port system. These will not be resolved within 24 hours but over a period of time.”
Minerals Council South Africa CEO Roger Baxter said the group was due to meet the department of minerals & energy to engage it on each of the 15 areas highlighted by the survey and hoped to propose solutions.
“It is disappointing that South Africa remains poorly perceived as a global mining jurisdiction, but there are fundamental problems that need to be addressed. The Minerals Council continues to work with the mineral resources & energy department, other government ministries, the Presidency and business organisations to create an investment-friendly environment to encourage sustainable, inclusive growth,” he said.
Baxter said there had been encouraging progress in energy reforms with the establishment of the National Electricity Crisis Committee and the government implementing significant reforms to enable greater private sector investment in electricity generation.
On the rail side, the council was working closely with Transnet to stabilise rail operations, he added. It was also in talks with the government about addressing crime and corruption in the sector and eliminating red tape holding back investment in exploration and mining.
Seleho Tsatsi, an Anchor Capital investment analyst, said competition for investment capital was high globally.
“Investors typically look for jurisdictions that have stable and clear regulatory frameworks. Unfortunately, we have heard from the mining sector recently that competition for skilled labour within the sector is particularly high. That appears, however, to be a global phenomenon,” Tsatsi said.
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