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Already more than enough risk in mining without stakeholders adding to it

6th September 2013

By: Martin Creamer

Creamer Media Editor

  

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Better understanding is needed about the economics of mining and the conditions required to invest in uncertain outcomes.

Miners have to make large capital decisions with limited knowledge because they invariably have a relatively small percentage of information about the deposit to be mined.

What the industry ends up doing is manage risk and what it definitely does not need is for regulatory frameworks to become yet another major risk factor in its decision-making.

There is already more than enough risk in mining without stakeholders adding it.

The most important step that legislators can take is to incentivise the massive investment needed for mining together with the downstream businesses that make economic sense.

Mining also has to play its part in supporting downstream industries that have a sound business case and common ground in this area – and many others – must be found.
Once those consensus areas are cemented down, they must remain intact and not be subjected to chopping and changing.

The South African mining industry must grow so that it can continue on its journey of transformation at all levels but it must not be subjected to forced, unsustainable transformation at the expense of growth.

South Africans should not continue to allow their most important industry to shrink through the legislative and other uncertainties on the horizon.

Steps should be taken to rid the legislative framework of all uncertainty from 2014 onwards.

As Mark Cutifani, president of the Chamber of Mines of South Africa and CEO of Anglo American – South Africa’s largest mining company – pointed out at last week’s Mining Lekgotla, a 5% growth rate would allow the mining industry to add at least another 100 000 direct jobs to the economy by 2020.

These direct jobs would help to support a further 160 000 indirect and induced jobs, bringing total new jobs to at least 260 000 across the country, which means that, at the current ten-to-one dependency ratio, the country could make sure that it helped another 2.6-million South Africans out of abject poverty.

At the same time, the industry must remove its legacy issues, once and for all.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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