In an interview about two months ago, Impala Platinum CEO Terence Goodlace had this to say to me: “The situation relating to the South African mining industry has deteriorated to the stage where deeply concerned international investors could cost the country a great deal more than the billions of dollars already lost in the wave of illegal strikes and violence in which close to 50 lives have been lost.”
“There is a very real concern on their part as to what South Africa will look like in a few years’ time,” he added, “and they could well feel compelled to withdraw their funds in favour of African and other investment alternatives.”
NOT A PRETTY PICTURE
Sadly, this past week has borne witness to some actual facts and figures that not only support Terence’s warning, but underline in no uncertain terms the serious, if not alarming, situation in which we find ourselves.
Statistics South Africa reports that while manufacturing production fell 1.1% year-on-year in September – the first drop in six months – mining output plummeted 8.3%, led by a disastrous 17.8% crash in platinum group metals production.
But the situation is more ominous than that, and is spread further afield by the mining industry. The South African Revenue Service has revealed that the country’s trade deficit for September was R13.8 billion, and pointed out that key contributing factors were the 4% month-on-month fall in the export of mineral products, as well as a 9% drop in the export of base metals.
Clearly, the past three months of mining strikes and violence are beginning to impact strongly not only on the mining industry, but on the country and the broad South African economy as well. And as far as foreign investor confidence is concerned, the current situation has triggered growing pessimism and the future picture is bleak.
FDI INTO SA PLUMMETS
Foreign direct investment (FDI) flows into South Africa tumbled 43.6% in the first half of 2012 compared to the same period last year, while FDI to Africa as a whole rose by more than 5%.
And these statistics are not the figment of the imagination of some anti-South African lunatic fringe radical. On the contrary, they represent the findings of The United Nations Conference on Trade and Development (UNCTAD), which produced the report.
Revealing the findings in New York, the United Nations Global Investment Trends Monitor suggested that, as South Africa battles the worst labour unrest since the end of apartheid, the numbers indicate that it will face increased competition for investment from its faster-growing neighbours.
The report added that FDI inflows into South Africa fell to US$1.7 billion in the first six months of 2012 from US$3 billion in the first half of 2011, reflecting sluggish domestic economic growth as well as a slowdown in developed economies.
“It reflects the situation in the main investors in South Africa, which are developed countries,” said Astrit Sulstarova, an UNCTAD economist involved in producing the report.
The IMF forecasts South African GDP growth of 2.6% this year, and recently cut its 2013 growth forecast to 3% from a July projection of 3.3%, due to the country’s close links to struggling Europe.
THE REST OF AFRICA IS LOOKING GOOD
Meanwhile, the flow of foreign direct investment into the rest of Africa grew 5.1% to US$23.1 billion in the first half of 2012 after three consecutive years of decline, the UNCTAD report said, citing a return of investor confidence to North Africa, especially Egypt.
Pretty alarming figures as far as South Africa is concerned, would you agree? But even more alarming is the fact that these FDI statistics relate to the period before August of this year. In other words, the shocking drop in investment flows into South Africa portrayed by these figures have obviously taken no account of the waves of mine strikes and violence that have hammered the country between August and the present day.
One is compelled to fear the figures for the second half of 2013, and to dread the extent of the message they could convey.
Perhaps it would be best to close by reverting to my recent interview with Terence Goodlace.
His closing words were: “Will we be able to right ourselves over a period of a few years? We will if we transform the workplace dynamic with a new dispensation where people co-exist, and with a proper value system governing how we operate. Then there is no reason why we should not be able to re-establish the reputation of South Africa and its mining industry.”