Policy certainty is the only card SA has left to play to ‘woo foreign funders’
A Deloitte analyst warns that SA has one card to play — policy perception — to attract investment
SA’s ageing mines and lack of major new minerals means the only lever the government has to attract new mining investment is regulatory certainty.
SA’s mining sector has nearly halved the number of jobs in the past 30 years and the gold and platinum sectors are in trouble, shedding thousands more jobs as shafts become deeper, productivity drops, grades shrink and costs outpace prices.
"SA’s mineral potential is no longer what we thought it was. A lot of our industry is old and difficult and getting to the margin. The only other lever you have to play with is policy perception to attract foreign investment," said Deloitte resources leader Andrew Lane.
SA did not perform well in the Fraser Institute’s latest policy perception index. It scored 42.7 points, ranking the country 81st out of 91 jurisdictions monitored. In 2013, it ranked 78 out of 112.
Regulatory uncertainty has been a feature of the local mining industry since 2012, when amendments to the Mineral and Petroleum Resources Development Act were proposed, and the three-year wait on a revised Mining Charter post-2014.
After a disastrous attempt at a charter by then-mines minister Mosebenzi Zwane in June 2017, an improved draft was released by new mines minister Gwede Mantashe in June 2018, with public comments invited up to end-August.
Gazetting is expected before the end of 2018.
Jonathan Veeran, a lawyer at Webber Wentzel, which has been assisting the department of mineral resources on parts of the charter, warned of unintended consequences of the procurement clauses.
The onerous conditions on local equipment suppliers contrasted sharply with those for foreign companies, which simply had to pay 0.5% of local turnover to a fund to support the Mandela Mining Precinct, which is engaged in research and development work to modernise and mechanise SA’s mines. "We could see a lot of companies offshoring and setting up elsewhere," Veeran said, adding this could lead to a loss of local manufacturing jobs.
One of the ideas raised with the department is that ratings agencies such as Fitch, Standard & Poor’s and Moody’s could be used to judge compliance with the charter rather than the different methodologies used by the department and the Minerals Council SA, which came up with vastly different interpretations.