Saturday, May 3, 2014

Investments in Mining: South Africa


Investments in Mining: South Africa

A few days ago a 2010 Mining Summit was held KwaZulu-Natal that discussed key issues affecting South Africa’s the mining sector’s global competitiveness and other matters of concern. Among others the summit recommended that the macroeconomic environment and its potential to attract investment to mining needed to be researched – including the tax and finance issues that could encourage investment into exploration and mining. As Earthstone in expanding its operations in the continent, South Africa seems our next step. Hence, I would like briefly to present what opportunities do we have in mining sector.
To begin with –  here is how South Africa looks for investors:
  • One of the most sophisticated and promising emerging markets, offering a unique combination of highly developed first world economic infrastructure with a vibrant emerging market economy
  • One of the world’s 26 industrialized nations
  • Regarded as the gateway to Africa.
  • Has the largest economy on the African continent about 25% of the continent’s GDP.
  • World Bank ranks the country 34th in the world for the ease of doing business in 2010
  • JSE Securities Exchange is one of the world’s top 20 exchanges.
This slide demonstrates investment environment:

Source: Department of Trade and Investments
Major incentives for investors may be found at the TradeInvestSA Web-site that offers investors and business people free access to specific investment and trade opportunities in South Africa. Some of them are:
Foreign Investment Grant – To compensate qualifying foreign investors for the cost of moving qualifying  new machinery and equipment from abroad to SA.
Strategic Industrial Projects  (SIP) —  incentive program designed to encourage investments into South African operations from both local and foreign investors. Its primary aim is to contribute to the growth, development and competitiveness of specific industry sectors by providing industrial investment allowances, in the form of tax relief, to qualifying industrial projects.

Critical Infrastructure Fund - Infrastructure projects intended to service IDZ, shall qualify for a grant of 30% of the qualifying infrastructure development cost. The minimum qualifying infrastructure development cost is R15m.
A realistic picture on investment climate is reported by Behre Dolbear 2010 RANKING OF COUNTRIES FOR MINING INVESTMENT:
“ A year ago, Behre Dolbear took a wait and see attitude in regards to South Africa. As it turned, out South Africa was stable, but uncertainty continued regarding the direction of President Zuma’s government. There is continued worry about its ability to deal with the daunting social problems in the country while promoting investment that would provide the money to meet those needs. Fears of impending large-scale land seizures of white farms, nationalization of businesses, and that the country will follow the path of Zimbabwe have subsided somewhat. The electricity rate increases proposed to take effect over the next three years will prove to be a huge cost hurdle for South Africa’s deep mines and will make many of them marginal or uneconomic. The overall power shortage and inflation continue to plague the economy.”

An interesting Table that summarizes possible ways to invest in mining was presented  by IFC: Partnering with IFC Addressing Challenges in Africa. I think that these are general ways, not only for IFC:

To read more about investments in South Africa – go to this Web-site

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