THE South African government could adopt a more investment-friendly attitude to mining and minerals reform if it helped repair trade relations with the US.
This follows a high-level meeting between the two countries’ governments earlier this month in which the importance of policy certainty for foreign investment was discussed.
The Financial Times reported on May 8 that about 25 officials from both governments held preliminary discussions over bilaterial mining deals which extended into the energy and infrastructure sectors.
The relationship between South Africa and the US deteriorated alarmingly quickly under the presidency of Donald Trump last year. Trump made false claims of white genocide in South Africa and then announced the US would resettle ‘Afrikaner refugees’. Heavy trade tariffs were also imposed on South Africa by the Trump administration.
Two CEOs who attended the meeting between the governments told Miningmx the talks had been constructive, but “early stage”. They declined to provide details as the nature of the discussions were confidential.
Mining deals with the US might form “a bridge”, said Minerals Council president, Paul Dunne on Wednesday who added, however, it was “a hanging question”.
“It was a very broad representation from the US, high-level, and quite serious,” said Dunne. “There is a hanging question – rather than an answered one: is it possible, through critical mineral strategies that may be built between the US and South Africa, that bridges the relationship between the two countries?”
However, one of the major sticking points for prospective US investment in South Africa is the country’s empowerment regulations. Currently, legislation allows for a 26% equity stake in projects or companies operating in South Africa’s mining sector. An amendment act currently undergoing a second draft has potential to deliver policy surprise, the Minerals Council said today at its annual general meeting.
Mzila Mthenjane, CEO of the Minerals Council, said changes to the legislation had been raised at the meeting earlier this month. “The issue of the MPRD (Minerals and Petroleum Resources Development) Bill obviously came through in terms of what progress has been made and what the key issues are,” said Mthenjane.
“From a Minerals Council perspective, it certainly does serve in our favour, in that it is yet another stakeholder expressing a keen interest in investing in the country and wanting to ensure that investment is not constrained by legislation,” he said.
The thorny issue of an equity equivalent programme as alternative to black ownership for multinationals was also discussed, said Mthenjane.
“But it is not something I would delve into,” said Mthenjane. “There was mention that it remains a concern from the US perspective, but it is something that I think is being dealt with at a government-to-government level.”
Previously, South African-born billionaire Elon Musk’s satellite company internet company Starlink said it was interested in investing R2bn in South Africa rather than meeting empowerment equity targets.
Policy uncertainty
Policy certainty is a critical matter for the industry while it waits for the MPRD’s second draft to emerge. Dunne acknowledged he could not rest easily until the draft’s contents were known despite constructive discussions between his council and the department of mineral and petroleum resources.
“Engagements with the department and the minister on a face-to-face basis have been both professional and productive,” he said. “What still sits in the back of our minds and worries us is that we end up with a surprise whereby the second draft of the amendment bill does not fully or completely represent those engagements,” he said.
Dunne said the council expected the second draft of the amendment bill before the year-end, adding that the process was inevitably slow.
“Why we should be concerned is that whilst time moves on, the uncertainty of certain policy remains, and that is not conducive, as we said at the time, to investment, and perhaps even more importantly in some respects, to the need for employment in South Africa,” he said.
“Mining investment brings serious, decent, well-paid jobs, as you know. And as long as the uncertainty of policy remains, that inhibits investment, and therefore inhibits job creation.”
