The Mining Indaba which has been held every year since 1988 is one of the world’s top mining financial and investment conferences – it certainly is the biggest by far in Africa, drawing in excess of 7 000 delegates from all over the mining world.  Less important than the specific mining addresses are the obvious opportunities for networking and deal-making.  It is here that opinions are formed about mining in Africa and in such conversations attitudes are formed by miners and investors as to the hotspots and what should be avoided.  The last two conferences have clearly focused on mining outside of South Africa, with South Africa being left to sort out its mining policies and clarify the opportunities it offers both foreign and local investors.

As everybody knows the South African mining industry is a pillar of the South African economy; it is the biggest in Africa as well as the basis of the country’s industrialisation.  But it is, as Peter Leon a leading mining lawyer has said, at a crossroads.  Besides having the world’s largest mineral reserve (estimated at US$ 2.5tn) mining production has contracted by 12%, while South Africa’s policy potential according to the Fraser Institute Survey of the world’s major mining jurisdictions ranks 67 out of 79 countries reviewed.  The main reason for the South African mining industry’s decline, and certainly the main reason why the last two Indabas have given priority to interest in Africa outside of South Africa, lies in the regulatory uncertainty engendered by the Mineral and Petroleum Resources Development Act 2002, which came into force in 2004.  Generally referred to as MPRDA, it replaced private ownership of mineral rights with one of state custodianship and conditional state licences.

In addition, there has been increasing talk over the last three years within ruling ANC circles of nationalisation.  This was put down quite strongly at the ANC’s elective conference in December, but as I will mention, there are other causes of concern to both local and foreign investors.

Aside from the regulatory issues events in the South African mining industry over the last six months or so have hardly been reassuring to potential investors.  We refer in this regard to the tragedy of Marikana, the response of the Unions and of the Government to funding policy decisions particularly in the platinum area caused by international factors, the fact of strikes and violence and evidence that the trade unions are losing control their members etc.  In fact, The Cape Times (Cape Town’s morning newspaper for those who don’t know) on the morning of the conference carried the headline “SA must salvage mining image at Indaba”.  Much therefore was expected of South Africa’s respected and competent mining Minister Susan Shubangu when she opened the conference.

She was quick off the mark to deal with the issue of nationalisation: “Nationalisation is not an option for our country.  I would like to affirm that our government is fully conscious of the reality that mineral development cannot happen unless capital is invested by the private sector.”  She went on to say “there is room for both private and public roles, indeed these are interdependent.”

After some general comments relating to transformation and poverty, she proceeded to discuss amendments to the Mineral and Petroleum Resource Development Bill.  The Bill and the amendments introduce a new regulatory system which clearly does involve a greater degree of complexity as far as licensing requirements for mining are concerned.  While Shubangu’s view is that: “the new process is expected to herald a significant improvement in service delivery in terms of certainty regarding security of tenure where mining or prospecting rights are at issue”.  This positive view was immediately challenged by Cynthia Carroll, the outgoing CEO of Anglo American.  Under the heading “New mining rules threat to investors”, she said that there were “glaring shortcomings in the Mineral and Petroleum Resources Development Amendment Bill that would hamper SA’s ability to attract and retain investment in mining....“we need to have a lot of conversation about that Bill because it would give us serious concerns.  It means a lot of the decision-making is open ended.”

Anglo Gold Resources Chief Executive Mark Bristow corroborated this sentiment and Business Day in an editorial spoke of the government having a vision “still rooted in interventionism”.  And by way of a summary on this 2013 Indaba and where South Africa stands, we conclude with the Business Day editorial: Although both sides have been trying to pour oil on these troubled waters, it remains clear that the government vision is routed in a philosophy of interventionism rather than cooperation and the calming words uttered at the Mining Indaba amount to platitudes.  Until that changes, investors will remain wary of investing in the local industry and South Africa risks missing yet another commodities boom.”  A sad comment.  But true.

What is pleasing is that Minister Shubangu referred to the mining proposals in the National Development Plan, which was fully accepted at the ANC conference in December.  However, what is disappointing is that she did not cast government mining policy in terms of the Plan – because the Indaba was a superb opportunity for the Minister to give the general assurances which were needed but then to present the government’s mining policy in terms of the National Development Plan.  It was an opportunity that was lost.  See Martin Creamer's article for an excellent summary of the mining proposals in the NDP - click here