[Opinion] The sorry state of SA’s mining policy can’t be turned around overnight

The policy perception index of the latest edition of the Fraser Institute’s Annual Survey of Mining Companies ranks SA 53rd out of 62 jurisdictions. On the investment attractiveness index the country comes in at 57th.

Botswana is the highest-ranked African jurisdiction, coming in at 10th in the attractiveness index, and on the policy perception side the country is ranked second. The state of Nevada comes in as the most attractive jurisdiction of the 62.

In terms of specific comments on SA, unnamed executives of major companies indicated that among the factors that deter investment are “onerous ownership requirements for exploration and operation” as well as “a lack of transparency” regarding the mineral cadastre system.

From a wider macro-policy perspective, the government has also since 2008 been pursuing the implementation of a regime geared towards expropriation without compensation. This adds its own element of disincentivising wider investment and skills development as it adds to SA’s risk premium.

It is highly unlikely that Botswana does not have its own challenges in terms of attracting new investments in mining. But one thing that would have counted in its favour is transparency. It is one thing for a country and government to face challenges; another thing entirely if it at least acknowledges these and details how it is trying to address them (with clear deadlines and accountability should it not stick to them). In terms of ease of doing business, Botswana has a functioning mining cadastre — unlike SA.

SA’s large endowment of minerals should not be seen as a guarantee of growth in future. Indeed, it could serve to act as a crutch, as we will always assume we can use it and fall back on it when global winds turn against us. Without fixing at least some of the basics in terms of policy and the wider logistics environment, mining infrastructure and capacity will continue to slowly decline.

According to Minerals Council SA CEO Roger Baxter, the two biggest risks to local junior miners are an unstable energy supply and an inefficient logistics system.Speaking at a recent round-table for stakeholders, Baxter said: “SA’s economy is in the intensive care unit. People can beat around the bush whichever way they want on the issue.”

Perhaps there is an element of pragmatism creeping into macro government policy, especially in areas such as electricity and transport. But those reforms, if they are to materialise, will take time. SA mining companies and exporters can ill afford to wait.

The country can move up the Fraser Institute’s rankings, but to do so requires identifying certain key pain points and resolving those — with clear consequences for those responsible if deadlines and deliverables are not met.

The current sorry state of mining policy cannot be turned around overnight, all in one go. But a commitment to fixing at least some of the basics that other countries such as Botswana get right would put SA on the path towards improving the appetite and desire to invest in the mining sector.

Article originally appeared here.