What would the South African mining industry look like with a more stable, regulated environment with an improved policy? That’s the question that was asked by the Chamber of Mines South Africa in its latest report.
The report, What if? – Mining Investment in SA in an improved policy and regulatory environment, was commissioned by the Chamber of Mines SA to explore and better understand the investment and employment potential of the mining industry, in the event of better practice in policy, legislation and regulation formulation.
The aim of the study was to help the industry become part of the top 25% of global mining jurisdictions.
Known for its volatility, particularly due to an uncertain political outlook, the SA mining industry is one of potential, despite a drop in its contribution to overall GDP (2.6% smaller in 2016 than it was back in 1994).
The Chamber of Mines lists six key inhibitors to attracting investment, increasing production. These include:
- The lack of a nurturing environment to stimulate long-term investment, exacerbated by a regulator which has failed to build partnerships for growth.
- Ongoing policy and legislative uncertainty.
- Poor governance, including the award of prospecting and mining rights
- Infrastructure constraints such as electricity supply and a lack of heavy rail infrastructure
- Failing local authority and a lack of trust between business and society
- The uncertain political outlook, with low levels of business and investor confidence
So, what has the report found? What if there was a far greater political environment in the South African mining industry?
- The estimated currently planned capital spending in the mining sector of R145 billion could potentially increase by R122 billion or 84% in a more stable and conducive environment.
- The impact on employment creation would be 48,000 people in the industry itself. Both direct and indirect jobs created would amount to around 150,000 much needed jobs in the current environment.
- Much of the currently planned investment is “stay in business” investment while investment in new mines has halved between 2012 and 2016.
- The publication of the DMR’s Reviewed Mining Charter will significantly exacerbate the decreasing trend in investment.
- In the current circumstances, five companies responded that they were not considering any potential new investments with one company contemplating divesting from South Africa, a decision to be taken in 2018 if conditions do not improve.
Chamber of Mines CEO, Roger Baxter notes that: “The findings of the survey illustrate that if the leadership focus in South Africa is shifted to creating an attractive policy, regulatory and governance environment - through ethical leadership, good governance and the adoption of competitive, stable and predictable policies - considerable new investment in mining can take place. This would create huge economic and transformation benefits for the country and the multiplier effects would be profound. Not only would this result in a significant growth in annual investment, but there would be a sizable increase in jobs, export earnings, GDP and, importantly, transformation.
“Taking this into account, the economic and transformational opportunity cost of the current toxic environment is detrimental to each and every South African.”