Mining entrepreneur Bernard Swanepoel has transformed from CEO of one of the world’s biggest gold miners into a champion for small business. In this interview on Rational Radio, the chairman of the Small Business Institute (formerly the AHI) talks straight about where the SA economic recovery will come from. He reckons the appointment of a Small Business minister in the cabinet was a bad decision because these companies need to be treated as an integral part of the whole economy. He points out that in SA only 28% of jobs are created by formal SMEs – under half the global average of 60%. No mystery, then, on how to make a proper dent in the country’s high rate of unemployment. – Alec Hogg
We were talking a little earlier about Harmony’s share price up 25 percent in the last week. A former chief executive of Harmony who’s still in mining but he’s very much a small business champion as the chairman of what used to be the Afrikaanse handelsinstituut, which became the Small Business Institute. Bernard lovely to be chatting, we saw each other earlier this week at your Junior Mining Indaba. You’ve got like 200 people squashed into that room at the Jo’burg Country Club. It seems that, well I don’t know if it was standing room only, but did you have to turn anybody away.
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No we obviously kept registrations to the maximum number but it was minister Gwede Mantashe’s first appearance as the new Minister of Mining and Energy, the deputy minister which is new to the industry joined us, the DG was there and I mean that obviously just shows the extent to which…
You were saying that Gwede Mantashe and the deputy minister and the DG were there. That sounds like quite the trifecta.
I think it’s the first time ever and I really do think it is because clearly under Minister Mantashe mining has got a guy who’s passionate about mining.
But I think in his short stint he’s already changed the mining charter to be slightly more friendly to the Junior miners, explorers and we’d like to see more of that.
I hope our line is going to get a bit better. Bernard you were coming through loud and clear and now you’ve been wobbling a little bit but let’s persevere. There was a question from Marky Mark who wanted to know can you please define junior miners what is a junior miner?
We have a problem that there is no standard definition. And often you know when you hear somebody come to the Mining Indaba they say no we’re not junior. We are much bigger than that. But worldwide typically prospectors, explorers and developers are comfortable to be called junior and then by legislation the view that below R200m of turnover, then you’re a junior. But quite honestly that’s quite small scale. So we are a bit more flexible. And if your mine is less than R1bn, we say you really are still just a smaller miner or a junior miner.
You know I was talking also with David Shapiro earlier about the Southern Cape and the gas find that Total has got, and the way that Shell’s going in there, is there a similar search for minerals in South Africa on the mining side.
Not yet. And I’ll tell you this partly because the government who owns all of the mineral rights of the country since the early 90s has to accept that it’s actually their duty on behalf of the nation to incentivise exploration prospecting, that’s worldwide the case. But I think in South Africa, initially the mineral rights were privately held. And therefore why incentivise exploration. And since democracy, now that it belongs to the state our government has struggled to get their minds around that they need to compete, the same as Australia, Canada and the DRC to incentivise international investors to come and do what is high risk, almost gambling exploration. So we’ve changed a lot of laws but we’ve never incentivised exploration. And that shows in the fact that we don’t have many exploration companies or junior miners in this country.
Maybe that will change because listening to the new minister Gwede Mantashe, not so new. But he’s now got an expanded portfolio. He did say there’ll be no BEE requirements on exploration. So I guess that is a move to try and incentivise people to get more involved.
Well that’s taking a big negative away. Historically the previous administration applied a 51 percent ownership rule and that’s crazy because you come in you spend a million dollars and you may find nothing. Now you need to spend a million dollars and have 51 percent black ownership. We really made it impossible to explore. So taking it away was one of the things we do credit ourselves and the Minister for that, but in the rest of the world you know, the tax incentives there are so-called flow through share schemes. There are lots of incentives to get people to contemplate exploring and South Africa is certainly far behind on that.
Let’s talk about the Small Business Institute because if South Africa is going to recover from the kind of chaos that we saw in the first quarter numbers down 3 percent, it’s going to probably need lower interest rates on the one hand as we heard from Roelof Botha earlier but it might also need… Well it’s certainly going to need small businesses to actually come to the party and start employing people. Are you making much progress on that front.
Unfortunately not. You know I think our government sort of five years ago thought there’s a problem small businesses, let’s give it a minister. I think it was a bad decision and a bad choice at the time. But because small business is not a sector of our economy like mining, small business is actually a segment of every sector. So there are small miners, there are small manufacturers, there are small financial institutions. And so until we don’t get small businesses to be an integral part of our whole economy, we will struggle. Now the NDP envisions that 90 percent of all new jobs should come from SMEs by 2030. If we achieve that, and I mean it sounds far-fetched, but if we achieve that then we will be in line with other successful economies. But Alec you know at present only 28 percent of formal jobs are being generated by formal SMEs. So it just makes South Africa an outlier, internationally 60 to 70 percent of jobs comes from this category. So we need to double the size of the formal small business sectors contribution to our economy. So to give us a sort of a minister out there somewhere with another department and the budget was never going to achieve this.
So give us some good news Bernard, I know you do like seeing the glass half full.
You know I think if you set South Africa free we will be shocked at the potential. I mean at the Junior Mining Indaba we celebrate success stories in the mining industry. Now I mean can you imagine being successful against all odds at mining, at our Small Business Institute indabas, we always have entrepreneurs there, I mean these are people who almost don’t want to come and tell people their story, they’re too busy having fun creating value. And of course all those entrepreneurs and small businesses that are successful actually become large businesses. And that’s great. But that pipeline needs us to deregulate. I really think if we get the sixth administration, President Ramaphosa’s administration, to put in place some of the things they talk about. I think we can really be the catalyst that gets our economy growing. And I mean we know we need to grow at 4-5 percent. Not at the or 0.1 or 1 percent.
You did mention some of the success stories. It was interesting to listen to Andries van Heerden at Arimat. Looking at the share price as well. They’ve had an incredible run when you consider how the mining industry as a whole has been taking now.
Absolutely. And you know until recently when he bought a manganese mine, he wasn’t particularly unsexy you know quarry material and so on. And that shows what can be done. I mean you know I think he’s such a success story. And it’s great that he’s a success story on the stock exchange because it also makes a broader audience aware that within mining there can be really great smaller mine companies. But his company is now I think six seven or eight billion rand in value and he was completely comfortable to come and share with other junior miners what he’s done. So that was really celebrating a success story.
A stock price that’s gone from R22.50 in August last year to R30 today and doesn’t sound like a huge amount, but when you’re in a market as you say in materials handling, just just to close off with Bernard, for prospective young guys, millennials people who are looking to become entrepreneurial in particular areas. We’ve got a miner or certainly someone who’s close to the mining industry as the president. You’ve got a miner in Gwede Mantashe who’s running the mining portfolio, is it an area that youngsters could reconsider getting into if they want to be entrepreneurial.
Yeah and of course the mining. I mean with 8 percent of the GDP coming straight from mining I think it’s much safer to become a supplier to the mining industry if you don’t want to mine yourself. I think it’s much safer to render services to the mining industry and say to the government, because unfortunately you know the government space has become a space of tenderpreneurs and brown envelopes. Whereas if you were to have a solution or a product, or a need to serve you know from a perspective of a provider I would certainly knock on the doors of the mines. The rules are well established the BEE requirements are well established. But mining itself is great fun but obviously very, very hard work. But I personally would never talk anybody out of mining as a as a prospective entrepreneurial enterprise. I think it continues to be a place where you can create unique value for yourself and for other stakeholders and for the country.
