IN HIS speech to the Wits Business School this week, Xstrata CEO Mick Davis made some penetrating comments about the dire state of the mining sector in SA.
The key point was apparently drawn from a McKinsey study which showed fairly graphically how SA managed to miss the last commodity boom. The study shows that mining boosted the gross domestic product (GDP) of a host of resource-rich countries between 6%-8%.
SA stood out as the country that contrived to miss the bus. During the biggest resource boom in living memory, the mining industry in SA actually managed to decline by a percentage point. If it had matched the global average, 8bn would have been added to GDP and 45000 jobs would have been created, Davis suggested.
The key restraints were unstable energy, poor transport infrastructure, shortages of skilled labour, in particular engineers, geologists and artisan, and "constrained capacity within regulatory bodies", which is a nice way of saying incompetent bureaucrats.
Once again, there is a plan to address all these problems in talks on the new mining code after a summit last week between labour, the government and mining companies. "It is, however, critical that we quickly transform our intentions into detailed, actionable plans to deliver the improvements necessary to position the industry for future growth and Xstrata is committed to playing our part in this process," Davis said.
That is code for "Can we please get a move-on?"
BUSINESS Connexion got a nice big bump, as you would expect after the company put out a Stock Exchange News Service statement that its basic earnings per share would be 80%-90% higher.
The news is particularly welcome because it suggests the company's "revitalisation" programme - some might call a restructuring - is working.
The only problem is that Business Connexion's earnings have been so up and down over the past few years, it's hard to know whether this is a sustainable change. Headline earnings per share growth till May 2008 was 18%, but for the next 15 months till August last year they were down again by about 17%. Weirdly, this decline took place even as turnover grew 33%.
To a large extent, it's not the company's fault. Earnings are driven largely by the contracts it can garner, and IT spend vacillates wildly, usually following, in an exaggerated arc, general economic trends. Margins are also small, so a few big contracts here and there can make an enormous difference. Still, you can't help wondering whether there isn't a way to construct a more consistent business model. But in the meantime, few will argue with such a big earnings boost.
DESPITE the economic downturn, the retention of highly skilled employees remains a big problem for South African companies.
A guaranteed package is still the most important factor, according to a study that was released yesterday by executive search and reward solutions company Mabili.
And though market conditions have been volatile, employers were still willing to pay a high premium for "hot skills" (high- performing individuals and employment equity candidates).
However, companies were still facing difficulties in retaining employment equity candidates. This was mainly due the high marketability of such candidates.
One of the most pressing retention challenges was the lack of sufficient candidates with the right skills. Martin Westcott, MD of resources consultancy P-E Corporate Services, said it was interesting to note that companies were progressively reducing their dependence on unskilled and semiskilled labour. Instead, there was a shift towards attracting and retaining skilled staff.
Competition globally has pushed the need for critical skills. Undoubtedly the government will continue to prioritise the shortage of skills as one of the major necessities on its agenda.
- Nick Wilson edits The Bottom Line (email@example.com)