THE platinum-rich country has been forced into the spotlight for all the wrong reasons over the past six months. Violent strikes took place across South Africa’s platinum belt last summer, culminating in a showdown at Marikana, outside Johannesburg, that left 45 people dead.
Blue chip miner Anglo American recently announced a huge overhaul of its South African platinum operations, threatening up to 14,000 jobs, to stop its business from leaking cash.
Prices, meanwhile, are under pressure from sluggish European car demand. With all these sparks flying, is South Africa still a compelling place to invest?
Anglo American Platinum’s long-awaited review into its operations was met with fierce criticism from the government and workers, although investors welcomed the plan to cut Amplats’ platinum output by almost a fifth. But its restructuring could be a positive step for the region, according to Travis Hough of Kemet Group, which advises African governments on natural resources policy.
“Anglo American is closing shafts and laying off people, but when the economy perks up, where are they going to get resources from? We must keep projects ticking over,” Roy Pitchford, founder of Zimbabwe-focused business Ferrex, told City A.M., adding that Africa will “will play a really big part in resources going forward”.
South Africa has come under a degree of suspicion from investors, with mining increasingly seen as too political. “Miners are sick and tired of all the bureaucracy – they just want to dig stuff out of the ground,” a source with knowledge of the country said. “South Africa could lose out because of this.”
A poll by FTI Consulting out yesterday showed that 80 per cent of the South Africans it surveyed see bribery and corruption as the biggest threat to foreign investment. Labour problems are seen as an obstacle by 70 per cent.
Jonathan Harris of Zamba Bauxite – which develops bauxite in Cameroon – agrees that the issues are mainly political, as the South African minister of mines “gets involved with everything”. “We need to get over that first,” he says. “There’s a huge disparity in wealth, and then there’s the perception of western-type companies like Anglo American, which is seen as foreign.”
Martin French, non-executive director of Sub Saharan-focused North River Resources, is optimistic on the fortunes of the nation, though he concedes there are downsides to working there. “The infrastructure is poor, and nationalism is alive in large parts of South Africa, so there’s a degree of unpredictability,” he adds.
The ongoing political pressures mean South Africa has become less attractivre to some. “It used to be the easiest place to do business but it’s a less stable place to be at the moment, although there are still a lot of opportunities across Africa,” counters Simon Raggett of consultancy Strand Hanson.
If the market is buoyant, retail customers snap at the heels of the African junior mining stocks. But, as Raggett highlights, there are almost no brokers raising money for mining projects, as the funding just isn’t there. And that’s why Indaba, where 7,000 delegates are heading, is so key: deals are done, contacts network and it provides a great chance to clinch that all-important fundraising for projects.
“It’s going to be a better year in the markets. It’ll still be difficult, but it’ll be a better year than last,” said John Theobald, executive director and chief exec at mining royalty group Anglo Pacific.
And as for the fortunes of South Africa, it still looks like a waiting game.