SINETHEMBA ZONKE Mining companies are trying to shield their foreign investors from volatility in South Africa
Recent restructuring and divestment moves by mining majors Anglo American Platinum (Amplats), BHP Billiton and Gold Fields are indicative of the difficulties that mining companies operating in South Africa are facing, says strategy and communications consultancy africapractice consultant Sinethemba Zonke.
He tells Mining Weekly that local mining companies have been feeling the pinch of the end to the commodities supercycle, which has highlighted the difficulties of operating in one of the most developed mining jurisdictions in the world.
Some of the challenges facing South African mining companies include having to operate assets that have become old and no longer yield the same profits that they used to; operating during a slowdown in key jurisdictions that previously supported the African and South African commodities sectors, including China; and the country’s socioeconomic issues, which have increased tension among the State, the private sector and workers.
Zonke explains that mining companies’ relationships with government and trade unions are deteriorating, which is why they have been shielding their foreign investors from South African volatility.
Amplats announced in July that it would sell some of its Rustenburg platinum mines, owing to unstable growth in the platinum sector and unstable relations with unions over the past three years. Further, Gold Fields spun off its South African operations in gold producer Sibanye Gold in 2012, after it had been affected by violent strikes.
In addition, BHP Billiton announced in August that it would embark on a restructuring exercise to form a new entity for its South African assets, which Zonke believes highlights increased investor uncertainty regarding the South Africa mining environment.
“These are three major developments that will continue to foster speculation about the viability of South Africa’s mining investment potential,” he says.
The Future
Zonke warns mining companies to expect a lot more challenges to come, as a result of government’s desire to increase State revenue: “The most logical place for government to turn to will be the extractives sector.”
He adds that, over the past four years, many governments across Africa have felt that mining companies had not paid their fair share in taxes, “especially during the good times of the commodities supercycle”.
There have been increased discussions across the continent about companies contributing their fair share to the fiscus and, in some cases, they have also been accused of tax evasion, says Zonke.