South Africa Chamber of Commerce in America (SACCA) president and CEO Euvin Naidoo will give a presentation at the 2009 Mining Indaba discussing the challenges that African economies and leaders face in the coming decades.
"With a drop in commodity prices, a flight of international capital to safety and general financial uncertainty gripping global markets through 2008, the commodity supercycle, that many players around the world had hoped would continue, is now over," says Naidoo.
His address will focus on the potential path ahead for countries in Africa to take these recent windfalls into state coffers and move from a cycle of transitional to transformational growth. He says from the 1970's through a large part of the 1990's, yearly gross domestic profit growth across sub-Saharan Africa consistently lagged that of the rest of the world.
Naidoo says that in 2009 growth in African markets is expected to outperform world averages, despite global economic uncertainty plaguing developed and developing markets. The role of the mining sector and that of commodities will continue to play a key role in Africa's growth.
His address will also look at the role of the mining industry and associated global trends, potential changes that lie ahead and the elements that could make the current growth lead to systemic transformation for parts of the continent.
Future of the Mining Industry
"If 2008 was a year where systemic risk was the dominant theme, 2009 will see a deep focus on specific risk emerge. In this regard, developments within the global mining industry have already been very visibly impacted on at the firm level by the current challenges markets are experiencing," says Naidoo.
He adds that the decoupling of a boom in commodity prices and the inaccessibility to relatively easy and inexpensive finance has played a role in even meticulously planned mergers being halted.
Naidoo says that difficult access to finance and a drop in commodity prices will also affect several other areas other than the merger and acquisition space. He explains that new explorations are harder to finance and many marginal mines are struggling to remain open.
"The threat of rising unemployment as a result of mining operations being affected is a serious concern affecting the daily lives of communities and families, as the prospect of unemployment looms," says Naidoo.
Challenges in the Mining Industry
Naidoo says there are two upcoming challenges that are prevalent in the mining industry. Firstly, he says that the issue of mining rights and the stability thereof will emerge as a critical factor, and the search for certainty and stability will continue to be a critical factor in the coming decade.
Secondly, beneficiation will remain a key theme as countries work towards moving up the value chain. He says in South Africa, the diamond industry has long been a focus of this in terms of cutting and polishing, and aluminum has also received its fair share of attention.
"In the coming decade an increased focus on the benefits of beneficiation in a more structured and systematic manner will be integral to unlocking longer term value. In addition, thinking through extractive industries, not only in terms of beneficiation, but also industrial clusters, will be key," says Naidoo.
He adds that he believe that themes along three critical areas will emerge in the coming decade and managers will need to prepare themselves to effectively deal with matters that are integral to the long term success of the organisation.
He explains that the three critical areas include sustainable mining practices and their effect on the environment, community and human rights, and health and safety.
Key Focus Areas
Naidoo says that during his time of working directly in the mining industry on large-scale operational turnarounds for some of the world's largest mining conglomerates, a key focus was on efficiency. He says this ultimately involved driving broad strategic decisions that were being implemented, but also had aspects that paid attention to operational detail.
He says this mindset is prevalent in the mining industry but there is room for improvement.
"In this climate, the elements of cost saving and efficiency become critical as marginal savings add up. More than this, it drives correct behavior throughout an organisation. Just looking at South Africa and our coal mining complexes, maintaining consistency in a number of areas, from efficient fleet use to effective use of explosives, are examples of areas for continuous improvement," says Naidoo.
He comments that tight economic times are not only challenges, but opportunities for managers operating in tough conditions to highlight their expertise and discipline, and these areas are expected to receive more attention.
Another key theme for the future will be one of increased communication among teams enabling workers to be more effective, says Naidoo. He explains that this includes efficient use of assets and mining fleets, and driving behavior that indoctrinates safety and necessitates time and energy being spent on efficient communication and developing management skills.
Naidoo says that a critical matter is that of effective leadership. He says that in the current economic climate there will remain a management tension between value and standards.
"While value is always a focus in terms of driving the bottom line for shareholders and stakeholders, standards at the end of the day must dominate in terms of ensuring the long-term success of any leadership team, whether they are operating in frontier markets around the world, or established markets," comments Naidoo.
He says that in the future, in areas related to values, leadership is paramount and, for those operating in emerging markets, this level of discipline of keeping teams focused on core guidelines is key. He comments that he believes that leaders in the mining sector need to be experienced in multiple aspects of business exploration, corporate diplomacy, international development, mergers and acquisitions and experience to drive tight operational controls.
"More so than ever, leaders need to epitomise not only good judgment, but one of a values driven approach," concludes Naidoo.