The Graceful Flight of Money

It was reported in a recent study that South Africa was the third least attractive investment destination for international mining investors. The only African countries found to be less attractive than South Africa, was the DRC and Zimbabwe. Whereas environmental regulations and tax do deter investment in South Africa, the biggest deterrents remain the uncertainty as to the interpretation of new mining legislation, regulatory inconsistencies and misgivings about land claims. South Africa also received a poor score in terms of labour relations and security.

The aforementioned deterrents are caused by actions perceived to be negative, risky and counter productive Investor perceptions are reinforced by statements politicians make and resultant expectations based on past performance. The impact of affirmative action and BBEEE coupled with the behaviour of the DME and labour in the area of safety and health is having an impact on perceptions and expectations. The delays in the promulgation of the land bill coupled to delays in expected amendments to the mining charter and promised changes in Royalty charges, does little to change perceptions. On the contrary, they serve to create more pessimism amongst investors. Promises, by politicians, to turn the Northern Cape into a mineral powered Utopia, by distributing more of the areas’ vast “mineral wealth” to the inhabitants, do not go unnoticed. Statements about radical changes in economic policy and the ascendancy of labour in the new ANC leadership do not add to investor’s confidence. Few statements by current and future leaders during the run-up to elections inspire confidence with investors. We know, from experience, that many things said during election campaigns are empty promises, populist rhetoric and mostly outright lies. However, with players the likes of Mantashe, Vavi and Nzimandi involved, this time around may be different and we can expect some vigour in implementing the populist promises.

Understanding potential investors and the way in which they express themselves, always politically correct with words wrapped in layers of cotton wool, so as not to offend, hurt and compromise future opportunities. This in mind, the problem as mentioned in the report, is probably understated. The people we are talking about here have never felt the need to criticise Robert Mugabe; they just make sure they fly under the radar. Tony Trahar and Neil Pretorius of DRD remains two of very few  miners who had the gall to openly attack government and government departments, on these issues, Trahar’s reward for his effort was to, be branded a racist sell-out by Thabo Mbeki. The lack of protestations from the mine owners and potential investors, coupled with the flight of capital from the mining sector, confirms that actions speak louder than words. People may consider the silence of the investors and decision makers to be tacit condonation, their actions when they withdraw investments and participation, often under the guise of economic pressure, indicates otherwise. Their intent is shown by their actions and it is only the naïve and stubborn that ignores BHP Billiton who, despite having some of their roots in this country, sold assets (Samancor Chrome and recently their interesting in Petmin) whilst limiting new investments. Other Tier 1 Miners limiting investment includes Lonmin, Barrick and Rio Tinto, whilst Anglo-Ashanti, Goldfields and Norilsk have escape strategies in place, or are in the process of setting up such strategies. The naïve may insist on believing that the sale of Anglo-Ashanti had nothing to do with getting rid of the South African operations and the management restructuring at Goldfields was done in the interest of corporate efficiency. Foreign investment in South Africa reduced to a trickle in 2008 with an effective outflow in the last quarter. The JSE, during the past week , has been almost devoid of any foreign players.

The realists, the investors that vote with their money, sees a new South Africa with a strongly left leaning government with a lot of power in the hands of the Unions. They see a government where left leaning leaders with a labour background, Vavi and Mantashe, holding sway over economic and fiscal policy decisions. The actions and anarchy shown in the latest SATAWU strike – amidst desperate economic conditions and the worst lay-offs in South African history – are indicative of what can be expected in future. They see a continuing stubborn adherence to AA  in it’s current form, despite the failures and irreparable harm done to the economy to date They see a place where they will operate with their rights, to the minerals they mine, held over their heads like a sword. They clearly, in their mind, hear the words of Vavi saying to Manuel; “we know where to squeeze you if you step out of line”. With the likes of Gwede Mantashe having declared the intent of the government to establish a State owed mining company, investors can see the nationalisation of their assets becoming a real possibility, this despite assurances to the contrary. 

The sad part of this is the fact that people do not speak out. This “quiet diplomacy” is doing the country irreparable harm. We must heed the words of Mamphela Rhampele when she urges us to speak out against what is wrong, even at the prospect of being called racist and “Counter-revolutionary”.

 

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2 Responses to The Graceful Flight of Money

  1. Gawie says:

    Best article I have read in a long time. Well done !

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