Bank of America echoes Malema’s Nationalization sentiment while Credit Suisse says investors “concerned” on BEE but Eskom big concern.

The Investing in Africa Mining Indaba started quietly under the radar in Cape Town yesterday. Some of the approximately 7,000 participants streamed into the CITCC for the world’s “premiere” mining investment event and the elephant in the room – electricity supply – was immediately exposed at the event’s inaugural critical session where Tony Blair and Graça Machel were guest speakers.

In the macro-economic scene for Africa, the size of the population of the continent is 1.1 billion (15 percent of the global population), yet it only accounted for two percent of the global GDP. A panel was asked the to share their views of what they believe is needed to raise Africa’s position in the global economy.

Michael Widmer, Head of Metals Research, Bank of America Merrill Lynch, said that the most important factors were “continued good governance, the rule of law and predictability in economic, social and personal lives.

“A host of developments, from better roads to better electricity and water and that foster economic development would have to go hand in glove to move forward. But we have seen progress in various parts of Africa in the past few years, which is very good. Education is probably more important than roads and water and electricity, and not only education for individuals but also on a governmental level,” said Widmer.

He added that in 1988 in a meeting with the ANC in Lusaka, and when it was apparent that “political change” would occur in the country, the party had already then addressed issues of nationalisation of mining interests in South Africa because these were encapsulated in the 1955 Freedom Charter, which the ANC co-incidentally dusted off at its 103rd birthday celebrations in the city a month ago.

“Back then we said we are in 1988 at it is pretty clear that they (mines) should not be (nationalised) and that private capital should develop recourses. It was interesting everyone in ANC at that time said ‘you are right, we just have to say maybe that made sense in 1955 but it doesn’t today’.”

On the question that while South Africa was today a “centre for global mining” there were “obvious” issues such as BEE, load shedding and structural problems with regard to power and energy – and wondered whether these would have an impact on investment considerations;

Justin Froneman, Director Head of Mining South Africa, Credit Suisse, said that while PGMs (Platinum Group Metals) are a huge market, South Africans had become “largely tolerant” of these issues.

“But on our international road shows there is concern about all of these issues. The big one is power and where that next Kilowatt or Megawatt comes from – and how do you sustain the market?”

He said in a market like PGMs where the “fundamentals do look good” power and regulatory uncertainty certainly permeated through shareholders and mining corporates and did result in relatively regular “pretty difficult questions to be answered.”

Froneman said that political uncertainty was one of the key issues holding back foreign investors.

“Some countries, where we are talking about mine closures right now on the back of fiscal changes, make it difficult for Africa to compete in the international context,” he said.

Even Chinese investment in mining had totaled around $5 billion in 2011, this had dwindled to under $1 billion in 2013, and they were keen to understand what had altered the Chinese approach.



Enjoyed this post? Share it!