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SADC countries have significant growth potential

STILL RAKING IT IN The strength of Southern Africa as an investment destination is derived largely from the power of the South African economy
STABILITY REQUIRED The local mining industry has to overcome several challenges such as ensuring legislative certainty and labour stability

EY mining and metals sector leader for Africa Wickus Botha discusses the current state and future prospects of Southern Africa's mining sector

STILL RAKING IT IN The strength of Southern Africa as an investment destination is derived largely from the power of the South African economy

Photo by Duane Daws

STABILITY REQUIRED The local mining industry has to overcome several challenges such as ensuring legislative certainty and labour stability

Photo by Duane Daws

11th July 2014

By: Ilan Solomons

Creamer Media Staff Writer

  

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While the mining industry across the Southern African Development Community (SADC) region has continued on a positive growth path – despite the tough economic climate – some investors have indicated that South Africa is losing its status as the “gateway to Africa”, according to professional services firm EY’s 2014 Africa Attractiveness Survey released in May.

Nevertheless, the yearly survey states that “the strength of Southern Africa as an investment destination is derived largely from the power of the South African economy”.

The survey notes that South Africa has maintained its lead in foreign direct investment (FDI) projects, thereby positioning itself as a launchpad for foreign investment in the fast-growing African market.

“Mining companies are showing a definite interest in exploiting minerals across Africa, and the SADC region is no exception,” says EY mining and metals sector leader for Africa Wickus Botha.

The survey adds that, from 2007 to 2013, South Africa increased its compound annual growth rate (CAGR) by 16.8%. It also highlights that, since 2007, FDI projects in Mozambique and Zambia have grown at a CAGR of more than 30%.

Botha stresses, however, that solid infrastructure – including rail, road and ports – needs to be established to successfully develop meaningful projects, particularly in the bulk commodity sectors such as iron-ore, manganese and coal.

This level of infrastructure is something most Southern African countries do not have, and Botha believes it will take some time before the rest of the SADC region will be on par with South Africa in terms of established infrastructure.

“This gives the South African mining community the opportunity to capitalise on the lack of competition. . . from neighbouring countries,” he states.

Botha notes, however, that the local mining industry still has to overcome several challenges such as ensuring legislative certainty and labour stability.

He believes that if mining companies and government work together, these challenges could be overcome.

“South Africa’s mining industry is a developed one and still possesses a great deal of opportunity,” Botha emphasises.

Beneficiation Push
Legislating beneficiation has been a contentious topic among certain countries in the SADC region, such as South Africa and Zimbabwe.

He cautions, however, that if governments enforce beneficiation, it will become an exercise in compliance, as opposed to the establishment of a genuine entrepreneurial sector.

Botha adds that when compliance is enforced, companies tend to ensure they fulfil only the minimum requirements.

“South Africa, in particular, has to be cautious about implementing whole-scale industry beneficiation for every resource mined. . . because it is unlikely that it will be able to cost effectively beneficiate all its minerals in a global market, where local companies have to compete with India and China, which are by far the largest steel manufacturers, for instance, in the world.”

He explains that if beneficiation is too costly a process, mining companies will not invest cash in unprofitable ventures.

Botha adds that a more feasible form of beneficiation would be to link industries and mining houses that use the same resources.

He highlights South Africa, which smelts its own platinum and palladium, as an example, adding that it would make sense for companies to produce platinum-related products such as catalytic converters and fuel cells.

“The beneficiation battles must be strategically assessed by government to ensure that it provides the country with opportunities, instead of obstacles,” states Botha.

Strike Impact
Botha laments that the recent strike in the platinum industry, which has cost mining companies millions in lost revenue, significantly damaged the country’s reputation.

He stresses that not only have investors lost confidence in the local industry but also in mining companies.

“South Africans are deeply concerned about the intensity and tenure of the platinum industry strike. Another concern is that the strike could still potentially impact on related sectors, such as the manufacturing and engineering industries, in the long term,” Botha concludes.

VIDEO:
To watch a video in which EY mining and metals sector leader for Africa Wickus Botha discusses the current state and future prospects of Southern Africa's mining sector, scan the barcode with TagReader (at www.gettag.mobi) on your cellphone, or go to 'Video Clips' on www.miningweekly.com

Edited by Samantha Herbst
Creamer Media Deputy Editor

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