JOHANNESBURG (miningweekly.com) – South Africa’s transport infrastructure was built for and remains better suited to the movement of precious metals and diamonds, Herbert Smith Freehills (HSF) consultant Biddy Faber told attendees at a roundtable to discuss comparisons between South African and Brazilian mining and infrastructure investments, on Thursday.
The event, held in Rosebank, was hosted by HSF and Brazilian law firm Pinheiro Neto Advogados (PNA), in collaboration with the Brazilian Embassy.
Faber explained that precious metals and diamonds are “business class minerals”, for which transport infrastructure is readily available.
Base metals and other commodities are, however, more easily transported by road or rail. In South Africa, this infrastructure is currently insufficient to meet the demands of the mining sector, which is also impacted on by high electricity costs and water scarcity.
Faber also pointed out that South Africa had a lack of deepwater ports, with "Richards Bay at capacity, Coega being far to remote [from shipping lanes] and lacking the requisite rail infrastructure, and Saldanha Bay remaining the only flagship of an infrastructure project built specifically for a mine. We don’t haven enough projects like that.”
She stressed that the infrastructure in South Africa was built to support precious minerals mining, but that the commodities landscape has shifted and the infrastructure landscape should too. “We really need parastatals to come to the private sector and collaborate to build infrastructure so that we are able to fully develop minerals that we have plenty of.”
Further, “we need to come to a solution at Eskom – we cannot have a viable mining sector without a stable electricity supply. We need to figure out how we’re going to fund our roads; urban tolling doesn’t work, and our road infrastructure is creaking.”
Meanwhile, PNA partner Adriano Trindade explained that aside from telecommunications, Brazil had also experienced massive underinvestment in infrastructure over the last decade, but had taken steps to “close the gap” between the required and actual level of investment.
“So far, the investment in infrastructure has been mostly financed by the Brazilian National Economic Social Development Bank . . . basically private long-term financing in terms of infrastructure was provided by State-owned banks and the idea is to try to develop a financing market for infrastructure markets, [enabling] commercial banks to be involved in a supplementary role.”
Trindade noted that Brazil has introduced several programmes and incentives, including the Investor Partnerships Programme (PPI), which “creates a specific secretariat within a government . . . projects are presented by various ministries to the secretariat which, with the assistance of a council, [chooses priority] projects [for development].
“By being part of the PPI, the project would become a national priority.” Trindade noted that the project would be fast-tracked in terms of licensing and more government resources would be allocated to implement it.
In the year to October, 191 projects were selected, 105 completed, "and in terms of investment we’re talking about around R$62-billion.”
He added that four mining projects, more specifically exploration licences, fall under the PPI. Brazil’s geological survey explored these areas and the licence areas will be auctioned for mining purposes next month.
In terms of funding, PPIs are either subject to concession or public–private partnerships (PPPs). “A selection of projects are operated by the private sector either as a concession from the federal or provincial governments, having been financed by equity or the PPP model would be applied, with a special purpose vehicle formed to fund and operate the project.”
Faber noted that there have been very few, if any, PPPs in South Africa, in terms of infrastructure development in the last decade. She added that the dearth of infrastructure development has all but crippled the construction sector. She stressed that both issues needed to be dealt with in a timeous manner if the economy was to grow.