At a time when the storm clouds are thickening for the South African mining industry, it now does not look like the next four years of a Donald Trump presidency will be any easier.
Unfortunately, the South African mining industry already does not exactly appear safe and stable to U.S. investors.
Mining is by its very nature a long-term investment that takes decades to mature. Moreover, it has an insatiable demand for capital, which must be raised in capital markets.
If markets are spooked it would be increasingly difficult to raise capital to invest in the South African mining industry. Regulatory uncertainty already permeates the industry with a new amendment bill having been passed, a third mining charter floating around in draft form and ongoing court cases on the implications of empowerment structures in mining not having been resolved.
The mining industry is SA’s sweetheart industry. It is labour intensive — and we need large-scale employment. It has a large cottage industry that surrounds it and encourages entrepreneurial businesses to sprout from the communities in which the mines operate. It has the ability to improve socioeconomic and living conditions for ordinary South Africans, and it is a great source of foreign currency, notionally strengthening the rand.
SA has identified with China as a trade partner and we are encouraging China to invest in our mining industry, as well as downstream beneficiation and manufacturing. We are firmly part of Brics (Brazil, Russia, India, China and SA) and the only African country to have attended the Group of 20 (G-20) summit in China earlier this year. There is a risk that this relationship may be at odds with potential US foreign policy objectives.
Although a weaker rand makes investment notionally cheaper, exports of mining commodities are all dollar based. A weakening rand has a negative effect on real profits and makes investment more uncertain and unstable.