In a deep hole

Political uncertainty, unclear policy and a militant labour force are stopping international mining houses from investing in South Africa.

This is according to a survey of 742 global mining executives conducted by the Fraser Institute in Canada.

Though South Africa was not among the 10 least attractive investor destinations overall, it ranked fourth-last - lower than Zimbabwe - where labour relations, employment agreements and labour militancy or work disruptions were considered as deterrents to investment.

South Africa - whose mining industry contributes R63-billion of the R814-billion of gross domestic product - ranked 64th overall and Zimbabwe 91st, out of 96 countries.

Finland was considered the best destination for foreign mining investment, Bolivia the worst.

Five percent of mining executives surveyed said they would not consider investing in South Africa because of the volatile labour situation, while 49% believed this was a "strong deterrent".

Some 26% felt it was only a mild deterrent and 15% believed it was not a deterrent at all.

The executives' comments about South Africa included:

• "Strikes, demonstrations, military killing workers."
• "Country with unworkable political structure."
• "Both South Africa and Zimbabwe are driving social experiments not driven by logic and economy but by ideology. In the absence of reason, primary industries become the cash cows to fund the unfundable. The rise of oligarchs in both countries evidences decline."

Mining investors' perceptions have been made known at a time when unions and mining houses are in intense negotiations to avert crippling strikes around the country.

The National Union of Mineworkers said last night it had rejected the final pay increase offer from gold-mining companies, greatly increasing the chance of a strike in the sector. The NUM had demanded increases of about 13% while the Association of Mineworkers and Construction Union wants 150%.

These demands, when the economy is slumping, "make no sense", said Fred McMahon, chair of economic freedom research at the Fraser Institute, speaking at the national mining lekgotla, in Sandton yesterday.

"If you're thinking of investing in South Africa . you don't know if . you're going to have a mine around or whether you're just going to have picketers walking around outside," he said.

The Marikana massacre - when 34 striking miners were killed by police last year - had definitely driven down investor confidence in South Africa and, McMahon said, it was clear long before then that there were "labour militancy problems" in the country. He said that unclear government policy also caused major uncertainty.

"They [investors] don't know exactly what the policy is, or don't know how it will be enforced, or when they would get a clear go-ahead, so in all areas that we test for uncertainty there is a high level of uncertainty," he said.

Other problem areas include political instability, trade barriers such as currency restrictions, infrastructure limits and the legal system.

Deputy President Kgalema Motlanthe - who last month led the signing of a peace "framework" for the mining industry - said the problems in mining were the cumulation of past practices and policies as well as the current global economic crisis.

"Over the years, the mining industry, supported by discriminatory legislation, has developed methods of making super-profits by relying on the super-exploitation of unskilled workers," he said.

"The mining sector is a prisoner of its apartheid past," said Motlanthe.

"We equally expect workers to understand that they have a contribution to make and with their labour rights come responsibilities. In principle, at least, the more the mining industry thrives, the more the workers would be equitably rewarded for their efforts," he said.

Mark Cutifani, CEO of AngloGold Ashanti and president of the Chamber of Mines, said: "I do not believe that enough is being done in terms of internal engagement between the government and the industry to resolve our issues and to build a relationship based on trust, mutual appreciation and respect."

Finance Minister Pravin Gordhan said for South Africa to be competitive the government, labour and the mining houses would need to make an "exceptional effort".

"South Africa is not going to become competitive by all of us sitting on our laurels," he said.

"We will require exceptional leadership, from labour, from business and from the government and as a collective in order to demonstrate . particularly to those who have funds to invest in this sector [mining] that we have what it takes to invite more investment into this economy and to reassure them that this economy and the mining sector is stable to enter into, and to turn around this negative narrative that says: 'Keep your distance from South Africa'," Gordhan said.