Not all doom and gloom for mining industry

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SPONSORED | CDHLegal The South African mining sector is facing many challenges, but regulatory certainty and Ramaphosa’s administration could spell a new dawn for the industry. Read more.

Regulatory certainty and Ramaphosa’s administration could spell a new dawn for mining sector despite challengesWhile it has been the main driver of the South African economy for many decades, the mining sector is under increasing pressure from rising costs, regulatory uncertainty and waning investor confidence. Yet there is hope that President Cyril Ramaphosa’s government will usher in a new dawn for the industry.

The energy, mining and utilities sector was the most active across the continent last year, with a total of 41 M&A deals, worth $5.5bn, announced. Of this total, 19 were African mining deals, falling well short of the post-economic crisis high of 37 seen a year before. At the same time, there has been a lack of the exploration expenditure necessary to identify the new mines of tomorrow. It was, however, heartening to note in the minister's speech at the Mining Indaba recently that he had instructed the Council for Geosciences to enhance the mapping of SA’s ore bodies.

Second is the mining industry’s dependence on public utilities for the supply of water and electricity. Eskom’s proposed electricity tariff increases would be highly detrimental to mines. In other jurisdictions, there have been amendments to legislation, such as increases in taxes on mining companies in the Democratic Republic of Congo, Tanzania and Zambia. This affects M&A activity throughout Africa, not just in SA.

Previously, miners were able to negotiate with the head of a community to conclude a transaction, but will now have to obtain the consent of the entire affected community, which may consist of opposing factions. This will be highly problematic and place new mining development in a state of stagnation. The department of mineral resources has appealed against the high court judgment.

 

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