Cyril Ramaphosa tackles mining investors’ fears
President says crisis-hit Eskom will be fixed as restoring energy security is an imperative
President Cyril Ramaphosa tackled major industry concerns about Eskom and the security of investments and land tenure, hoping to soothe fears and encourage capital inflows.
As the first sitting SA president to address the 25-year-old Investing in Africa Mining Indaba in Cape Town, Ramaphosa sought to address issues raised by the Minerals Council SA, mining executives and investors.
While he did not go into detail about what the government’s actions regarding Eskom will be — with that plan expected to be unveiled in his second state of the nation address on Thursday evening — he assured a packed room of delegates that the crisis-hit power utility would be fixed.
Eskom, the source of more than 95% of SA’s electricity, expects to report a net loss of R20bn for the financial year to end-March, up from the R11bn it had told the market to expect, while it cannot service its R419bn of debt from cash flows.
"Restoring energy security for the country is an absolute imperative," Ramaphosa said.
"We are giving detailed attention to the crisis and challenges that our electricity company Eskom faces," he said, adding the company was too large and important to be allowed to fail.
"Rest assured, we are going to address this," Ramaphosa said. "In the coming few days we will announce practical measures to stabilise Eskom’s operational, financial and structural issues to ensure electricity supply."
Trading in bond markets indicates that investors are increasingly positive that the government will come up with a rescue plan for the utility, with its dollar-denominated bonds that mature in 2028 rising over the last six days. That pushed the yield, which moves inversely to the price, to 5.86%, the lowest since they were issued in August, and down from about 7.2% in November.
Lower yields reflect growing confidence among bondholders that they will be repaid.
Listen to Business Day deputy editor Jana Marais and mining and energies writer Lisa Steyn as they reflect on the highlights of the Indaba.
Eskom has asked the National Energy Regulator of SA for permission to implement price increases of 17% and more than 15% a year in the following two years, a move roundly condemned by business organisations as deeply damaging to the economy.
The Minerals Council SA, which represents 90% of SA’s mineral production by value, has said that giving Eskom what it has asked for would put a third of the country’s 450,000 miners out of work.
Turning to the government’s intended land reform programme, which is likely to entail land expropriation without compensation and has raised concern among investors and was partly blamed for a slide in the rand in 2018, the president said the idea was to foster economic growth.
"Investors must not be scared their investments and assets will be taken away from them," he said. "Our approach to this matter will enhance rather than undermine property rights."
He singled out mining companies that had come forward and offered parts of their land holdings for housing, farming and commercial development.
While not naming any of the leading companies that had done so, it is understood that Anglo American Platinum, the world’s biggest source of the metal, was at the forefront.
Ramaphosa was equally unequivocal that the business climate in SA had changed since he took over the presidency about 12 months ago, after nine years under Jacob Zuma when corruption was rife.
A number of commissions of inquiry are revealing the extent of the rot in the government, its ministers and companies dealing with the state.
Ramaphosa committed his government and the state’s law enforcement agencies to act on these disclosures, which have yet to yield arrests or prosecutions.
"They will be acted on, there will clearly be prosecutions and there will be people going to jail," he said to thunderous applause.
"We will be cleansed and become a much better country, I promise you."