THERE is the brief prospect of travelling in the Rolls to the Mount Nelson hotel in Cape Town’s Gardens district, but I’m shepherded instead to a German sedan for the trip where Anil Agarwal and entourage awaits, in the Lord Nelson suite no less.
Agarwal is the founder and executive chairman of Vedanta, India’s only mining conglomerate. Listed in London by former chairman, Brian Gilbertson, the company is worth £3bn (R50bn) and comprises the bulk of Agarwal’s $3bn net worth which, according to Forbes, makes him India’s 65th richest person.
It is also the company that is investing $1bn in South Africa’s Northern Cape province building the Gamsberg zinc mine. In a period of widespread disaffection for South Africa’s mining sector, and where regulatory uncertainty and political inscrutability dominates, this is a rare show of confidence.
“Gamsberg will be a catalyst in South Africa,” says Agarwal. “We are entrepreneurs and there are some risks we have to take. But the South African government and people have opened their arms. We don’t get moved from pillar to post for approvals and South Africa operates by the rules,” he says.
This is not what one has come to expect from mining executives operating in South Africa.
Normally, the discourse is about inordinate delay, red tape; even obstruction. For instance, a High Court judgement last year found the Department of Mineral Resources to have attempted to force Australian investor Aquila Steel, now owned by China’s Boasteel, into sharing its manganese deposit in the Northern Cape by claiming overlapping prospecting rights.
Agarwal, however, seems to have a sanguine view of South Africa’s progress as an investment destination so far. “Culturally, there is a good fit between India and Africa. And I haven’t seen any other African country where Indian origins go back four or five generations like in South Africa,” he says.
“I am very new here, but there is a huge legacy of black and white. I go to some conferences and I find a lot of agony. But one thing I can tell you is that the government is on a good mission.
“I fully agree that foreign investment is not coming at the moment. They are very reluctant as they don’t find much stability. That fear is always there, but I think it will improve. Africa has to do a lot of PR,” he says.
Vedanta’s plan, as described by Agarwal to the local Indian press recently, is to have “one arm in India and another arm in Africa”. He has also spoken about creating another Hindustan Zinc in Africa, starting with the Northern Cape. Hindustan Zinc is a subsidiary of Vedanta and the world’s second largest zinc producer.
It’s also the company that was the subject of a telephone conversation between Agarwal and Mark Cutifani, CEO of Anglo American. According to Agarwal, there are good reasons for the two companies to be combined.
“We had a discussion with Anglo. Hindustan’s assets are among the finest. It is siting with $6bn in cash and no debt and generates $2bn in cash every year so putting it with Anglo would be one plus one making four,” says Agarwal.
Cutifani seems to have turned down the offer, however – although intriguingly, Agarwal thinks discussions have just been paused. “The proposal went to the board but it was not the right time. It was just a friendly idea. It is a transaction that still needs to be digested,” he says.
As for Gamsberg, the initial $400m investment to build a 250,000 tonne a year zinc mine is progressing at a rate of knots. An improvement in the zinc price has also given Vedanta fresh momentum to invest a further $500m taking production to 400,000 tonnes/year.
The expansion is under discussion. Says Agarwal: “I am very smart; not street smart, but no-one will push me to do the wrong thing”. It’s an outlook with which Vedanta’s South African CEO, Deshnee Naidoo can concur: “He tells us to focus on the operations; he’ll do the M&A. Remember, he’s an executive chairman”.
So one shouldn’t be distracted by the suite and the Rolls (even though we didn’t ride in it?) “Definitely not,” says Naidoo. “He’s pushing us all the time. As for the Rolls, next time,” she says.
