Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: With Anglo American now in danger of being canabalised, the South African economy needs a big new corporate champion to step into the breach.
Creamer: We always talk about support of small medium sized companies. Government wants to do that and it is a big employment area. We must realise that those companies do well when there are big companies, they feed off those big companies. We need to protect our big companies.
We haven’t done that with Anglo American. Should the government have allowed the primary of listing to go to London? No, it should not have. If that primary listing was in South Africa, would that company have been in better shape? Yes, it would have. Did the Australians do the right thing by not allowing BHP Billiton to have primary listing in London? Yes, they did the right thing.
Are they better placed, because they have primary listing and main listing is in Sydney? Yes, they are. I think that is the lesson we have to learn. We have lost out now on Anglo American. You see its plight getting worse and worse. Now, a big Indian investor, Anil Agarwal, has taken 13% of it through his family trust. He is saying that he is just sitting there watching, but of course, we know he is linked to Vedanta and he has previously, seven years ago, bought Anglo American zinc assets in the Northern Cape and turned them to positive account.
He paid off those assets, the R1.3-billion, in two years. He is now sitting and doing what Anglo and Gold Fields couldn’t do by putting up a new zinc mine at Gamsberg. It is 40 years in the making. He is not a slouch, but he is also not that keen on taking over the whole of Anglo American. So, what happens with that? Is it going to be canabalised? Is it going to break up further? That is the big question mark hanging over it. You go down the main street of Johannesburg and you look at those Anglo offices and they are under utilised.
Would Anglo American have been better had it stayed even as a big conglomerate with 650 different operations going around, not only mining, but in industry, in commerce, paper, timber, food and all over the place. Wouldn’t it have been better for South Africa? Yes, it would have been, because even though it was a conglomerate that London did not like, it would have been better suited for a place like South Africa. If they had stayed here at this point in time with all those tentacles going out into industry, we would have been in a better place.
Did the government do the right thing? No, it didn’t. And when it was in industry and the tariff walls were brought down so fast, even Anglo at the time said South Africa was being holier than GATT. We have a situation where the world has an agreement on trade and tariffs and these we are allowed to have. We were allowed to bring those tariffs down at an orderly pace. The world agrees on that, you don’t have to just slam them down and make all the walls of protection disappear overnight.
But, the government wanted to be holier than GATT – the General Agreement on Traffis and Trade – and smashed the walls down, ruined industry, had Anglo selling off left right and centre. Assets that should have gone for a much better price, assets that we see no longer exist. So, I think that we need to learn a lesson here. We do need these corporate champions. I know there are better companies coming up now in non-mining areas, which is great.
Perhaps the next big champion is going to be non-mining. We see the likes of Bidvest and Discovery and how well they are doing. Perhaps these will be the big champions of the future. We know that the previous Mining Minister Ngoako Ramatlhodi, before he was pushed sideways, he said that we should have a big mining champion, it should be a big private sector company, let’s try and build it, but, of course, he didn’t last very long. The new Mining Minister doesn’t seem to have any intentions along those lines.
In fact, what was the impact on Anglo American of the way the Department of Mineral Resources acted? Negative, because it created uncertainty. That uncertainty impacted on Anglo. What is now left of Anglo? We see what they have done with their coal assets now, they have put them into a situation with iron-ore in a separate company. Why did they do that? They say the South African assets now coal and iron-ore have become more flexible. What does that mean? Are they still going to sell them off?
Well, they were going to sell them, then they decided they were in a better position not to sell them. So, uncertainty all over the place. What have they done with their diamond assets and platinum assets? Also, put them into a separate package. Does it look like they are going to sell them off? They are not saying so, but why package them into something separate to make it more flexible in case there is a buyer. We sit there with a company that could have been playing a big role, as we need it now. There is not enough growth in this economy to support the closure of the social inequality gap, to support reduction in poverty, to support employment. We have shot ourselves in the foot. South Africans have shot themselves in the foot by doing what the Australians did with what was our company. We had Gencor, it went to London and became Billiton. It then became BHP Billiton. They are in a better position from our actions then we are from our own actions. So, hopefully we learn the lessons, we can learn the lessons. We have to realise that we have made a lot of errors and that you don’t play around with listings.
You also don't play around with making your Johannesburg Stock Exchange weaker, because taking those primary listing to London, those people think differently. As you can see, what was the reason why we went to London? Why did Anglo go to London? They told us this is one of the areas of a lot of money, you can raise capital here for South Africa, for Africa. Did they raise one dollar? Not one dollar. Did they pay a lot of dividends to London shareholders? Yes. When they didn’t pay dividends, was there a shouting and screaming and kicking match?
Yes. So, those people are very demanding when you go on those stock exchanges. South African shareholders are far more understanding of the long term nature of the mining and how it should operate here. I think it would have been a much better bet had the primary listings stayed here. We need a lot of companies now with a Joburg base, but a global face.
Kamwendo: From now on, mining’s role as an economic transformation lever must be used to the full.
Creamer: Now, we are seeing that mining is an economic transformation lever. We are sitting here in Joburg, what does it do? It has huge leverage all over the place. Africa is realising that can be done in Africa. We, having learnt the lesson, have forgotten the lesson. We need to realise that with the new African Mining Vision and they are telling us how you should deal with your mining. Also, a new development centre, the African Minerals Development Centre. We know also of the Zambezi Protocol and all these things going around.
They are new visions, let’s take lead of these new visions and make sure that when we do go into mining now, we use its economical transformation leverage to the full. We know that it works, we know that it can float a lot of boats and that there can be a flurry of economic activity around mining investment and supporting structural economic transformation, not related to mining. Let’s make use of that.
We have still got trillions of dollars worth of metals and minerals in the ground. We know that platinum is going through a hard time. The government should learn the lesson that how can we help when you are in trouble. We don't hear that question being asked.
Kamwendo: A new online market place has been launched for the buying, selling and storing of platinum metal.
Creamer: I am a promoter of platinum. We have got such a wonder treasure test of this fairy dust, as I call it. It can do so much, but it is in a bad way at the moment.
You can see the price just announced down at $954/oz, not a good price. Then you also announced that the rand is so strong. Those two things are going to hurt platinum very badly. What are we going to do about it? It is a big employer. So, you see now the World Platinum Investment Council (WPIC) has been created. That WPIC wants to promote investment in platinum, just like we have got investment in gold and silver.
Why not platinum? So, they have managed to get platinum onto the BullionVault online trading market place. This is a lower cost market place people can go in there and be able to buy, sell and hold platinum as an investment in a cheaper way, in a bullion vault in London, safely.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.