Mineral Resources Minister Susan Shabangu. Picture: FINANCIAL MAIL
Mineral Resources Minister Susan Shabangu. Picture: FINANCIAL MAIL

GLOBAL investors will watch Mineral Resources Minister Susan Shabangu like a hawk when she delivers the keynote address at the Mining Indaba, which begins in Cape Town on Monday.

At stake are billions of dollars in foreign investment, already jittery following months of violent labour protests, job losses, mine shut-downs and threats of higher taxes.

The African National Congress (ANC) rejected nationalisation of South Africa’s mines at its policy meeting in Mangaung last year. The party did, however, adopt the SIMS (State Intervention in the Mining Sector) report, which included proposals for windfall taxes, the creation of a state mining corporation and declaring certain commodities as strategic resources.

Policies adopted at the ruling party’s national conference usually become national policy, yet the minister has not elaborated on how policies and additional resource rents would be implemented.

South Africa’s mining industry has been rife with uncertainties in recent times following illegal strikes, followed by the shutting of mines, a consequent threat to jobs and Ms Shabangu threatening to take mining licences from companies.

Cadiz mining analyst Peter Major said investors, governments and other stakeholders would be looking for Ms Shabangu to provide clarity on where the mining industry was going.

Webber Wentzel partner Peter Leon said: “The minister must send a strong message to investors, not just that South Africa is open for business, but that it welcomes foreign investment and that the government will create the right environment (for investors). It must be said that there is never going to be a threat to security of tenure, this is absolutely critical.”

KPMG mining taxes head Andries Myburgh said Shabangu needed to provide certainty on how mining taxes would be implemented and on pressing issues such as the implementation of the SIMS report and possible carbon taxes.

According to Mr Leon, a joint statement by the government and Amplats this week, in which the miner agreed to postpone its retrenchment plans for two months, and reassuring comments from President Jacob Zuma and Finance Minister Pravin Gordhan at the World Economic Forum in Davos, helped to contain the fallout and brought some assurance.

“Mr Gordhan made it clear that no additional mining taxes will be imposed without extensive consultation,” he noted.

However, Mr Leon emphasised more clarity was needed on the ANC’s policy proposals around strategic minerals and state ownership.

KPMG Africa natural resources head Carel Smit said the biggest challenge would be to bridge a widening gap between the investment community and the South African government.

“They need to use the Mining Indaba to start bridging that gap and try to work closer together,” said Mr Smit.

Thomas Wilson, head of strategy at Africapractice, expected the balancing of private sector incentives with government take to be a key theme at this year’s indaba.

“Moves to extract greater revenues from mining projects have been common across the African continent in the last 12 months. Furthermore government tactics are becoming more diverse: state ownership of infrastructure, local equity participation in projects, more extensive local procurement.

“However, in many cases there have been teething problems: governments have struggled to find the right balance and destabilised investor confidence in places such as Guinea, Kenya etc.

“Ultimately the mining community has to become better at guiding governments towards workable models. I expect an animated dialogue between host governments and private partners over what constitutes the right balance,” he commented.

Zambian-born economist and New York Times bestselling author Dambisa Moyo agreed, saying the uncertainty in the South African mining sector was by no means unique and that volatility in mining countries across the globe was the order of the day.

“Australia raised its mining taxes by 30% last year, you have seen expropriation in Argentina, issues in Mongolia, there are concerns around the gold-mining business in DRC.

There are obviously many challenges and I think many mining companies are trying to balance the difficulties of lower prices with the rising cost of production at a time when governments don’t have money and are trying to rake in those extra taxes. Consequently, employment in the mining sector has also become a serious issue.

“Governments continue to grapple with their own budgets and a sluggish global economy continues to put pressure on how and where businesses are able to operate across the world,” she said.

Ms Moyo said the Mining Indaba would be a good opportunity for competing stakeholders to sit down and engage on such matters.

This year more than 7,500 people are expected to attend the Mining Indaba in Cape Town, representing more than 1,800 companies and the governments of 32 countries in sub-Saharan Africa.

Of the delegates, about 56% are African, 18% from Europe, 12% from Australia and 8% from North America.

Over the past five years, indaba-related spending in the Cape Town area, including for hotels, tourism, shopping and golf, has reached an estimated R336m.

* This article was first published in Sunday Times: Business Times