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On-The-Air (18/03/2016)

18th March 2016

By: Martin Creamer

Creamer Media Editor

  

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Every Friday morning, SAfm’s AMLive’s radio anchor Dhashen Moodley speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly.  Reported here is this Friday’s At the Coalface transcript:

Moodley: African Rainbow Minerals (ARM) head Patrice Motsepe this week urged South Africans to come together to boost this country’s struggling economy.

Creamer: Patrice devoted quite a lot of time at the interim results presentation of ARM to issues affecting South Africa as a whole. That is the sort of corporate patriotism that we have to see exercised at corporate level.

The country is not only going through political problems, but it is going through serious economical problems. What Patrice Motsepe is calling on the country to do is really come together in the centre. We need to bond together in the centre and forget about the extremes and make sure we push this economy forward in the interest of jobs and of poverty alleviation and business growth.

You can see things are seriously down and unless we have this movement forward, the momentum is going to be lost, particularly with Moody’s here and the June date coming up. Motsepe also pointed out the intricacies of our economy, which defy markets. He was talking about black economic empowerment (BEE) and saying that with is own broad-based black economic empowerment trust, he battles to hold that together, the 26% that is demanded in the country that you have to keep it at 26% in perpetuity.

This sort of mandate defies the market of the world, because people should be allowed to sell the shares that they have and he says that they do. Domestics who have his shares, teachers who have his shares, business owners, small business owners come to him and say they need to cash in, and sell his company’s shares.

They know that he needs to keep his BEE intact, but they have got to cash in and they do. He says they sell and that starts to undo his BEE credentials. What he is saying is that we should look at what the market demands globally and we should try and follow the global rules. If you defy them, you have all sorts of complications like if you have to keep topping up the BEE, you have upset all you other shareholders, because you continue to dilute the value of the shares.

These are things that we need to consider and I think at this point in time perhaps coming together in the centre and forgetting about the extreme politics, in fact, throwing extreme politics into the sea, as he said, and let us make sure that economically, we hold our economy together.

Moodley: Coal head David Brown called for a debate in South Africa around the need for government and business to work collaboratively.

Creamer: He is the head of Coal of Africa (CoAL). Although he is as South African as all of us and the company operates in South Africa, we have got to look at CoAL as a foreign investor, because it is listed on three exchanges, Australia, London and Johanessburg. He is saying that he is looking at the country as a foreign investor, he is coming in and trying to develop projects which are good for the country, which give that vital momentum to the economy.

But, the red tape he has to go through here is unbelievable. His plea is for government and business to work collaboratively at this stage to make sure that when we go and apply for rights at the Department of Mineral Resources, we are dealt with slickly and have efficiency.

The lack of efficiency causes our costs to rocket and so many delays and uncertainty that it is difficult to continually raise funds. You find the Australian mentality and the AIM mentality in London, they don't give you all the money; they give you some of the money and then you have got to progress things and go back and say you’ve done it all, but still have obstacles. They will want those obstacles cleared before they give you the money.

You can't just do this all at once. He is saying also when it comes to State enterprises like Eskom and Transnet, when he needs to transport that coal, make sure that the processes are clarified, because any lack of clarity makes it very difficult to raise funds. With Transnet particularly, he is saying if you look at the coal price at the moment, there is just not much profit left if you have to transport that coal, because the price is so low.

When he is saying ‘work collaboratively’, he is saying, ‘can’t we look at a situation where if the coal price is down our rail tariff is lower; when the coal price is up, our tariff rises, which we saw with the aluminium industry working in South Africa with regard to supply of electricity to the aluminium industries. So that model is there and he is saying can’t South Africa extend it further. He’s saying let’s debate this, because we need to put on a prettier face for the foreign investors.

Moodley: The share values of thriving companies are down on global stock exchanges because of negative perceptions about South Africa.

Creamer: You have a company like Sibanye Gold, one of our gold champions doing brilliantly at the moment, because not only is the dollar price of gold going up, but the rand price of gold is soaring to record levels. Sibanye was talking Canada at the big PDAC, where we also had the Deputy Minister of Mineral Resources and a lot of South Africans and legal people and potential investors.

He was saying why are my shares discounted because I am South African? I am doing so well, but you discount me, because you look at South Africa because it has got so many bad perceptions that you are building in the risks and you won’t allow my share to go to the level of other gold companies that are not in South Africa.

Yet I am doing better then they are. I have just been named as one of the top business CEOs of the year in London, but my shares don’t reflect that. It is all because of this negative perception you have of South Africa.

Moodley: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.

 

Edited by Creamer Media Reporter

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