SOUTH Africa’s explosive land issue and its commitment to rooting out corruption were key concerns for investors who remained wary of a mining sector that faces challenges on a range of other fronts.
That is one of the themes that has emerged at Mining Indaba 2019, the annual Cape Town gathering of the industry.
President Cyril Ramaphosa pointedly addressed both topics in his speech at the Indaba, referring to land dispossession as South Africa’s “original sin”. For many investors, corruption is widely seen as the current sin. Both have left harmful legacies and how these are addressed politically is a major focus of investor attention.
Hulme Scholes, director at Malan Scholes Attorneys, said this point was driven home when he was speaking with investors on a recent road show in Australia. During a panel discussion, he said he had expected conversations to be dominated by concerns around the new mining charter.
“Investors and fund managers there had two questions. One was expropriation without compensation and two, are these people being fingered in the state-capture inquiry ultimately going to be prosecuted … It’s an indicator that a democracy works when corrupt government officials get locked up,” he said.
He was referring to the commission into allegations of “state capture” chaired by deputy chief justice Raymond Zondo, which has heard stunning testimony about the depth of corruption which accumulated under former president, Jacob Zuma.
Ramaphosa is trying to draw a line in the sand between his administration and Zuma’s on this issue and told the Mining Indaba that there would be prosecutions that would see the convicted donning “orange overalls.”
But the policy drive by the African National Congress (ANC) to expropriate land without compensation is still unnerving – not least because of the lack of clarity about how it will proceed.
Assurances that it won’t threaten food security or that “unused” land will be targeted first raise many questions, adding to uncertainty.
“Expropriation without compensation is a problem for Ramaphosa which is why he is raising the issue here,” said one foreign mining executive, sentiment echoed by others.
Outsiders don’t necessarily see the issue through a South African prism.
“Foreigners see expropriation without compensation as a property rights issue while South Africans see it as a land rights issue. Foreigners see it as a general weakening of property rights” said Paul Miller, fund manager with CCP 12J Fund.
“Ultimately, the only measure of investor confidence in your mining industry is when people are putting in exploration money. That means they are comfortable enough to take a speculative 20-year view on your country. And until your regulatory regime is such that you are attracting foreign exploration money, you have not created conditions for investment. And it’s quite plain that we haven’t done that,” Miller said.
