South Africa missing the point…and the cage

March 4, 2011

As South African mines minister Susan Shabangu launches a North American roadshow, the Toronto-based Fraser Institute is releasing its 2010-2011 global mining survey, which ranks South Africa 67, of 79 jurisdictions across the world.

Over the past five years, South Africa has fallen precipitously from 37 in the rankings and in many subsets of the survey South ranks very close to countries like Zimbabawe.

 “South Africa remains a good investment destination”, says the Department of Mineral Resources (DMR), disagreeing with 494actual mining investors polled in the survey. The DMR will nevertheless be taking this message on an international road show slated for early March in Canada and United States”.

I wonder which part of the report the ANC, Shabangu and the Department fail to understand. Maybe they just do not understand the business they are trying to regulate and govern.

It costs R 2 billion to start a medium sized mine and it takes 10 years or longer before that investment shows any returns and then the returns are limited to 20 years; a risky business indeed. Wiil you put 50% of your pension money into such a venture? Will you put a cent of your retirement money into such a venture if you were to retire in ten years time?

If South Africa is going to create 8 or 9 mines a year, required to create 140000 jobs in Zuma’s plan, in the next ten years, we are going to need these investors. The industry cannot be sustained or create jobs by taking the mineral rights of operating mines like Sishen and handing it to someone else in South Africa without any fixed  investment taking place.

Examining the results of the Fraser survey it is clear investors are steering clear of the South African mining industry for a number of very valid reasons. The uncertainty caused by the regulatory environment mitigates against the high risk posed by South African mining. The high cost of labour, restrictions on the employment of skills because of affirmative action, the general shortage of critical skills and the cost of strikes erodes returns and creates a business environment where high risk and low return is the norm. Add to that the possibility that your “property” are threatened with nationalisation, appropriation by connected individuals and with Mugabe style invasions a distinct possibility, the apathy of investors are understandable; in fact as a shareholder I would praise their caution.

The truth of the matter is that the biggest mining companies in the world avoid investment in the South African mining industry, not because they are ill informed, on the contrary, it is companies like BHP Billiton, Rio Tinto, Anglo American and Goldfield, most of them with strong South African ties and roots, who are reducing their exposure to South Africa.   

What is significant is that the mighty BHP Billiton ignored South Africa in their $50 billion expansion plan. It is significant that DeBeers are selling their South African properties and are investing millions of dollars in the Snap Lake Mine, a hell hole, in the icy Northern territories of Canada. It is significant that Goldfields prefer to invest in a mine in Finland, a place where people are notoriously expensive, rather than in a relatively easy, cheap and simple Uranium operation in South Africa. It is significant when Xstrata prefers to invest in an Iron ore mine in Mauritania rather than acquiring South Africa’s Lonmin, the third biggest platinum producer in the world.

 It is even more significant when, despite calls for increased mineral beneficiation, the leading producer of ferrochrome in the world, halts the expansion of ferrochrome capacity and reverts to ore exports to China. It is a tragedy when the biggest BEE mining company in South Africa whose connections with the top office of the country are legendary, prefers to export chrome ore rather than expand their benificiation capacity because, whilst the returns from ore exports are smaller it ameliorates the risk of the investment in smelters.

Shabangu and her cronies think the investors are stupid. You do not have to be a rocket scientist to see the folly of investing in South Africa.

It is interesting to note that Zimbabwe have the potential to create a second Rustenburg; they can produce as much platinum as are produced in the Rustenburg area yet it remained largely untouched for two for the same reasons why people are avoiding South Africa. This situation will be exacerbated every another, more restrictive labour law is passed, or another property hijacked, or another call for nationalisation is made, even when Mugabe calls for the attachment of foreign mines because we, in the eyes of the investors are now not much different to Mugabe.

If the Zuma government is to turn the tide they will have to start dancing to a different tune; Umshini Wham is just not cutting the ice.

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The Death of a Minister

February 8, 2010

With eminent miners, Nic Holland’s and Nicky Oppenheimer’s, expression of faith and confidence in mining life in South Africa, according to Susan Shabangu, potential investors and mine owners alike can be forgiven for thinking everything was hunky-dory.

Their belief, that the nonsensical and poorly written discussion document released by the ANC Kindergarten is nothing but a hallucination and a bag of typical Malema hot air, is totally understandable considering the utterances by Jeremy Cronin and Gwede Mantashe on Nationalisation. But then, what do Holland and Oppenheimer know, spending the bulk of their time plotting their divestment from South Africa they are bound to be slightly out of touch with reality.  

Shabangu, in the mean time, having assured investors that mines will only be nationalised over her dead body, must have seen her life flashing by for a moment on Sunday when Chairperson and stop-gap Ex-Deputy President, Baleke Mbete, informed ANC heavyweights that ministers and cadres should familiarise themselves with the content of the much-vaunted aforementioned position paper. As for the hapless white-Messiah, Jeremy Cronin, one can only wonder what the future holds.

It seems Shabangu’s past contributions – notably the shoot-to-kill policy, subsequently hi-jacked in spectacular style by Fikile Mbalula; mentor and friend of Malema – counts for nothing as she fights for her life, so to speak. Jeremy Cronin, unlike Kortbroek van Schalkwyk and Barbara Hogan, despite his many years of experience in struggle politics, still do not know his place in the pecking order.

From Mbete’s stance it is patently clear that the views of Malema prevails with the ANC heavies and the Long Schlong himself, who briefly popped out of bed to put to make it clear which hole he is drilling in a manner of speaking. It seems Malema, the Long Schlong’s love child and favourite son – according to that much respected genealogist, Mr. Ben Trovato, wields a bit more power with the elders than the inconsistent Shabangu and the dapper but naïve Cronin.

My advise to Oppenheimer and Holland; “Hedge your bets and, like Cynthia Carroll and so many others, go to Luthuli House and join the queue at Malema’s door. Perhaps the rotund little boy can find it in his heart to arrange a deal with the new movers and shakers in the Mining Industry, Mandela and Zuma Inc.


Nationalisation – A Matter of Life and Death

February 4, 2010

The nationalisation debate or non-debate, depending on your perspective, could become a matter of life and death it seems. Given the quarters in which the discussion rages at it fiercest, where stabbings and burnings are at the order of the day, some statements by major protagonists could  turn out rather prophetic.

I am referring of course to the spat between the Minister of Mines and the ANC kindergarten. Malema started this dice to death when he stated that nationalization of mines will happen in his lifetime, which means – given the average life expectancy of the South African male being down to 47 – the window for this envisaged nationalization of mines, particularly gold and platinum mines – Malema’s stated target – cannot be too far away. Those having false hopes that the window may be enlarged by Malema’s longevity, think again – the tsotsi’s obesity problem is likely to make the window even smaller and he,  realizing the risk,  are upping the ante on this matter.

Susan Shabangu, in reply to the Tsotsi, and in a desperate attempt to calm the nerves, told mining investors – already suffering jitters when they hear the words South Africa  mining and investment spoken in the same sentence – that nationalization will only happen over her dead body.

Shabangu’s statement are contrary to her position only a few months ago when she made her “State of the Industry” address, stating emphatically that mine owners will wish her dead for various reasons. Ironically, that same mine owners are now praying that she outlasts Julius.

However, those naively pinning their hopes on Shabangu, dare I remind you that the same Shabangu has made a number of U-turns on this subject? The statement by the DMR that state ownership of strategic mineral mines is just another form of nationalisation – nationalisation by stealth so to speak.

Anyone trying to get clarity from Gwede will be left justifiably confused, as Chris Barron found when he interviewed the “Jumping Jack” last week.

As for the leading fornicator, he is too busy building a nation to care about insignificant and boring little debates amongst the minnows. That is the stuff that his “Loottenants” deal with.

Anglo America, hedging their bets will not be derailed by the confusion and Cynthia Caroll, whilst promising a bail out for ESKOM and a great partnership in “strategic” coalmines, are reportedly consuming copious amounts of Chivas with the Tsotsi, discussing compensation for nationalised mines – anything rather than getting into bed with Mick Davis.