The South African mining sector needs policies that recognise the type of investment that mining demands and which reduce the risks related to investing in long-term projects to encourage investment in the sector, says Chamber of Mines (CoM) CEO Roger Baxter.

He tells Mining Weekly that the current level of investor confidence in South Africa is concerning.

“Investors naturally prefer certainty and stability, particularly around legislation, and consistent returns. Given the long life cycle of mining operations, mining needs a predictable, stable and internationally competitive regulatory environment,” Baxter adds.

“This is a resilient industry that has risen to the challenges many times in the past. It is key to deal with the short-term issues to ensure sustainability and then focus on the main constraints holding back investment and growth in mining in the medium and longer term,” he notes, adding that industry leaders need to work together to stabilise the industry and realise its longer-term potential.

CoM representatives will attend the yearly Joburg Indaba from October 5 and 6 at the Inanda Club, in Johannesburg, which is aimed at hosting frank conversations between stakeholders in the mining industry. Among the representatives will be CoM president Mike Teke and senior executive for modernisation and safety Sietse van der Woude, who will also be among the event’s panellists. CoM VP Andile Sangqu and CoM head of safety and sustainable development Dr Sizwe Phakathi are confirmed speakers at the conference.

Baxter emphasises that the mining industry is the foundation on which South Africa’s industrial development was built and continues to contribute significantly to the country’s economy on a local, community and macroeconomic level.

Last year, the mining industry contributed 7.7% of gross domestic product, about 15% of foreign direct investment and 25% towards exports. It also contributed 20% of private investment and created 1.4-million jobs.

However, a slowdown in the Chinese economy, anaemic growth rates in regions such as Europe and the US and exchange rate fluctuations have contributed to the recent declining demand for most minerals and the subsequent drop in their prices, placing the mining sector under “huge” pressure.

A number of top global mining companies are still facing challenges carried over from last year, needing to tackle not only the downturn in commodity prices, as demand slowed and oversupply emerged, but also a decrease in market capitalisation to $494-billion, compared with $719-billion in 2014; revenues falling by 21% to $539-billion, compared with $678-billion in 2014; and impairments doubling to $53-billion from $27-billion in 2013.

“Mining companies are focused on cost cutting and improving productivity, as well as capital discipline and adjustment to ensure their survival,” Baxter states.

From 2012 to 2015, about 59 400 jobs were lost in South Africa’s mining sector, he says. While decisions on restructuring are not taken lightly, this strategy is often key to the survival of mining companies.

South African labour law and mining legislation is “extremely enlightened” and favours extensive consultation and alternatives to retrenchments,Baxter highlights, adding that preserving the viability of the mining industry can have a long-term impact on saving the majority of jobs in the sector.

Further challenges faced by the South African mining sector involve declining grades; ageing mines; production disruptions, such as industrial action and community disruptions; infrastructure challenges, which include electricity supply disruptions; and the inability to increase productive shifts, which have all had a severe impact on productivity across the industry.

“Improving productivity and reducing or containing costs are key to the sector’s viability in the future and the CoM believes that all stakeholders have a role to play in helping improve productivity and lowering the rate of cost increases,” Baxter explains.

Mining and minerals are critical for the growth, development and transformation of South Africa, he stresses.

A successful mining industry, Baxter says, requires a more effective problem-solving partnership between government, business and organised labour; a regulatory and legislative environment that is stable, predictable and competitive; a stable and constructive labour relations environment; better social licence to operate and access to available, efficient and cost- effective infrastructure such as rail.