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Foreword - Outlook 2015

April 2015

By the time this Foreword has been written, the Honourable Minister of Mineral Resources, Advocate Ngoako A Ramatlhodi, has delivered his opening address at the IHS Energy South Africa Coal Exports Conference on 4 February 2015 (the Coal Conference), and the Investing in Africa Conference on 10 February 2015 (the Mining Indaba), the State President,  Mr Jacob Zuma, has delivered his State of the Nation Address, and has hurried to clarify the application of the Regulation of Landholdings Bill to agricultural land only.

The common message has been that the South African mining industry remains core to addressing key challenges in South Africa, including poverty and inequality.  The key question, of course, is whether the substantial and key challenges facing the South African mining industry can be addressed, once again, making the South African mining industry an investment-friendly destination. 

To do so, requires not only lip-service to key challenges, but a substantial and meaningful commitment to addressing challenges, such as the energy crisis, providing a stable employment environment, providing infrastructure (roads, rail, ports and water), and a certain regulatory environment. Potential investors may remain concerned about South Africa as a positive investment destination if these aspects are not addressed.  The recent foreign direct investment figures that have been published, suggest that there is cause for concern.

During his opening address at the Coal Conference, Minister Ramatlhodi emphasised that as a country, South Africa was seeking long-term solutions to the mining industry in general, and that the coal sector was a critical part of the industry.  The Minister opened his speech by focusing on the rapidly evolving dynamics in the global energy sector, characterised by low oil prices, the emergence of shale gas and other renewal energy resources as alternative sources, as well as international protocol thresholds to limit carbon footprint.  Minister Ramatlhodi acknowledged the concern about the volatility in the coal price, which has a direct effect on the profitability of companies, contribution to the fiscus, and implications for employment. He mentioned a sobering fact:

The latest declining coal prices have resulted in a 23-billion revenue loss in exports and, while South Africa has in excess of 66 billion tons of coal that are economically extractable in the short to medium-term, development of these resources will require an investment of a minimum of ZAR100 billion in extraction, infrastructure and logistics.

On a positive note, the Minister mentioned that the South African government has prioritised infrastructure development as part of the enabling environment to unlock mineral development.  The Minister acknowledged that in order to attract investment and development, it will be necessary to create joint partnerships with the private sector, and create a regulatory environment conducive to positive private investment decisions.

The team

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