Investors stunned by SA Govt’s plan to have Council for Geosciences lead exploration drive

What now for SA mining?

SOUTH Africa’s current account is expected to remain in surplus in 2022 – news that will warm the heart of finance minister, Enoch Godongwana ahead of his Medium Term Budget Policy Statement next month. As in previous years, the country has its mining sector to thank for the bumper tax take.

According to RMB Morgan Stanley, the mining sector’s contribution to Government revenue this calendar year – expressed as cash tax paid and assuming current mineral spot prices – is forecast to be R770bn compared to R263bn in the 2020 calendar year. The contribution in calendar 2022 is likely to moderate, yet it will be a meaningful R750bn. That’s a major contribution from a sector that feels underserved by its government.

Speaking at a mining conference in the Limpopo province, mines minister Gwede Mantashe sounded dismissive of this contribution. Mining companies were doing “what they should be doing”, he said. A question on the lips of mining delegates who attended the Joburg Indaba conference last week was whether the government was doing what it should. For instance, it is yet to deliver a new mining cadastral system – the administration through which mining and exploration licences are registered and managed – after promising it last year.

Instead of an explanation for the delay, Mantashe turned on the sector for failing to produce new black mining capitalists which he wanted raised from grassroots origins. Chris Griffith, CEO of Gold Fields, spoke for many when he said there could be no new black mining capitalists without new resources to mine. And that requires a licensing cadastre in order to catalyse mineral exploration.

South Africa’s exploration industry is in desperate need of new investment. A recent SA Reserve Bank Quarterly Bulletin demonstrated the problem. Gross fixed capital formation in mining exploration totalled around R1bn in 2020 – its lowest level by a margin since 1994. Mantashe is not blind to the matter: he said at the conference South Africa should target comprising 5% of world exploration spend compared to 1% currently.

Role of Government questioned

That’s a commendable goal, but its execution is the main talking point. According to Mantashe, his department’s Council for Geosciences will lead the charge in exploration. The idea drew a range of responses from howls of derision to carefully worded pessimism.

“I heard 650 participants at the conference) collectively sigh,” said Joburg Indaba chairman, Bernard Swanepoel, a former CEO of Harmony Gold. “I wouldn’t just sigh,” said Fiona Perrott-Humphrey, a London-based director at Rothschild & Co: “I would scream. Oh dear me: no, no no”.

“As people get a better appetite for risk they will go into other countries such as Zambia and the Congo. If the South African Government has its heavy hand on everything, it [exploration] is dead,” she added. A day later, BHP was connected with a possible return to the Democratic Republic of Congo.

International shareholders represented by BlackRock agreed the government ought to create the environment for others to work. “Relying on the government to find the next large deposit is reasonably unrealistic,” said Brett Beatty of Resource Capital Fund which, for the time being, is sitting on the sidelines in South Africa.

First stop for Mantashe’s Department of Mineral Resources and Energy is to upgrade its functioning. “Government is inherently, horribly bureaucratic,” said Vusi Mpofu, lead mining and chemicals banker at Nedbank Corporate Investment Bank. In addition, the skills within the bureaucratic net are not up to scratch.

This means even regulating the mining sector has proved too much of a challenge for government as demonstrated by the delays in permitting a mining or prospecting licence application. “It goes further than that,” said Mpofu. “You, in good faith, will put in a licence application and you hope it will be dealt with by a competent bureaucrat.

“That is your first prayer.

“Along the chain of 17 iterations before approval it can only take one incompetent person for that [application] to be stymied for a year,” said Mpofu.

5 COMMENTS

  1. If you can’t attract local and international investment because you won’t change your policies, then taxing your citizens and giving the money to government scientists is the last resort. Of course there is not an entrepreneur amongst them -that is why they are government scientists. So we continue to wait for the economy (and mining) to go to zero so that we can get the country’s creditors to force the government to do the right thing.

  2. [Comment moderated]

    The DMR can’t even answer their phone’s and many of their emails return because their servers can’t handle large files. the only staff who do anything are these who try find reasons to close mines down. Imagine the trouble SA would be in if the mining companies decided on a tax revolt and invested their profits offshore instead.

  3. If they start with tax revolt, they want government to close the mines down. The economy will struggle but the minerals will remain in the ground.

  4. DMR DNA needs a drastic and urgent makeover.
    Especially in the issuing of prospecting licenses and the details around old order rights lapsed rights new rights.
    The processing is a joke.

    Wake up SAA smell the roses and see who is related to who in these departments.
    As the saying goes its not what you know, It’s who you know
    That is why SA is in the situation it is. What a great example for future generations to follow.
    shenanigans get you everwhere in SA

    The dots should be followed and connected in the flow area of international finance coming into SA and if it reaches it intended project.

    The new system will never materialise anyway, as there never has been a proper system or managed by trained competent workers.What is reason for the delay? ? another mining indaba so that once again pockets can be lined.

    Anon20

  5. There is a SA developed cadastre that has been bought by many African countries. It works for them. So why does the DMRE not acquire this system. Going to tender allows for looting cf PPE looting. Of course the system has been developed by people do not fit the “racial profile” required.
    In addition it has been proven that they cannot handle processing PR and MR applications ( except for Orion)) timeously – > 5000 PR applications outstanding.
    Given this scenario they now want to do exploration . They do not understand any aspect of the business.More opportunity for looting.

LEAVE A REPLY

Please enter your comment!
Please enter your name here