Africa

Details

  • Industry: Energy & Natural Resources, Mining
  • Type: Business and industry issue
  • Date: 2/16/2011

Buoyant Mining Indaba reflects confidence in mining sector 

Heralded by its organisers as their largest conference since its inception, the 2011 Mining Indaba was different from previous gatherings for a number of reasons. With over 5 700 delegates in attendance this year’s Indaba created more than just the usual networking and meet and greet opportunities.

Having come through the recent global economic downturn, the mood among delegates this year was buoyant and optimistic for the short to medium term. This was largely due to the fact that commodity prices are up following the global economic crisis. For the African delegates, it was heartening to see the global interest in the resource-rich African mining sector. Numerous mining entities from various parts of the world were not just represented at the conference, but keen to explore market opportunities on the continent, reinforcing a mood, which suggests that ‘Africa’s time has come.’

 

Contributing to the optimism, is the bounce-back and steady recovery of commodity prices following their slide during 2008 to 2009.

 

With optimism, however, comes caution. Chief among the cautions is that China, in an attempt to cool down its rapid growth, might put a brake on its commodity imports. China also faces stubborn inflation problems, which might be a factor in coming to such a decision.

 

A key emphasis to emerge at the Indaba was the need for effective partnerships among stakeholders in the sector. This would entail the sector working in concert with government, organised labour, communities, business and other stakeholders. All partners have key roles to play. Labour has an obligation to increase productivity to enhance global competition while government has an obligation to ensure critical infrastructure such as rail, water and power, a stable investment platform, etc The view emerging was that together, partners could create enabling platforms and arrangements for successful mining activity for the benefit of all stakeholders and also enhance the responsibilities and accountabilities of each member. Some companies have already formed such partnerships with commendable results, which were acknowledged by government.

 

Perhaps the most significant development was the announcement by the Minister of Mineral Resources, Susan Shabangu, of the Electronic Mineral Management System. While long anticipated, its introduction was hastened by developments in the sector, which require greater transparency and accountability from both government and those applying for prospecting rights.

 

The new system is expected to be operational by 2012 and the announcement was broadly welcomed by the sector as reinforcing transparency and a consistent application of regulations. The system is also designed to enhance our ability to compete against other markets, where licensing takes less time than in South Africa. However, many players have decided to adopt a ‘wait-and-see’ approach until the system has proved itself to meet the intentions of government and stakeholders in the mining sector.

 

Referring to the debate around nationalisation, Minister Shabangu said that clarity should be brought to mining in South Africa and that uncertainties need to be addressed. While delegates agreed that certainty will benefit investment in the mining industry, there was less than anticipated concern around security of tenure (rightly or wrongly). Also emerging as a related theme was the mining sector’s reaffirmation of its commitment to sustainability, as leaders in the area. Sustainability has been a key focus area of the mining sector and while discussion was driven by the need for the compatibility of extractive activities and a strong business case, a clear focus on communities also emerged.

 

Communities in areas living around or affected by mining activity have, as always, been identified as stakeholders who need to be a key part of the equation in the business plans of those involved in successful and sustained mining activity. These concerns were linked to companies needing to declare and strengthen sustainability measures as part of their stakeholder reporting requirements.

 

A key concern raised related to the political circumstances on the continent and their impact on the continent’s mining potential. Recent developments in Tunisia, Cote d’Ivoire, Egypt and Yemen create some caution around doing business in Africa. Although Africa is probably more stable now than it has been for a number of years, there are some key indicators, which need to be taken into consideration. Amongst these are food and food price security (which led to the situation in Tunisia), the presence of a large, disgruntled youth (as seems to be the case in Egypt) and corruption (perceived or real).

 

Since it appears as though these ingredients are part of a recipe for revolution they need to be considered by investors to ensure that the socio-political and economic stability required for long-term mining commitments in different African markets will deliver a return.

 

Globally, there are also some uncertainties relating to structural changes that are required in the larger economies given the interdependence of countries around mineral resources.

 

By and large, however, the mining sector is displaying a renewed confidence, based on economic optimism, the need for mutually beneficial partnerships and an emerging long-term vision for sustainable extractive activities.

 

Contact

Contact
Carel Smit
Head of  Energy & Natural Resources Markets in Africa at KPMG
Tel: +27 11 647 7065
carel.smit@kpmg.co.za