Private equity investors at the Mining Indaba in Cape Town have urged African governments to foster economic certainty in their countries.
“Mining companies are okay with paying tax and in helping regional development. But at the same time, for us to put capital into a project, we have to have certainty,” Canada-based Resource Capital Funds MD David Thomas told delegates.
Investor risks include possible nationalisation, power shortages and expropriation and changes to the tax regime.
“It’s a very competitive time. The key message to any government is that you can’t be lethargic,” says Bert Koth, MD of Denham Capital, which is active in investments in Africa.
“You have to continue to work on the tax regime, make sure regulation is transparent and continue to be efficient.”
Thomas advised mining companies that good assets and a strong management team with experience in the commodity sector and a degree of financial sophistication would help to draw private equity.
He encouraged mining companies in South Africa to “step up to the plate”.
“South Africa is a mining country with a tremendous amount of intellectual capital. Don’t sell yourselves too short. You have the technical chops…the same as anyone in the world.
“South Africa is slightly behind in pairing up and tapping into partnerships with people who have done their time in the market, such as in Australia and Canada. That too will happen in South Africa.”
KKR Global Institute policy and research director Neil Brown said it was important to work closely with partners across the spectrum.
“We help mining companies work with governments, particularly on frontier markets. We need to understand what the priorities of the governments and communities are. We want to engage, be transparent and ensure we are adding value to the communities we are part of,” he stated.
KKR’s research into companies was meticulous. “We are pretty tough on projects. We take a hard technical look at them. Because of the technical costs in the industry, we’ll do a feasibility study and take a hard look at operating costs. We hit the project really hard,” noted Brown.