Assurance and advisory firm EY in Africa has incorporated a new transaction advisory services (TAS) technical team into its Natural Resources segment. The team includes a century’s combined mining and oil and gas expertise and combines “deep sector expertise and economic competence” to support clients.
Further, the team’s members, many of whom are well known in the industry, have sterling reputations to match their expertise – a factor that may go a long way towards addressing the trust deficit between the various stakeholders within the minerals industry, and, more importantly, between the mining sector, affected communities and investors.
Dr Godknows Njowa is the TAS Natural Resources team lead and is supported by natural resources veteran Andy Clay.
Clay tells Mining Weekly that the team was established to continue to provide credible technoeconomic evaluations of mineral projects and assets and improve investor confidence in South Africa, especially in its minerals sector, noting that the team has a proven record, particularly regarding mineral resource reporting, financial compliance and asset valuation.
Additionally, he notes that the team has the necessary knowledge to advise, and that it is compulsory for auditors to consult with experts on “any instrument, asset or liability for which they are not technically competent”. Clay notes that the global TAS team, with its “wealth of experience” across commodities, service lines and competences, has the necessary experts in-house.
Njowa adds that the TAS Natural Resources technical team forms part of EY’s existing corporate finance service lines, ensuring that the team is able to offer technical support to the company’s assurance, advisory and tax service offerings. However, the team’s primary focus is asset technoeconomic reviews.
“When I first started Venmyn in 1988, it was with Rand Merchant Bank . . . the basis of its creation at the time was that the industry did not have many independent technical advisory businesses,” says Clay.
He adds that this meant that the industry reported in a manner that was inadequate, and that this had to be addressed in the lead-up to the 1994 elections and the new dispensation. The country and its companies now had to comply with global financial standards and be scrutinised by global institutions.
Clay notes that, while there are numerous technical advisory firms today, there is a lot of misinformation. “Many companies delist assets because they were overvalued. There are parastatal and commercial disasters, and a lot of them are related to incorrect information surrounding asset values and impairments. Investors are seeking credible financial data – we assist with that.”
Further, Clay notes that the cautious optimism ushered in by the leadership changes across Southern Africa is underpinned by uncertainty. He notes that the TAS Natural Resources technical team is willing to play a similar role to Venmyn’s in the early 1990s – to provide a little more certainty and foster better compliance. “Times are changing, but we’re here and we’re willing to help lead the change.”
The association with EY is hardly new – EY used to be Venmyn’s alliance partner, emanating from the International Accounting Standards Board Extractive Industry’s Issues Paper discussions, says Clay. “In 2000, the Issues Paper posed questions on how to account for the value of mineral assets – all we’ve done is come home to our original alliance partner to continue to promote and create standards and methodologies around that problem.”
Njowa adds that it is admirable that an international organisation such as EY recognised the opportunity to incorporate this into the firm, adding that it demonstrates EY’s flexibility, agility and commitment to creating value for its clients.
Clay welcomes the fact that Mineral Resources Minister Gwede Mantashe looks to be wrestling with the issue of transformation and the Mining Charter, but both he and Njowa suggest that more needs to be done on policy certainty. The policy uncertainty issue is a challenge and a concern for many investors in South Africa and on the African continent.
Clay notes that EY’s Trends Outlook reveals that North America and Australia have consciously reduced taxes, royalties and regulatory burdens on the mining industry to stimulate new projects and investment.
He suggests that African mining jurisdictions take note, as, “based on what we have learned from the Prospectors and Developers Association of Canada, Africa needs to prove it is a place ripe once again for attracting foreign direct investment.”