JOHANNESBURG (miningweekly.com) – If the proposed Mining Charter is promulgated, it will dent South Africa’s score on global research firm BMI Research’s Sub-Saharan Africa Mining Risk Reward Indices, as it could deter investment.
The research firm currently places South Africa as the second-most attractive country for capital investment in mining in the region, behind Botswana.
The Department of Mineral Resources’ much-contested Mining Charter serves as a guideline for transformation in the local industry, calling for 26% black ownership in mining firms. This week marked the last week in which Mineral Resources Minister Mosebenzi Zwane could gazette the redrafted charter, media reports read earlier.
One point of contention was the procurement stipulations, which will require mining companies to procure 70% of goods from local manufacturers, as opposed to the previous 40%. The mining industry further argued that the charter was too vague and gave too much discretion to government officials.
BMI Research global industry research head Marina Petroleka told Mining Weekly Online this week that the regulatory framework and political stability of a country, paired with labour costs and government intervention, were some of the major determining factors in the indices and that the promulgation of the Mining Charter would cause South Africa to “fall behind” other mining jurisdictions, such as Ghana or Namibia.
She further noted that uncertainty remained around the implementation of the charter, as the Chamber of Mines was still to contest it in court.
“In a time when you have had a couple of years where there were pretty steep price declines, uncertainty and tremendous volatility in the sector, mining companies will certainly exercise a lot of caution in investment,” she highlighted.
Petroleka noted that capital expenditure was returning, albeit at conservative levels. “What we are seeing in South Africa is that the bigger players, such as Anglo American and BHP Billiton, are already scaling back investments or looking to divest assets, taking a much more conservative approach.”
However, she pointed out that the Mining Charter could see major players further divesting.
Meanwhile, Petroleka noted that the “heavy-handed intervention” of the Tanzanian government banning all exports of unrefined gold and copper was another example of how the attractiveness of the sub-Saharan region would be undermined. “The risk appetite has disappeared.”
Speaking on the bright spots in the region, Petroleka cited Botswana, Côte d’Ivoire and Ghana as countries that would experience increased mining investment, as they have more stable profiles.
“Resource wise, they might be a lot smaller, not boasting world-class deposits, but the opportunity cost has shifted a lot in favour of these countries.”