South Africa is still punching below its weight division when it comes to mining competitiveness and productivity.
This is despite the country being in the top five globally regarding mineral richness and literally possessing almost any mineral one could choose to name in the ground.
This is according to Noah Greenhill, Head of Corporate Finance at Sasfin Capital and speaker at the upcoming Joburg Indaba: Investing in Resources and Mining in Africa, which takes place from the 29 to 31 October at the Hilton, Sandton.
“South Africa is gifted with minerals and we should be in a much better position globally. We should be a Mecca of mining finance for the world. But we are not. Why do mines choose to raise capital and list in Toronto, London or New York? Some companies are listed in Toronto while 100% of their assets are here in South Africa.”
Greenhill says investors are already talking about opportunities ex-South Africa and this needs to change as there is over 100 years of mining experience, infrastructure and banking finance in this country which countries further north in Africa do not possess.
“Yes, we appear fragmented locally in the mining sector and this repels investors. Government, business and labour need to come together and present a unified face to mining and speak with a unified voice to encourage investment here. No-one is leading the charge and people spend far too much time defending positions rather than spending time putting real value propositions together showing the benefits of doing business with and investing in South Africa.”
He says South Africa has the minerals but needs to work through the issues. ”If you look at any successful entrepreneurs in any industry you don’t read about their problems, but rather them doing what they have to in order to succeed and focusing on solutions.
“We are suffering from a culture of complaining and people can point fingers at government, labour or technology but this doesn’t help anyone. We need to get on with it as there is too much complaining and not enough doing.”
He emphasises the need for more of an enabling environment to foster investment in mining locally. “We need accessibility to the right people and policy and regulatory certainty. When I attended a capital resource conference in Botswana a few years ago, the minister of mining walked around the conference room and engaged directly with potential investors and delegates. Juxtapose this with a mining event a couple of years ago where the past South African minister of mining firstly arrived late, then moved around with a big entourage so no-one could get near, and finally briefly spun the party line in his speech before walking away.”
It is this approach as much as regulatory obstacles that create a barrier to meaningful discussion and investment as it is not an enabling environment that says, “I want to do business with you”.
Looking to solutions and incentives Greenhill cites how Toronto offered tax incentives in the 1970’s to stimulate the mining sector and grow appetite for junior mining companies.
“They offered floats and shares on the stock exchange where every 100 dollars invested and spent in mining gave back 80 dollars in tax rebates into investor’s pockets. As a result of this incentive, billions of dollars have been invested in junior mining in Canada. Understanding the risks but offering these incentives grew appetite for mining, junior mining and exploration companies.”
The problem in South Africa, he says is how risk averse we are and there is little appetite for junior and exploration mining investment locally. Greenhill believes there is a large global appetite for minerals and rare earths and the raw materials for everything consumed in the world is either grown or mined.
In conclusion he believes that South Africa needs to strive to attract mining investment and encourage junior sector listing on the JSE to form a mining portfolio, but this scenario will only become possible if South Africa creates a more enabling and approachable environment for investors.
The 2013 Investing in Resources and Mining in Africa conference. For bookings and further information are available on line www.joburgindaba.com