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Political shifts lift investor mood in southern African mining

Industry leaders meeting in CT said the mood was radically different from a year ago as rising commodity prices economic recovery and political change help offset libngering challenges.

Picture: AFP.

CAPE TOWN - Mining is a long-term game, but in southern Africa dramatic political changes have transformed the investment mood for the better in the space of a year.

Angola’s Jose Eduardo dos Santos and Zimbabwe’s Robert Mugabe stepped down in 2017 after a combined 75 years in office, while the election of Cyril Ramaphosa as head of South Africa’s ruling ANC heralds the looming end of President Jacob Zuma’s scandal-ridden administration.

Industry leaders meeting in Cape Town for an annual mining conference said the mood was radically different from a year ago as rising commodity prices, economic recovery and political change help offset libngering challenges.

“We can see the positive signs already in South Africa. There is nothing better than the rand’s strength to indicate what has happened to sentiment,” said Phillip Barton, chief executive of diamond miner De Beers’ South African operations.

The rand has gained about 5% against the dollar since Ramaphosa’s election in December.

Underscoring the new confidence, almost 130 years after De Beers emerged from mines around the dusty South African town of Kimberley, the company is going back to its roots with a clutch of exploration permits to prospect for gem deposits there.

Rio Tinto has also hinted at expanding its African presence and this week said its board would consider new investment in infrastructure in South Africa.

MINER MINISTERS

Politics, once the drawback, are becoming the region’s drawcard.

“Zimbabwe has good geology, it has good people, and it looks like the political changes like South Africa’s are moving in the right direction,” said Neal Froneman, chief executive of precious metals producer Sibanye-Stillwater, which has assets in both countries.

Zimbabwe’s new mining minister Winston Chitando, who has worked in the industry, hosted a three-hour breakfast at an exclusive waterfront hotel to court investors and will follow up with a mining conference back home at the end of the month.

Angola’s new minerals and oil minister Diamantino Azevedo - who has a PhD in mining engineering - also wooed investors at a three-hour presentation on mining opportunities in Africa’s No. 2 crude producer.

The changes could hardly be starker. In the past, Angolan and Zimbabwean ministers at the conference made almost no public bid to attract investors and were generally unapproachable, surrounded by surly handlers.

The ruling parties in both nations, the MPLA and ZANU-PF, are liberation movements that critics say were corrupted by power. The ANC now has a similar reputation.

Companies that have operated in Angola and Zimbabwe in the past lack fond memories, so a lot needs to be done.
“We operated there (Angola) and it was extremely difficult. It was soul-destroying and heartbreaking,” said Petra Diamonds Chief Executive Johan Dippenaar.

But new Angolan President João Lourenço is seeking to win credibility with investors and draw a firm line between his administration and his predecessor’s, which was accused of squandering and siphoning off the nation’s oil wealth, leaving most of the population in abject poverty.

Angola is the world No. 4 diamond producer and minister Azevedo told Reuters the former Portuguese colony aimed to begin gold production next year while inviting companies to explore for iron ore and copper.

Investors said they were encouraged that the Angolan and Zimbabwean ministers were from the industry.

“I can’t tell you how encouraged I am to see a man from us, a man from the industry heading that ministry; that is the single most encouraging thing, for me,” Wilfried Pabst, chairman of African Metals Management Services Ltd, said in reference to Zimbabwe.

Pabst, whose company has lithium and tantalum assets, has had business interests in Zimbabwe since 1992.

TWO OUT OF THREE

In South Africa, the political situation remains fluid: Zuma is widely expected to step down soon as head of state before his term expires in 2019 but in the meantime Mines Minister Mosebenzi Zwane remains in office and there is no love lost between him and the industry.

Zwane made no mention in a speech of the numerous disputes between his department and the industry, which says it will deal with him only through the courts.

More promisingly, the Chamber of Mines said it is engaging directly with senior members of the ANC.

The investment outlook for South Africa, the world’s top platinum supplier that has produced a third of the gold mined in recorded history, remains cloudy.

Technical services companies, often seen as a measure of real activity, say it is essential to diversify away from Africa to stay in profit.

South African-based Master Drilling, which last year added Australia and India to the list of countries in which it operates, said on the sidelines of the conference that only around 25% of its business is in South Africa. It saw no immediate change.

An industry survey published by the Chamber of Mines at the conference also underscored South Africa’s investment problem.

A third of South Africa’s largest mining companies are not considering any new investments in 2018, while one of them may even pull out of the country, the industry survey found.

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