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Attracting Global Equity Investment To SA Mining Will Require Changing The Narrative

In South Africa, mining is a well-established industry that has been overperforming in the face of Covid-19 challenges. Much of the industry’s response to the pandemic has been excellent, with quick and decisive action taken to protect the health and safety of employees, ensuring the sustainability of the sector through the crisis and underpinning robust overall performance during a bull market for many commodity prices.

This relatively strong showing can also be attributed to the fact that it is backed by credible and robust health and safety regulation and legal and financial frameworks.

This highlights the important role that the mining sector can, and should, play in restoring South Africa’s economy. More importantly, it raises the question of how the mining sector can leverage its resources and resilience to reposition itself as an engine of such economic growth.

Mining, like many other industries in South Africa, has spent much of the past 25 years focused on addressing the challenges and injustices of the country’s unequal past. The sector has played a significant role in driving the transformation of the country across many areas of society. However, while there is clearly still work to be done in this regard, if South African mining is to achieve its full potential as an economic growth driver, it needs to look forward to change the ‘sunset sector’ narrative that has emerged in recent years.

Interestingly, the global shift towards ensuring and investing in a more sustainable planet is creating a unique opportunity for mining to rewrite this narrative. Investors are increasingly prioritising the environmental, social and governance (ESG) considerations as key informants of their investment decisions. Society and industry are quickly moving away from fossil fuels and leaning towards cleaner options with low or no emissions and renewable sources. And Covid-19 has added momentum to this migration by making us all increasingly aware of the vital importance of changing our relationship with our planet and stopping the abuse of its resources. Ironically, this could augur well for mining in South Africa.

The coming years will undoubtedly see us shifting away from some of the commodities that have long been mining’s bread and butter –  most notably coal –  towards a greater focus on the resources required globally for clean energy generation, such as copper, nickel, manganese, vanadium and the platinum group metals. Fortunately, South Africa is already an international leader in the extraction of some of these metals, so we are well-positioned to turn the shift to clean energy generation and storage to our advantage. 

How can South African mining reposition itself to capitalise on the advantages it has in the mining of many of these increasingly important commodities? Bold and visionary leadership and the equity capital to fund the necessary research and development and exploration are two key routes. This equity capital has traditionally been hard to come by in South Africa, so one has to turn to the international equity markets, where we compete for this capital with mining and other sectors on a global scale. This is where we have fallen short in the past.

Negative perceptions of mining in this country continue to cripple equity investment flows, which means it is now imperative for stakeholders in the industry to make a concerted effort to change those perceptions by changing the narrative. One way of doing so is to make sure that stories of sustainable transformation, community upliftment, committed ESG implementation and significant performance improvement are shared, around the world, thereby improving the industry’s attractiveness in the eyes of sustainability-conscious investors.

In the ESG space, for example, many of Nedbank CIB’s mining clients are making significant progress in terms of implementing renewable-energy projects that will provide a portion of their power needs going forward. Most, if not all, of these clients are also making great strides in terms of water conservation, treatment and stewardship, and many have dramatically improved their health and safety records as well as their labour and community relations and upliftment, creating solid socioeconomic foundations for future growth in the process. These are all good stories, but only a few of them are told to big enough audiences. With commodity prices bucking the current global downward economic trend, there has never been a better time for the South African mining industry to take a hard-sell approach to changing perceptions and attracting the attention of international equity investors.

By Greg Webber; Co-head: Mining and Resources Nedbank CIB