Will Gwede Mantashe make or break SA’s mining future this week?
Eskom crisis will cast a long shadow over any talk of big new investments in mining
Gwede Mantashe can make or break the outlook for SA’s mining industry this week. The world’s most influential mining executives and industry professionals have descended on Cape Town and the minister of mineral resources & energy will be in the spotlight as he takes to the podium at the annual Investing in African Mining Indaba later today.
In stark contrast to the optimism that was brimming over at the 2019 edition, when President Cyril Ramaphosa addressed a standing-room-only gathering, the crisis at Eskom will cast a long shadow over any talk of significant investments in the sector.
Eskom’s new CEO, André de Ruyter, would do well to make a surprise appearance at what organisers have correctly dubbed “the world’s largest mining investment event”.
For De Ruyter, who quietly met 25 mining CEOs within days of stepping into Eskom headquarters Megawatt Park, this is an opportunity to deliver a clear message to a powerful audience that has significant influence over investment decisions. Unapologetically bold finance minister Tito Mboweni returned home from the annual World Economic Forum (WEF) meeting in Davos, Switzerland, last month with a sombre message: “Investors are mostly worried about Eskom and our fiscal sustainability.”
This is a compelling reason for both Mantashe and De Ruyter to take the time to engage with key industry players and place before them convincing reasons why they shouldn’t take their money elsewhere. De Ruyter has already impressed those who have interacted with him with what one mining executive described as “a crystal-clear understanding of what is required”. The key question is whether he will be given the political support he needs to execute his mandate.
Enter Mantashe, himself a charming and able orator at the best of times whose influence as chair of the ANC is often underestimated. Which leads to another major concern for investors: the battle for control of the ANC is perplexing to those who do not understand how it is possible that so many leaders who followed Nelson Mandela have stolen billions of rand from the very people who elected them. Mantashe is perfectly placed to explain the complexities of the ANC and why no arrests have been made — yet.
The combination of a messy political fight and an energy crisis does not, however, mean investors will overlook opportunities in SA. They are more likely to take a wait-and-see approach. After all, companies such as Anglo American have in recent years pumped more than R35bn into expanding diamond, iron ore, platinum and zinc assets in Limpopo and the Northern Cape.
Similarly, Vedanta has invested R21bn in the Gamsberg zinc mine, which Ramaphosa opened a year ago. And there are many more examples of investments in the industry.
Notwithstanding the fact that mining’s contribution to GDP has declined from 21% at its peak in the early 1980s, the industry was the strongest performer in the second quarter of 2019. However, on the back of chronic load-shedding in the third quarter, mining was down 6.1% to cause the biggest drag on growth, according to Stats SA.
As if the third-quarter GDP figures were not enough cause for concern, unemployment rose to 29.1%, with 18,000 more people losing their jobs in the formal sector. In spite of this bleak picture, the mining industry still employs close to 450,000 people, meaning more than 2-million people depend on the industry.
Clearly, the GDP and employment numbers alone tell us that the crisis at Eskom will have caused Mantashe a few more grey hairs as he contemplated his opening speech. Sentiment is driven largely by perceptions, which are influenced mostly by communication. In this case, the minister’s speech will communicate a particular set of messages to investors and either reassure them or leave them with more doubts about SA’s ability to overcome a set of formidable challenges.
The chief representative of big mining companies, Minerals Council SA, recently said the electricity supply crisis is the single biggest risk to the economy and mining industry, calling on the government to “act urgently”.
This is the polite talk in public but privately mining executives are questioning Mantashe’s commitment to resolving the crisis. After all, some of the solutions lie with the man himself, who, as the minister responsible for energy policy, holds the key to at least some of the regulatory framework. Approvals for renewable energy projects are gathering dust on the desk of officials in his department.
After a difficult 2019, De Ruyter’s appointment will give renewed hope, and today is an opportunity for Mantashe to again send clear messages to investors and inject desperately needed confidence into the mining industry.
• Michaels, a former political correspondent and spokesperson for the mineral resources ministry, is group public affairs head at FTI Consulting. He writes in his personal capacity.