Welcome to the opening edition of Mining Prospectus for 2016, amid very challenging times for the industry as a whole, with commodity prices and investor confidence dropping faster than the Rand and the Proteas batting line-up!
One could draw some parallel between South African cricket and mining. Both have been blessed with undeniable talent and opportunity, with some of the best players in the world, much like the natural resources of South Africa (SA).
SA mining and cricket however, have some of the worst leadership on offer arguably with little direction and forward planning. Infighting and greed often take precedence over what is good for the county in my humble opinion. As a result, SA will never be the number one mining country in the world again, and the cricket team is unlikely to ever win a world cup.
Let’s get down the facts behind the problem. Mineral exports, as a percentage of total merchandise exports, declined from 35% in 2011 to 26% last year according to reports, while mining’s contribution to the JSE declined from 38% to just 15% and its contribution to foreign direct investment inflows fell from some 33% to 15% over the same period.
Those sorts of figures really do not bode well for 2016’s outlook, after a torrid time for the mining industry in 2015, with little positive to report on, making writing editor’s letters a chore to be honest, as one does not like to dwell on the negative. Although, when the elephant is in the room, it cannot be ignored.
However, reaching rock bottom, excuse the pun may not be a bad thing for the long term outlook of the industry. Government and labour need a reality check as to just how dire things are. Labour cannot keep pushing the boundaries, as the boundaries are already stretched on many of SA mining houses dwindling balance sheets.
The ‘powers that be’ need to let business get on with running business and not interfere. Very few state-owned enterprises run as a profitable concern, therefore government taking more control and enforcing more legislation is unlikely to help, but rather dig a deeper hole.
True black economic power comes from the bottom up and not from the top down, with a few fat cats helping themselves to the biggest piece of the pie. This is no different from the dark old days of SA, where a few privileged white people took the lions share. A more sustainable and mutually beneficial model is needed, with education as the key.
So as we enter a tentative 2016 there are once again more questions than answers, but such is the state of mining, and might well continue to be until meaningful leadership is in place from business, labour and government. No one side can solve the problem, but together anything is possible.
