Investors will be hoping for more certainty and leadership from government on matters of labour, mining rights, royalties and nationalisation as the new Minister of South African Mineral Resources, Ngoako Ramathlodi begins his term of office.
“Investors want political certainty on how the government views mining assets, nationalisation and state involvement in the sector. The government has been ambiguous on these difficult issues and it hurt its credibility,” says Olivier Barbeau, mining specialist at auditing and advisory firm, Moore Stephens South Africa.
Barbeau says investors want to know where they stand. “The government needs to come out very clearly on its stance on the mining industry, as well as on the labour market.
“The market does not like vagary and ambiguity-it always perceives it negatively. The government needs to set the record straight,” says Barbeau.
Investors are also expecting Ramathlodi, a former lawyer and Deputy Minister of Correctional Services, to make an effort to allay investor fears on the labour front, particularly with the crippling four-month-long strike in the platinum sector still underway.
Barbeau further states that South Africa trumped by other African countries in attracting much need Foreign Direct Investment to the mining sector, especially by the Democratic Republic of Congo (DRC), Mozambique, Botswana and Zambia.
“Whilst political risk is far lower in South Africa than in many of its close neighbours and infrastructure is far better, investors prefer to go to where they know what to expect.”
Barbeau says Zambia is surging ahead in attracting investment largely because it offers stability and certainty to investors. According to the World Bank, Zambia has the largest known reserves of copper in Africa, while significant gemstone, gold, zinc, hydrocarbon and other deposits remain unexploited.
Countries like China are relying on the production of copper in Zambia to cater to their ever-increasing electricity demands.
DRC, one of the world’s largest producers of cobalt, copper, diamonds and tin, has put a range of measures into place aimed at attracting investment and stepping up governance and transparency