The recent spate of strikes and general labour unrest in platinum and other sectors of South Africa’s mining industry cost the country an overall 6 per cent in lost production Sajil Singh, Lead Analyst at Coface, tells Alec Hogg in this interview. In the platinum sector, the Rand value impact on Amplats and Lonmin alone was R10-billion – with their workers forfeiting R1-billion in income. Other aspects of the fallout, he says, have included growing lack of confidence in our economy by fellow Bric nations, and deflection of investor attention to alternative markets such as Angola and Mozambique. Europe, on other hand, is more laid back in its perception that this has been an anomaly that will shift focus to other markets in the short term before South Africa’s inevitable bounce-back. Our country is unique in that it is neither a true African economy nor a European economy, Sajil concludes. GK.
ALEC HOGG: Well, welcome back to Power Lunch. 2012 marked the beginning of strikes in South Africa’s mining sector. You will very well remember what happened at Marikana and we’ve just had an escalation thereafter. Sajil Singh is the Lead Analyst at Coface. It was interesting yesterday we had Steve Phiri in here from Royal Bafokeng Platinum. They were immune to the strikes. They’ve managed to continue production as normal and done very well. At the other end, you have Lonmin, who were not immune to the strike. Clearly, they were paralysed, by it and you’ve got these two opposites. However, for the country as a whole, what has the platinum strike, and all this unrest in mining meant to us?
SAJIL SINGH: Okay, well if we look at just output, in terms of the impact the strikes have had on the mines, you’re looking at about six-percent reduction in production.
ALEC HOGG: Only six?
SAJIL SINGH: Yes, six percent in total.
ALEC HOGG: Overall?
SAJIL SINGH: Yes.
ALEC HOGG: Of total mining, though?
SAJIL SINGH: Yes.
ALEC HOGG: All right, how much is platinum though?
SAJIL SINGH: For platinum, it was quite significant. In terms of Rand value impact, we’re looking at about R10bn, so it was significant for the platinum producers in general – and that’s Amplats and Lonmin. In terms of wages to staff, you’re looking at around R1bn of lost revenue…and that impacts significantly throughout the economy.
ALEC HOGG: Where do you get your numbers from? The Chamber of Mines has got very different figures on wages?
SAJIL SINGH: Yes, it is very difficult to get an accurate figure. However, our analysis is done purely on the wages that would have been paid. We then analyse what has not been paid, accumulate it, and then do a few adjustments using our various models.
ALEC HOGG: So, you’ve been pretty conservative in all of this?
SAJIL SINGH: Yes.
ALEC HOGG: But if we have a look at the South African economy, generally – and there’s all indication that we certainly aren’t going to hit two-percent. Maybe, if we’re lucky, we’ll hit one-and-a-half percent. What are your numbers telling you now?
SAJIL SINGH: Our numbers are telling us around 1,1 to 1,2 percent – very, very conservative. I think we probably might get to about 1,4 but 1,5 is definitely stretching it – and that really is a tragedy for, being an emerging market, and trying to compare with other emerging markets…especially in Africa.
ALEC HOGG: Coface is a global organisation?
SAJIL SINGH: Yes.
ALEC HOGG: When you talk to your colleagues from other parts of the world, what do they think about the things that are happening here?
SAJIL SINGH: Really different views… In terms of Europe, the general consensus is that this is just an anomaly. It can fly by. Nothing major here. Let’s focus on other markets short-term; South Africa will bounce back. However, we are finding from the BRICS Nations – our counterparts in Russia, China, and India – that they are starting to feel there’s a lack of confidence in our economy. That’s what we’re getting in terms of their sentiment. That is what is frightening long-term. In our short-term strike: yes, it affects us right now – but we’ll bounce back. That’s not too bad. But when you’re getting foreign investors – and significant ones – that are losing confidence in our markets and are now looking to other markets, such as Angola and Mozambique, it’s terrifying for our long-term prospects. And that’s where we are at the moment.
ALEC HOGG: Those are extraordinary insights because, clearly, these are the people in those nations, who engage with the Governments and would be shaped in their opinions, no doubt. Let’s just take the worst-case scenario: South Africa is kicked out of BRICS. Would it mean anything?
SAJIL SINGH: Really speaking, at the moment, it’s not a financial benefit for us to be a part of BRICS. It is more of a sentiment – and a foreign direct investment indicator that indicator tells us whether people want to invest long-term in our economy. If we don’t have that investment level, we are not going to be able to grow – and that leads to a number of socioeconomic problems locally. So, the country can escalate into a greater degree of poverty, if you want to call it that.
ALEC HOGG: It’s so interesting here. You said earlier that the European’s are saying ‘we’ll bounce back’. As to the Americans, we know there’s the whole White House discussion going on at the moment, – but the allies are the ones who are most cautious. Perhaps they know South Africa best.
SAJIL SINGH: Well, they know emerging markets, I would assume, a little bit better. The problem in Europe is that sentiment of ‘bouncing back’ because that’s what they do. It’s a very elastic market. Things go up. Things go down. They’re used to those sorts of concepts. They more or less categorise South Africa in line with their type of economy, when it’s not so in reality. I know we are not a true African economy, but neither are we a European economy. We are very unique in that.
ALEC HOGG: Very useful insights from Sajil Singh. He’s with Coface, the Lead Analyst there for Coface South Africa. Well, that’s all from us here, in South Africa. We’re going straight now to West Africa for Power Lunch from that part of the Continent. Cheerio.
GUGULETHU MFUPHI: Indeed Alec, but before we do say goodbye, you’re leaving me out of the conversation here, and you might have noticed that we touched on the Forbes Women Africa cover, but I want you to turn your attention maybe later on, to pages 84 and 85, Alec. Maybe one day this will move from inside the cupboard to the outside.
ALEC HOGG: How long did you spend in makeup to get that photo shoot done?
GUGULETHU MFUPHI: Two minutes.
ALEC HOGG: Two minutes? Okay, Gugu. Well then, I don’t know who’s taken over your body because the Gugulethu I know…two minutes in makeup is not even finding her seat.
GUGULETHU MFUPHI: Alec…
ALEC HOGG: Your secrets are out.
GUGULETHU MFUPHI: That’s where we leave it for today, nonetheless. As Alec mentioned, you will be watching Power Lunch West Africa at international programming right after this break. From the two of us, it’s goodbye.
ALEC HOGG: Cheerio.
