SA mining sector under siege
South Africa owes much of its existence as a nation to its mining industry which remains one of its largest contributors to its GDP. But sadly, the mining sector is now facing an unprecedented crisis in crime. The threat to the mining industry, and the broader country, is very real, resulting in the deaths of mine employees and illegal miners, the closure of operations, and losses to the fiscus of billions of rands. This makes it increasingly difficult to attract international investors, with many seemingly scared off by the unacceptable levels of blatant violent criminality. To make matters worse, the Fraser Institute, which annually ranks the world's mining jurisdictions on governance and policy issues, puts South Africa bottom in terms of investment security in its most recent report. According to the Minerals Council South Africa, the mining industry lost revenue of R35 billion in 2021 because rail deliveries of minerals fell short of targeted tonnages. More needs to be done by the government and South African police to ensure that these criminal enterprises are quashed. This requires bold and decisive interventions. If not addressed soon, then it seems the mining sector will be in serious trouble. This article is republished courtesy of the Daily Friend. – Asime Nyide
Crime is killing mining
Staff Writer
The deterioration in the fabric of society has accelerated dangerously, according to a recent report by the Global Initiative Against Transnational Organised Crime (GI-TOC).
'Organised crime is an existential threat to South Africa's democratic institutions, economy and people,' GI-TOC director Mark Shaw told Bloomberg.
Hulme Scholes, a partner at Malan Scholes attorneys, says 'I'm stating the obvious here, but what's happening in SA is an expansion of criminal activity into the vacuum created by the failed state.'
One CEO, who asked not to be named, says plans for a mine worth billions in new investment — and thousands of jobs — were frustrated because foreign investors were scared off by community disruption.
'The reality is that our equity investors ran, our share price fell and because the share price fell, the banks were saying how would we get our proportion of the equity to build the mine,' he told the FM.
International investment is falling at a time when long-term global demand for minerals has been boosted by the energy transition. Fiona Perrott-Humphrey, senior adviser to Rothschild & Co UK, explains that mine community relationships, complex empowerment regulations and high capital intensity of new deep mines 'have just got too hard' for offshore investors.
Another major problem is illegal mining. The government 'hasn't vaguely understood the extent to which it needs to intervene in the crisis', Perrott-Humphrey says.
Company CEOs cite illegal mining as their primary operational concern. Stronger penalties must be imposed, and police and legal responses must improve.
Mines are also vulnerable to community disruption either by people seeking political gain or those extracting 'fees' for influence, or both.
The Fraser Institute, which annually ranks the world's mining jurisdictions on governance and policy issues, puts South Africa bottom in terms of investment security in its most recent report.
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