South Africa Mining

Mining industry remains the backbone of country's economy

Industry Reports by Synergy Media Specialists

PUBLISHED : Tuesday, 25 September, 2012, 11:08am
UPDATED : Monday, 27 May, 2013, 3:41pm
 

The African continent's reputation for being a risky investment proposition is changing. Despite linguistic, jurisdictional and cultural differences in each of the 54 countries on the continent, there are an increasing number of case studies indicating that Africa is open for business.

As one of the continent's financial and political "shining-lights", South Africa, with its wealth of natural resources, is successfully balancing its economic progress with its closer ties to China.

There is renewed interest in Africa from both developed and developing countries.

Despite being the second largest continent in the world, Africa receives only 5 per cent of global foreign direct investment. Sub-Saharan Africa remains the frontier region with a wealth of untapped resources and huge opportunities for intrepid investors.

While Africa is expected to experience 6 per cent growth this year, weak African states and lack of infrastructure remain significant concerns.

Political direction in Africa this year will affect the development of the continent and "brand Africa" could possibly use a makeover next year.

The continent's 1 billion people would certainly benefit from sharing some good news with the rest of the world.

The global financial crisis is good for Africa. Firstly, capital will shift towards the continent and secondly, the crisis is causing a South African homecoming revolution. With the repatriation of talent to South Africa, skilled South Africans are returning home to play their part in the future of their country.

While unemployment, corruption and crime are major causes for concern, South Africa is recording high growth rates and there is a genuine desire to ensure the advancement of the country's population.

Infrastructure challenges are creating opportunities, the finance sector is strong and the country is creating a consumer class which will present huge opportunities to retailers and manufacturers.

Noah Greenhill, senior general manager, marketing and business development, Johannesburg Stock Exchange, says: "In 2012, South Africa will see an economic growth rate of 3.5 per cent. As a country, it can be argued that South Africa's is a 'teenage economy', having been closed to international markets prior to 1994. Today, the country is heading in the right direction. Chinese investment is playing a crucial role with long-term investors actively participating in infrastructure, mining and resource projects."

South Africa continues to benefit from its wealth of natural resources and demand from China and India is driving the mining boom.

Today, South Africa is the world's largest producer of manganese, platinum, chrome and vanadium. It is the second largest producer of rutile, zirconium and palladium, and is the world's third largest exporter of coal.

Mike Teke, CEO of Optimum Coal, says: "We are bullish about the South African economy and are expecting continued growth into 2012 and beyond. The party is here in terms of business opportunities within the resource sector and there is a drive to ensure this continues through political and financial stability."

In terms of building on the strengths of a resource driven economy, while the rest of the world is taking a step back, South Africa is stepping forward.

Bheki Sibiya, CEO, the Chamber of Mines of South Africa, says: "Mining in South Africa is the backbone of the country's economy and continues to present opportunities for growth, we represent the interests of our members and provide stability within the South African mining industry. If you are in the mining business or looking to invest in the resource sector, you should focus on South Africa.

"Citibank recently valued the minerals sector in South Africa at US$2.5 trillion and we want to see continued investment in the future. We intend to ensure that the next generation benefits from the resources we are blessed with in

South Africa. The industry is an enabler for the country's growth and the positioning of South Africa on the world stage."

While the bulk of its financial engagement in Africa is from sovereign wealth funds, China is now the most prominent trader, provider of capital and commercial actor in Africa. As China continues to expand its presence in Africa, the interests of China and South Africa will undoubtedly increase. Martyn Davies, CEO of Frontier Advisory, says:

"In 2011, Chinese investors announced they had made almost US$3 billion worth of investments into South Africa. This year, China is likely to become the largest foreign investor in South Africa.

"While Western economies battle with sluggish growth, sovereign debt crises and government inertia, China is becoming an increasingly assertive commercial player in South Africa. Beijing views South Africa as its foremost strategic partner in Africa and a major player in multilateral global politics."

The "South Africa - China Corridor" flows in both directions. It is important that South Africa builds on its knowledge of China, increases its influence in the country and identifies the long-term implications of China's growing presence in Africa, says Davies.

Sven Grimm, director, Centre for Chinese Studies, says: "China's decision to 'go out' at the dawn of the new century marked an opportunity for the African continent.

Africa has been given a chance to diversify its relationships with the outside world and to actively use and shape globalisation."

South Africa is spearheading the continent's desire to engage with China through its resources sector. As South Africa continues to build on its partnership with China and encourage stronger commercial ties, the future of the South African and Chinese alliance looks secure.

Greenhill adds: "Our message to China is that we are open for business and that working with South Africa will create mutual benefits for both South Africans and our Chinese partners."
 

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