While international investors remain generally optimistic about Africa, sentiment with respect to South Africa is “extremely cautious”, says law firm Hogan Lovells partner and mining head Warren Beech.

“The reason for the caution stems from the volatility of the rand, which impacts on various aspects, among others, regulatory uncertainty, the return on investment and labour instability.”

This sentiment was widely apparent when partners from the commercial and mining departments at Hogan Lovells in Johannesburg met last month with a range of prominent Chinese State-owned enterprises and banks with substantial interests in Africa.

Foremost in creating negative sentiment was the uncertainty surrounding the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, which could have the effect of discouraging foreign investment.

The firm’s recent experiences in China have been that traditional Chinese investors and, in particular, the State-owned enterprises, remain committed to investment in Africa, including South Africa, but that a more cautious approach is being adopted.

Beech says it appears that the Chinese inves- tors have unfortunately had some bad experi-ences with their investments, for various reasons, including overselling of assets by the sellers, the sellers nonappreciation for the complete regulatory environment, the lengthy timeframes associated with compliance, and the constantly changing regulatory environment.

Chinese investors are alive to the concerns with regard to the MPRDA Amendment Bill and have expressed similar concerns to investors from other countries and regions.

In terms of the Mining Charter, and the black economic-empowerment quotas therein, inves-tors are generally accepting the reality and, in most cases, are committed to compliance, but the concern of “shifting goalposts” regarding the quotas remains an issue.

Beech maintains that the “extremely cautious” investment outlook from traditional markets towards South African mining is unlikely to improve significantly in the short to medium term.

Despite this sentiment, however, the mining industry and government have publicly restated their commitment to addressing investor per-ceptions.