AMN - Investment in SA junior sector faltering – comment by Yolanda Torrisi

Investment in South Africa’s junior mining sector is faltering due to regulatory uncertainty, lack of coordinated policy development among government departments and a poor and inefficient administration. The junior sector is key to a healthy mining industry and the situation in South Africa is exacerbating the industry’s woes.

While investors are often willing to ride-out bumpy territory to reach the long-term destination of healthy returns, it is a little difficult to see any light at the end of the tunnel in South Africa. This is backed up by Webber Wentzel’s mining sector group deputy head Jonathan Veeran who says, “Mining investment is normally of significant magnitude, high-risk and long-term in nature. Risks flow from the macro-economic factors beyond the control of the investor and host countries, and cannot be avoided.”

Among the challenges that have stung junior investment in 2017 are the lack of consultation on amendments to the Mining Charter and lack of certainty around when the Mineral and Petroleum Resources Development (MPRD) amendment bill would come into force.

Jonathan Veeram says regulatory uncertainty has bitten the junior sector hard and deep, and the South African government should look closely at developing a lighter regulatory regime.

The country’s regulatory framework is complex and requires skilled personnel and consultants to ensure compliance. These people are usually out of reach for juniors owing to the expense. Then there is also the time consuming task of regulatory compliance, which is also costly.
Creation of an efficient and transparent public administration system is critical to driving investor confidence, according to Jonathan Veeram, and this includes consistent legal principles as well as timely decision making.

He says legislative parameters within South Africa’s mining industry need to be about more than just political grand gesturing and must address corruption as well as sanctions against rogue states and individuals. He says the fact that South Africa is missing from the Extractive Industries Transparency Initiative (EITI) is an example, especially considering 26 African states are members.

Policies and regulations should promote a competitive mining industry that is also sustainable in the long term and South Africa’s government needs to consider carefully what can be done to support the industry that has done so much for the nation in the past … not bring it down.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com