As the biggest slice of mining revenue goes to government, fund managers were scratching their heads last week over why the South Africa government would in those circumstances cause such woeful damage to the industry through legislative uncertainty and the imposition of incremental burdens.

Speaking on the last day of the Joburg Indaba, a panel chaired by Rand Merchant Bank business development director Henk de Hoop and made up of Allan Gray portfolio manager Sandy McGregor, Absa asset management head Stephen Arthur, Pan African CEO Cobus Loots and Petra Diamonds CEO Johan Dippenaar spoke on the buy side’s view of optimal capital allocation in the context of the current investment cycle and stakeholder demands.

Arthur made the point in the discussion, attended by Creamer Media’s Mining Weekly, that it was in the best interest of government as the biggest revenue beneficiary to enable the mines to do well .

“What I can’t believe is that they are not bending over backwards to remove risk, because government’s the biggest beneficiary,” the Absa asset manager said.

Instead, South Africa was featuring extremely poorly in global surveys as an investment destination and mining houses had diminished their South African investments to avoid the hassle of doing business here.

“They’ve all voted with their feet,” Arthur commented, adding that it was up to the legislators to provide certainty and, since 1994, it had been up and down, with nothing solved.

“Do I buy Shoprite or a South African mining company? The optics on Shoprite are far better than on a South African mining company, where you have all the legislative and political issues that take all management’s time and very little time is [spent] on running the mine.

“Pick n Pay will be open and people have to eat, whereas I can’t say with certainty how many days mines will operate. It’s generally not worth the investment,” Arthur said.

Cadiz Corporate Solutions mining policy consultant Peter Major said in summing up that the South African environment was very negative for mining.

“You keep thinking government can’t keep missing all the benefits of mining, but government keeps driving more and more investors out of mining. They have been tinkering with it for 20 years and they have just made what was horrible more horrible,” said Major.

McGregor said there had been huge resource depletion in South Africa and that the country would not stack up against the Democratic Republic of Congo with its great deposits.

Loots cautioned on viewing other jurisdictions through rose-coloured glasses and emphasised the importance of returns needing to stack up.

Dippenaar said he believed that the company’s projects in South Africa were very good ones and that “we don’t sell the story well enough”.

He said some of Petra’s mining experiences outside South Africa made operating in this country look like a walk in the park.