News / Africa

    South Africa a Hard Sell at Mining Bash

    Miners chant slogans as they march past the Lonmin mine during the one-year anniversary commemorations to mark the killings of 34 striking platinum miners shot dead by police outside the Marikana platinum mine in Rustenburg, Aug. 16, 2013.
    Miners chant slogans as they march past the Lonmin mine during the one-year anniversary commemorations to mark the killings of 34 striking platinum miners shot dead by police outside the Marikana platinum mine in Rustenburg, Aug. 16, 2013.
    Reuters
    South Africa hosts the annual Africa mining conference but the country is a hard sell at its own party.
     
    Outside investors are increasingly wary of South Africa's mining sector and extra salt is being rubbed into its reputational wound as the conference coincides with a massive strike in its platinum shafts.
     
    Foreign flight is a huge concern, not least because the industry needs outside investment to sustain itself.
     
    “Because of the capital-intensive nature of the mining industry and the fact that South Africa doesn't have sufficient domestic savings, the industry relies heavily on foreign investment,” said Paul Miller, investment banker for mining and metals at Nedbank Capital.
     
    “In order to attract that investment we need to provide a competitive return,” he said.
     
    The hardening perception is that the returns in South Africa's mines are too low and the risks too high. Around 45 percent of the country's platinum operations are losing money, according to the industry.
     
    Bankers and executives interviewed by Reuters at the conference all said foreign investors uniformly raised a number of concerns about South Africa, starting with labor.
     
    South Africa's over century-old mining industry has always needed not only huge amounts of capital but has also been highly labor-intensive.
     
    And labor right now is scaring the wits out of capital.
     
    The hardline Association of Mineworkers and Construction Union (AMCU) has been on strike for almost two weeks at the world's top three platinum producers, Anglo American Platinum , Impala Platinum and Lonmin, hitting over 40 percent of global output.
     
    The two sides remain poles apart over wages, with no resolution in sight.
     
    AMCU's rise on the platinum belt has also been marked by violence as it poached tens of thousands of members from the once-unrivaled National Union of Mineworkers in a bloody turf war that killed dozens of people.
     
     Marikana tipping point
     
    This included 34 striking miners shot dead by police outside Lonmin's Marikana mine in August 2012. Bankers and mining executives say that incident was a “tipping point” that sparked an exodus of foreign capital from South Africa's mines.
     
    Lonmin's chief executive Ben Magara told Reuters that before the Marikana shootings, Lonmin, which has its primary listing in London, had 30 percent South African ownership, but it is now 50/50 South African/foreign.
     
    Sibanye Gold, a spinoff from Gold Fields  that has all of its operations in South Africa, was around 24 percent domestically owned when launched last year and that ratio has risen to 48 percent, company officials say.
     
    Rajat Kohli, London-based global head of mining and metals at Standard Bank, described the situation as “dramatic” and said some investors he spoke to said they would put money anywhere else in the continent “but not here”.
     
    Some bankers said South African investors understood the local mining industry and were not as jittery about sinking money into it as their offshore counterparts - but foreign-exchange controls mean they often have little choice about where to park their cash.
     
    Neal Froneman, Sibanye's chief executive, said South African mining had a lot going for it, including the skills required to extract resources in tough environments. The country had produced about a third of the bullion ever mined and still has vast quantities beneath the ground.
     
    “This is elephant country when it comes to the gold business. There are still more resources to mine than have been mined. We have 100 years of knowledge,” he told Reuters.
     
    But he added that “we cannot operate in isolation of the capital markets. We are fooling ourselves if we think we can.”
     
    South Africa, which produced almost 80 percent of the world's gold in 1979 and is now only the sixth-largest producer of the precious metal, is also challenged by its geology. The country's mines are the world's deepest, which makes them dangerous and costly to operate.
     
    Investors at the Cape Town conference have been reminded of these challenges by news on Wednesday that emergency workers rescued eight miners trapped a mile underground by a fire and rock-fall at Harmony Gold's Doornkop mine near Johannesburg, but nine other workers remained unaccounted for.
     
    Harmony's chief executive Graham Briggs hastily left Cape Town, where he was to give a presentation at the conference, to attend to the drama unfolding underground.
     
    Investors here have also been put off by the mixed signals given by mines minister Susan Shabangu, who on Tuesday reiterated that discussions were under way that could lead the state to declare minerals such as coal “strategic”, which could curb exports. She gave no time frame for such a policy.
     
    This has added a layer of policy and political uncertainty as well as risk to an industry already reeling from the woes of labor strife and tough geology.
     
    “Investors are concerned that given the rise of labor unrest and policy uncertainty within the ANC [African National Congress] government, risks in South Africa are on the increase and margins are getting squeezed,” said Tom Wilson, director of consultancy Africa Practice.
     
    “The margins are squeezed so effectively that the risk/reward curve doesn't look as appetizing as perhaps it should.”

    You May Like

    Vietnam Mulls Tough Measures for ‘Misbehaving’ Chinese Tourists

    Move comes after footage surfaced online of Chinese travelers harassing a banana hawker in Da Nang

    Pakistan Social Media Star's Honor Killing Fuels Debate

    Qandeel Baloch's murder puts spotlight on deadly tradition and other mistreatment of women

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Wall Already Runs Along Parts of US-Mexico Borderi
    X
    July 22, 2016 12:30 AM
    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Poor Residents in Cleveland Not Feeling High Hopes of Republican Convention

    With the Republican Party's National Convention underway in Cleveland, Ohio, delegates and visitors are gathered in the host city's downtown - waiting to hear from the party's presidential candidate, Donald Trump. But a few kilometers from the convention's venue, Cleveland's poorest residents are not convinced Trump or his policies will make a difference in their lives. VOA's Ramon Taylor spoke with some of these residents as well as some of the Republican delegates and filed this report.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video With Yosemite as Backdrop, Obama Praises National Parks

    Last month, President Barack Obama and his family visited some of the most beautiful national parks in the U.S. Using the majestic backdrop of a towering waterfall in California's Yosemite National Park, Obama praised the national park system which celebrates its 100th anniversary this year. He talked about the importance of America’s “national treasures” and the need to protect them from climate change and other threats. VOA’s Julie Taboh reports.
    Video

    Video Counter-Islamic State Coalition Plots Next Steps

    As momentum shifts against Islamic State in Iraq, discussions are taking place about the next steps for driving the terrorist group from its final strongholds. Secretary of State John Kerry is hosting a counter-IS meeting at the State Department, a day after defense ministers from more than 30 countries reviewed and agreed upon a course of action. VOA Pentagon correspondent Carla Babb reports.
    Video

    Video Russia's Participation at Brazil Olympic Games Still In Question

    The International Olympic Committee has delayed a decision on whether to ban all Russian teams from competing in next month's Olympic Games in Brazil over allegations of an elaborate doping scheme. The World Anti-Doping Agency recently released an independent report alleging widespread doping by Russian athletes at the 2014 Winter Olympics in Sochi. So far, only Russian track and field athletes have been barred from the Summer Games in Brazil. VOA's Zlatica Hoke has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.
    Video

    Video Millennials Could Determine Who Wins Race to White House

    With only four months to go until Americans elect a new president, one group of voters is getting a lot more attention these days: those ages 18 to 35, a generation known as millennials. It’s a demographic that some analysts say could have the power to decide the 2016 election. But a lot depends on whether they actually turn out to vote. VOA’s Alexa Lamanna reports.
    Video

    Video Number of Syrian Refugees Arriving in US Jumps

    The United States is committed to resettling 85,000 refugees from around the world by October. Of that number, 10,000 will come from Syria and already some 4,000 Syrian refugees have arrived in the United States, many of them settling in the state of Illinois. As VOA’s Kane Farabaugh reports from Chicago, their arrival is not the end of a difficult journey to find peace and stability.
    Video

    Video Rio’s Trams Await Olympic Tourists

    Over the past century, many cities around the world replaced electric trams, prone to breakdowns and backups, with faster and more spacious buses. But for some reason restored antique trams are a huge tourist attraction. So it’s no wonder the authorities in Rio de Janeiro are busy restoring their city’s old tram line ahead of the Summer Olympic Games. VOA’ George Putic reports.

    Special Report

    Adrift The Invisible African Diaspora