African Mining Network

AMN was established to develop and build relationships across Africa’s mining community, and give the world a preview of what is happening in mining in Africa.

AMN - South Africa needs action to reverse trend – comment by Yolanda Torrisi

Yol headshot May 2011

Firm leadership is needed in South Africa to lift the mining industry. Mining is a cornerstone of the economy and national action is needed to move things forward to benefit the whole economy. Power generation reform, combatting crime efforts and appropriate government spending must be prioritised by leaders willing to stamp out corruption.

The latest Indaba conference in South Africa’s capital was a time for reflection and for the resources industry to take stock. The state of play in South Africa is something to address.

Reforms shepherded in by South African President Cyril Ramaphosa have made a difference to mining and resource development in the country. But more needs to be done.

Too many South African miners and explorers are having to look further afield for opportunities. What the country needs now is to fix its issues. Among the sticking points are power supplies for mining projects and corruption in the nation’s public utilities.

As I’ve said recently, it’s vital red tape is minimised so people can pursue private power generation options. The industry also needs certainty on the regulatory and policy front, and energy security, as South Africa’s Resources and Energy Minister Gwede Mantashe has rightly committed to.

Certainty in government services is particularly important given the issues business has had with State-owned power play Eskom and government transport provider Transnet in recent years.

Discussions held in Cape Town this month make it clear leading figures share a frustration with the nation’s direction.

Minerals Council South Africa chairperson Mxolisi Mgojo spoke for many of us when he called for urgent action on crime, corruption at Eskom and Transnet, and security of electricity supplies and costs.

“We cannot stress the urgency enough,” the Exxaro Resources CEO and industry leader said at the Investing in African Mining Indaba conference.

Sibanye Gold CEO Neal Froneman called it right when he noted: “There has been a distinct lack of turnaround, if anything we have gone backwards”. South Africa’s mining industry has been contracting and it’s time to reverse the trend.

Minerals Council South Africa chief economist Henk Langenhoven shared 2019 figures this month showing resource industry production shrank 2.8% last year when compared to 2018 output. It’s a worrying result highlighting South Africa has made no real production gains since 2009.

The nation is stagnating and losing ground, with Minerals Council South Africa CEO Roger Baxter also saying South Africa is going backwards. Action at the national level is needed to turn things around, especially given AK47-toting criminals have started turning up to mine sites.

Input costs, wages and electricity are all increasing, so it’s time for intervention. South Africa’s leaders must ensure there’s a containment of future costs. There must be reliability and certainty of key inputs like power so project costs don’t blow out and put financiers off investing in new ventures.

Froneman called out Ramaphosa on financial management at Indaba, arguing the absent leader “hasn’t made some of the difficult decisions and we are hurtling into a debt trap”.

Escalating national debt is a threat to South Africa. The nation must now choose wisely how it spends money, especially as it faces losing its final investment-grade credit rating next month during a Moody’s Investors Service review.  While the investment outfit previously called it “a bit early” to judge the Ramaphosa government’s structural and policy reforms, it might change its mind in March.

South African chief economist Langenhoven understands we need large-scale action. “We know that the South African mining industry has significant economic and transformational potential,” he said. “Unlocking this potential will require a concerted effort from all stakeholders to address the structural and policy constraints that are negatively impacting the performance of an industry which remains the flywheel of the South African economy.”

But what about Ramaphosa’s plan of attack?

His representative Khusela Diko has argued for time and patience on judgement calls, saying it’s “not realistic to expect … interventions to yield immediate results.” She says the government has faith the reforms will eventually have a “measurable impact on growth and jobs.” Wonder how Moody’s will call it.

With companies such as platinum miner Sibanye looking outside the nation’s borders for opportunities, it’s time to speed up national reform. Finance Minister Tito Mboweni was on the right track when saying “it’s time government acted in the national interest”.

It’s time for action now in South Africa. Once dollars go away, progress could slow further. It’s time to change now before it’s too late.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact:yolanda@yolandatorrisi.com