Norman Mbazima, deputy chairman of major diversified miner Anglo American (LSE:AAL), had strong words for South African regulators on Monday (February 5). Speaking at a keynote address at this year’s Cape Town-based Mining Indaba conference, Mbazima focused on “what is required to encourage investment back into South Africa’s mining industry,” suggesting that it is a topic that needs “an honest airing.”
Pointing to underwhelming 2017 GDP growth of 0.7 percent, a 13-year high in the unemployment rate and a “revenue shortfall of some R50.8 billion,” Mbazima said that the country “desperately needs to grow its economy at a significantly faster rate.”
He believes that the mining industry needs to contribute to that growth, but emphasized that its current performance is not satisfactory. Among other things, said Mbazima, gross fixed investment in mining has been stagnant since 2009, and net investment is down 57 percent since 2008.
Why? In his opinion, South African regulations are a major problem. “At present, we have anything but a conducive regulatory environment,” he said, urging listeners to consider a number of points, including the fact that “the relationship between the Department of Mineral Resources and industry is at an all-time low,” and that targets are changed every time the country’s mining charter is reviewed.
Under recent proposed changes to the mining charter, the South African government wants to see at least 30 percent of the mining sector owned by black investors. Members of the mining industry have opposed these measures, which they have said “impose unreal targets.”
Overall, said Mbazima, the South African mining industry is facing “comprehensive” issues that should not be overlooked. “[These issues] can only be resolved by dialogue and engagement to arrive at a regulatory regime that works for everyone,” he said, adding, “[o]ne that is clear, concise and consistent.”
Aside from regulations, Mbazima also thinks the South African mining industry would benefit from: a more stable political environment, revitalized rail and port infrastructure, investment promotion and a better understanding of financial returns and fund flows.
In closing, he urged regulators to consider the obstacles facing companies that want to invest in South Africa. “Put yourself in the shoes of the boards taking these multi-decade investment decisions,” he said. “It’s tough and we have to compete for limited capital. Unless investors can see that all of us have confidence in our economy, our democracy and our institutions, they will take their money elsewhere.”
Mbazima added, “the mining industry can be a significant contributor to [economic growth in South Africa], but only if we make conditions right for investment. This is a pivotal moment for South Africa … let’s seize that moment. Together.”
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.