South Africa is desperate to improve its investment climate, which was clear at the 2014 Mining Indaba where numerous speakers promised that South Africa would pull through its current challenges. The sentiment was kicked off by Minister Susan Shabangu.
Recent “nightmarish” events in the mining sector, coupled with local labour unrest and attacks on the industry from the minister have taken a toll on the South African economy at large, seeing the rand drop to a five-year low. This has investors feeling “very jittery and very full of doubt and concerns,” Iraj Abedian, Pan-African Capital Holdings chief executive said shortly after Shubangu’s address indicating that it is not a very happy environment for the mining companies or the investment community that backs South Africa’ mining industry.
As a result, investors continue to adopt “a wait-and-see approach to the South African mining industry,” says PWC’s Mine SA, limiting the availability of funds for capital expenditure. The minister’s speech has done little in the way of addressing legitimate investor concerns about labour instability and pending legislative changes, making it difficult for local mining companies to strategically position themselves.
Abedian accuses Shabangu of making empty promises, saying that “she is trying to make gestures that are friendly as opposed to her previous aggression. She is trying to regain a bit of lost ground.” This will impact her credibility, however, and leaves investors wondering what her true agenda is. Furthermore, news headlines implying that the minister is ‘yo-yoing’ will damage investor confidence, Abedian says.
The Mining Indaba states that “this is where the world connects with African mining,” but was the 2014 event mere damage control for the minister, or was there a real ‘connection’ and was progress made in addressing investor’s concerns? For investors, what has been the lasting impression of South Africa when compared to other opportunities in Africa?
“We also have the rest of Africa competing for South African investors,” says Abedian. South Africa’s economic growth is lower than that of many of its African counterparts, with Nigeria set to surpass South Africa as an economic powerhouse this year.
Investors are becoming increasingly interested in developing countries where growth prospects are improving, and Shabangu should have better utilised the platform presented to her by the Mining Indaba “to restore South Africa’s credibility as an investment destination of choice. There is an enormous amount of mineral capacity in this country for the next 60 to 80 years and we need to manage that resource very, very carefully in order to unlock benefits for the workers, the nation and investors,” concludes Abedian.
By: Vicky Sidler