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

Photogallery Americans Celebrate Thanksgiving With Feasts, Festivities

Holiday traditions include turkey dinners, 'turkey trots,' American-style football and New York parade with giant balloons More

Video For Obama, Ferguson Violence is a Personal Issue

With two years left in term, analysts say, president has less to lose by taking conversation on race further More

Video Italian Espresso Expands Into Space

When Italian astronaut Samantha Cristoforetti headed for the ISS, her countrymen worried how she would survive six months drinking only instant coffee More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
To Make A Living, Nairobi Street Vendors Face Legal Hurdles, Physical Violencei
X
Lenny Ruvaga
November 27, 2014 7:05 PM
The Nairobi City Council has been accused of brutality in dealing with hawkers in the Central Business District - in order to stop them from illegally selling their wares on the streets. Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video To Make A Living, Nairobi Street Vendors Face Legal Hurdles, Physical Violence

The Nairobi City Council has been accused of brutality in dealing with hawkers in the Central Business District - in order to stop them from illegally selling their wares on the streets. Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video For Obama, Ferguson Violence is a Personal Issue

Throughout the crisis in Ferguson, Missouri, President Barack Obama has urged calm, restraint and respect for the rule of law. But the events in Ferguson have prompted him to call — more openly than he has before — for profound changes to end the racism and distrust that he believes still exists between whites and blacks in the United States. VOA White House correspondent Luis Ramirez reports.
Video

Video Online Magazine Gets Kids Discussing Big Questions

Teen culture in America is often criticized for being superficial. But an online magazine has been encouraging some teenagers to explore deeper issues, and rewarding their efforts. VOA religion reporter Jerome Socolovsky went to this year’s Kidspirit awards ceremony in New York.
Video

Video US Community Kicks Off Thanksgiving With Parade

Thursday is Thanksgiving in the United States, a holiday whose roots go back to the country's earliest days as a British colony. One way Americans celebrate the occasion is with parades. Anush Avetisyan takes us to one such event on the day before Thanksgiving near Washington, where a community's diversity is on display. Joy Wagner narrates
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid