South Africa’s mining industry is one of the very few that truly shares the value it creates with its stakeholders – employees, governments, host communities, suppliers and shareholders.
However, this is not enough to help alleviate the country’s enormous economic challenges, Anglo American CEO Mark Cutifani told delegates at the 2019 Joburg Indaba earlier today. Cutifani was also inducted into the SA Mining Hall of Fame on Tuesday, 1 October.
He believed that we needed to think differently about mining if it was going to fulfill its true potential of being a cornerstone in transforming a significant economy to benefit South Africa’s society as a whole.
“We can only achieve this if we create a new paradigm – one where mining moves from merely sharing value to helping to create enduring value for all. The two concepts might sound similar, but there is a material difference. The difference lies in how we ensure that the value we create stands the test of time, and is not just for the short term. More importantly, creating enduring value requires all of us to actively participate in the process.”
He explained that “enduring value” has several features, some of which includes sustainable and healthy returns for shareholders; a consistent contribution to the national fiscus; self-sufficient mining communities; and a skilled workforce that is enabled to adapt to the unfolding change in the nature of work.
However, South Africa’s mining industry has three immediate tasks if it is to create this enduring value. “Firstly, we need to urgently focus on creating an enabling environment for investment in the sector. Secondly, we need to embrace modern mining with all the opportunities it brings; and thirdly, we need to navigate a transition that is sensitive to our current financial and social complexities. That is, we need to find compromises and solutions to both sides of the debate.”
With regard to creating an enabling environment for investment, Cutifani said that effectively, for much of the past decade, the sector has been “cash-starved”; with investment levels declining, while the input costs of mining (e.g. energy and water) have soared, and where regulatory uncertainty has understandably caused reluctance among international investors to support major new mining projects.
“Despite this, Anglo American has continued investing in South Africa, particularly if you look at the last 25 years of democracy. In the last 20 years since Anglo American merged its South Africa business with its other businesses around the world, we have invested more than R300 billion in capital expenditure in today’s money in South Africa.”
He explained that prominent among these were the development of the Venetia diamond mine, the Mogalakwena PGM complex, and Kumba’s ongoing expansion of Sishen/Kolomela. “We will continue to evaluate investment opportunities and act decisively when prospects materialise that are competitive on a global basis.”
Upbeat about South Africa
Cutifani said there were many reasons to believe in South Africa’s mining industry, irrespective of the challenges the country faced.
“South Africa remains one of the top-ranked countries globally in terms of mineral endowment. There is no shortage of geological opportunity. The Minerals Council of South Africa is of the view that even in the absence of a greenfields exploration boom in South Africa, mining investment could almost double in the next four years if the country was to return to the top quartile of the most attractive mining investment destinations. Doubling investment would create additional jobs, materially increase exports and direct and indirect taxes and royalties paid to the fiscus.”
However, to achieve this, he said that, first, our political climate must be stable and investor-friendly. “We are encouraged by the continuing positive improvements in South Africa’s political arena. There are several challenges – like the parlous state of the public fiscus – but overall, I think that government is on course towards the much-needed stability that international and domestic investors require.”
“Secondly, we need regulatory clarity and certainty for the long term. We now have a revised Mining Charter, and while we may have misgivings on some of the unresolved issues in the Charter, it is clear that these can only be resolved if we, as an industry, work with the Department of Mineral Resources and Energy to find a solution that guarantees the growth and sustainability of South Africa’s mining sector.”
Cutifani also added that we needed to better promote the industry. “Investors must believe that we have confidence in our industry, economy and institutions if they are going to invest. We cannot achieve this when we keep pulling from different ends. We need an aligned voice, bringing labour, government, NGOs and mining companies to promote the South African mining industry. I’m not for a second suggesting that we should abandon our respective positions and causes, I’m merely making the point that we are all vested in the success of this industry and need to start acting in that way.”
He strongly believed that if South Africa followed through positively in terms of policy, and the domestic investment climate, and could compete effectively with other mining jurisdictions, it would create the certainty and stability required for potential investment “for today, tomorrow and for the long term”.
“With 453 000 people directly employed in the mining industry today, resulting in a further 1.4 million indirect jobs and supporting around 4.5 million South Africans, the multiplier effect of a growing mining industry should not be underestimated – driving a wholesale economic renewal for South Africa.”