The current outlook for the mining industry is better than it has been for some time, says law firm Cliffe Dekker Hofmeyr mining head Allan Reid.
Reid, who attended the 2018 Investing in African Mining Indaba, held in Cape Town last month, comments that the general mood at the event was cautiously optimistic.
The improved mood can be attributed to recent political changes in South Africa, but “the words of leading politicians need to be followed up with concrete action”, he implores.
Further, amendments need to be made to Mining Charter III and especially to the Mineral and Petroleum Resources Development Act (MPRDA) of 2013, “which still hasn’t seen the light of day”, Reid points out.
He says that Mining Charter III has far-reaching implications on various levels, all of which are detrimental to the mining industry. “The suspension of Mining Charter III has resulted in many mining companies saying that it is a precursor to what is going to happen in the future and they are withdrawing from the country or putting transactions that they were considering on hold.”
While there were no formal discussions on Mining Charter III or the MPRDA Bill at the Indaba, discussions were held on the side-lines. Reid says many investors were enquiring about expectations in the next 12 to 18 months amid African National Congress (ANC) president Cyril Ramaphosa taking over as President of South Africa.
The difficulty of conducting transactions under the current uncertain circumstances was also discussed. “Investors are looking for not only regulatory certainty, but also for a timeline during which this certainty will be achieved. South Africa needs to achieve something concrete between now and the next Indaba,” he stresses.
Consequently, Reid believes that there will be discussions between the Chamber of Mines and a high-level delegation from the ANC that will translate into negotiations with the Mineral Resources Minister, with the three parties subsequently working out a way forward which is “less draconian and more achievable”.
Some investors have been withdrawing from South Africa since the announcement of Mining Charter III.
“I think the investors that are exiting the industry are largely foreign investors. Local investors are still in the field, considering which assets they can pick up fairly cheaply . . . investors from abroad are wary of engaging further until there is regulatory certainty,” Reid says.
While he notes that these investors are venturing into West and East Africa, he suggests that Zimbabwe could also be a possibility. “The country has huge resource deposits and indications are that its legislation will be amended to make it more investor friendly. Investments that could have come to South Africa, may very well end up there.”
However, Reid says investors will return to South Africa once there is regulatory certainty. Government needs to send out a positive message that the sustainability of the mining industry is one of its major considerations, he concludes.