Mining Indaba comes at crucial time

Cape Town will host the annual conference next month at a time of volatility in the industry.

Cape Town will host the annual conference next month at a time of volatility in the industry. Picture: AFP.

CAPE TOWN - Global corporate, political and economic thought leaders will descend on Cape Town for the annual Mining Indaba at a time when labour volatility and uncertainty around key legislative changes continue to make investors jittery.

Mining Indaba Managing Director Jonathan Moore says the event aims to unite mining companies and investors to drive investment in Africa. Up to 8,000 delegates are expected to attend the event at the Cape Town International Convention Centre between 3 and 6 February.

While optimistic about the local mining sector's outlook, Moore says the obvious challenges facing the industry need to be put to rest in order for investors to feel comfortable about spending their money in the country.

"At the end of the day, investors are looking for transparency and consistency. Every time you have labour issues it's concerning to investors," says Moore.

Speaking to the cyclical nature of the industry, Moore says, "What governments have an opportunity to learn is that when mining remains consistent through that cyclical change, that's when countries see the best results from their efforts to drive foreign direct investment into the mining sector."

Webber Wentzel Head of Africa Mining and Energy Projects Peter Leon says since the Marikana tragedy, in which 34 miners were killed during a standoff with police, labour unrest has either wholly or in part been to blame for credit rating downgrades by three international agencies.

Ongoing labour unrest, falling production figures, soaring operating costs and failure to adhere to international best practice from a regulatory perspective are some of the industry's biggest challenges, he argues.

Investors are also eager to know what will transpire with proposed changes to the Mineral and Petroleum Recourses Development Act.

The proposed amendments have drawn criticism from lawyers and mining executives for a number of reasons, including increased ministerial discretion.

Leon says the proposals, which relate to beneficiation, will empower the minister to set the percentages and differentiated prices for the beneficiation of "designated" minerals.

The minister must also consent to their export.

He says the provision creates, among other things, regulatory uncertainty because of unfettered discretion.

The bill was not passed in Parliament in 2013.

Looking at the year-on-year drop in production figures, Leon says the size of the mining industry in the next five years is likely to decrease dramatically.

Taking into consideration the economic landscape and the problems besetting the industry, this year's Mining Indaba will be all the more interesting.

As MD of the indaba, Moore believes that South Africa's long-term opportunities remain attractive.

"When you look at the richness of mineral recourses here in South Africa, the future is very bright," he says.

Moore believes South Africa continues to be seen as a gateway.

"At one point, it was probably more prominently positioned as a gateway. But I think as the continent has continued to open up and as investors have become more comfortable putting capital to risk in other areas, they've realised there's an opportunity to work across the continent and not directly access that through South Africa."

Click here for a feature on the Investing in African Mining Indaba.