#MiningIndaba: Charter at the mercy of SA's leadership

Cape Town – The future of South Africa’s mining industry, once the backbone of the country’s economy, appears to be hanging on President Jacob Zuma’s possible exit and the revival that Deputy President Cyril Ramaphosa’s leadership will bring once he takes over the reins, according to analysts Fin24 spoke to on the sidelines of the 2018 African Mining Indaba.

Speaking to Fin24 by phone on Wednesday, Wickus Botha, Africa mining and metals leader at EY is of the view that challenges plaguing the Mining Charter, which is currently being challenged in court, can only be resolved once South Africa’s government leadership is settled.

“We need to first see what the new leadership will look like. There are all sorts of reports that President Jacob Zuma will be leaving. That needs to settle,” he said. If Ramaphosa were to take over the next thing to consider is if he will introduce changes to the leadership of the Department of Mineral Resources (DMR), Botha explained.

The Chamber of Mines this week had openly criticised Mineral Resources Minister Mosebenzi Zwane’s leadership. Chamber president Mxolisi Mgojo called for ethical leadership in the department. “We need ethical people around the table, people who have general interests in the industry and what is good for the country. Only then will we have a genuine conversation.”

Chamber CEO Roger Baxter echoed Mgojo’s statement that the Chamber is not happy with the minister, but said it was up to government to make appointments in the DMR.

The Chamber has also called for multilateral discussions with different stakeholders to define a vision for a transformed mining industry. In turn Zwane repeated statements that the DMR’s door is open for engagement, but that does not mean it will agree on everything.

Botha weighed in on the issue, saying he doesn't believe that completely restarting the drafting process for the charter may be the best solution. There are areas in the charter which were not discussed with the Chamber in its engagements with the DMR, Botha explained. 

“If we have a new leadership and a new president who decides the process must start again, then that will take a long time. We will need certainty as quickly as possible,” said Botha.

Uncertainty won’t disappear overnight

Investors don’t take too kindly to uncertainty, especially as it is an enabler of corruption, Botha explained. Botha acknowledged there was optimism following the Ramaphosa-led delegation to the World Economic Forum (WEF) in Davos. However, uncertainty will not go away overnight, he said. “You build trust over time.”

Theuns Ehlers, managing principal and head of resource and project finance at ABSA Corporate Investment Banking, who was also at the indaba, told Fin24 that there is an expectation that Ramaphosa would be leading the charge to address the key issues in the industry.

“We have lagged behind many African peers and part of it is the uncertainty,” he said. Sorting out policy will change things in a big way.  

Shirley Webber, managing principal, coverage head natural resources at ABSA Corporate Investment Banking, said that stability of regulatory frameworks are a concern for investors. The charter has to be fair for everyone, and legislation should not be changing every month, she explained.

When it comes to big mining projects, investors consider regulatory frameworks before putting their money behind it, she explained.

When asked if the DMR leadership was something investors considered, Webber said that because mining is so important in South Africa, who is running the DMR does actually make a difference. She added that it’s a combination of leadership positions which must be filled appropriately, not just those of the DMR.

But overall there is optimism for the sector in 2018, Ehlers said, adding that there was an uptick in new capital developments in the industry.

“Some of the mining companies are spending money again, which was not the case 12 to 18 months ago.” This has been helped by a recovery in commodities. “We see a recovery in commodity prices, from a profit margin perspective, the commodity cycle is in a much better space,” he said. 

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