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New Kids On The Mining Block

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If radical socio-economic transformation – the term favored by South African politicians these days – had a face, it would probably look like one of the many new mining operations being established by new players in the industry.

A recurring theme over the years at the Mining Indaba has been the uncertainty in the South African mining industry. This is driven by contested regulatory and legislative issues which have looked to aggressively introduce transformative initiatives across the industry.

That narrative has not changed but this year’s gathering in Cape Town had a tinge of optimism, with miners waiting for the contentious legislation to be changed.

In 2017, the then-Minister of Mineral Resources, Mosebenzi Zwane, announced a new Mining Charter that “shifted the requirements for black ownership and employment equity at mining companies, as well as the companies from which they procure any goods and services.”

Following this, industry stakeholders say they have lost confidence in the ministry. According to the Chamber of Mines, the Mining Charter made investors wary of committing any capital to the country. A report by the Chamber of Mines claims that investment into the sector, which contributes 8% to GDP, has been stagnant since 2008.

This year, there were calls for the minister to stay away from the event. The stakeholders wanted Cyril Ramaphosa, who at the time was Deputy President, to deliver the keynote address. Zwane ignored this and defiantly asked, “In terms of the population of South Africa, what percentage of the people do these critics represent?”

“Anyone who thinks they can better the charter, our door is open for discussion,” Zwane told FORBES AFRICA on the sidelines of the event.

But, if you look past the legislative woes and the political rhetoric, you’ll see an encouraging story of a young black man who struggled to break into the sector which has previously been dominated by a privileged few.

A recent report by Statistics South Africa noted that mining production had increased by 6.5% year-on-year, up from the annual growth of 5.2% reported in October 2017. This bodes well for Black Royalty Minerals, a subsidiary of the Makole Group, which launched its first colliery in Bronkhorstspruit, a small town 50kms east of Pretoria, at the end of January.

“For us, mining is a pillar and a cornerstone of the South African economy. It’s a foundation that you cannot ignore when you talk about economic development. So, in 2014, [Bronkhorstspruit] is where Chilwavhusiku started, we did our prospecting and applied for all our authorization and after this was done we realized that we could take this project into the mining phase and that’s exactly what we did. And now, as we stand here, we are very proud of this development,” says Ndavhe Mareda, the Chairman of Black Royalty Minerals, which is 100% black-owned.

“One of our mandates is growth. We are looking at both the domestic market as well as export markets. We are working with a lot of traders in the hopes that we’ll be able to expand our horizon. And, we want to do this the right way, in a way that will not exploit the land or its dwellers and of course that works well with the society.”

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Mareda was born in Venda, a former homeland of the apartheid regime in northern South Africa. He obtained his matric and moved to Johannesburg, the City of Gold, to further his studies. He obtained his Bachelor of Commerce at the University of South Africa and practiced as an accountant before venturing into entrepreneurship.

The company, which became operational in 2014, employs 350 people – 90% of whom are Bronkhorstspruit locals. It is hoped the colliery will create opportunities for the some 20,000 people that live around the mine.

“There is a huge level of unemployment in Bronkhorstspruit and our mine eases a lot of the pressure applied by the poverty. We give tender preference to the locals. These tenders may be for transportation or any other services that the mine needs to commission,” says Mareda.

This is what the disputed Mining Charter is looking to foster – assisting black-owned businesses like Black Royalty Minerals.

Disputed government policies are not isolated to South Africa.

The Democratic Republic of Congo (DRC) is no stranger to legislation battles between government and mining conglomerates. The government recently completed a new draft of what it calls the Mining Code. It awaits the signature of the president. In the meantime, mining companies are anxious about the future of their operations in the region.

Randgold Resources started developing Kibali, in north east DRC, eight years ago. After investing $2.5 billion in the operation, the giant gold mine may have to stop productivity.

Randgold chief executive Mark Bristow says the mine is on track to produce its target of more than 700,000 ounces of gold in 2018, making it one of the largest gold mines in the world. But, with the Mining Code, this prosperity may be short-lived.

“It is our express wish that the government grasps the serious consequences this ill-considered code will have on its ability as a country to attract international investment and re-investment to the DRC, and to refer the code back to the ministry of mines for further consultation with the industry,” says Bristow.

Officials, however, are confident the code will demonopolize the industry and allow the country to enjoy a percentage of the profits made from the exploration of its resources. Albert Yuma Mulimbi, Chairman of the state-owned mining company Gecamines, says it will be renegotiating its contracts with international mining partners operating in the DRC.

READ MORE: ‘I Said Kill Me, They Said Cheers!’

Regulation is not the only issue facing mining in Africa. The former president of Nigeria, Olusegun Obasanjo, in his official address, highlighted that creating a sustainable environment for emerging miners is no simple task. He said the industry is marred by a lack of transparency as well as a legacy of mistrust of major miners. The mining industry has been accused of pursuing profits at the expense of its workforce.

Solutions to these issues need to be found.

Apart from the emergence of junior miners, the mining industry in South Africa is looking at technological advancement to resuscitate the sector.

“Technologies like robotic process automation and artificial intelligence will enable core mining activities to be performed from locations that can support a more diverse and inclusive workforce,” reads Deloitte’s Tracking The Trends report. “These new technologies will turn the mining value chain upside down, disrupting both existing business models and the traditional roles and relationships among mining companies and their customers, suppliers, and even competitors.”

This is the kind of disruption that excites another junior miner, Olebogeng Sentsho, who’s a disruptor herself as a young woman emerging in the mining industry. She is the founder of Yeabo Mining, a company that specializes in erecting and operating waste management plants at mines.

“In order to make headway in this industry we need greater support and space from various stakeholders. The increasing cost of mining, especially when discovering alternative minerals in decommissioned mines, is immense,” she says.

Sentsho says Yeabo Mining will need R50 million ($4.1 million) for infrastructure needed to mine in the current climate.

“It’s not an easy ride but it’s one worth hanging onto and I am confident about the future and the markets we’ll be serving as Africans,” says Mareda with a smile and genuine hope.

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Economy

Why The High Number Of Employees Quitting Reveals A Strong Job Market

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While recession fears may be looming in the minds of some, new data from the Bureau of Labor Statistics shows that the economy and job market may actually be strengthening.

The quits rate—or the percentage of all employees who quit during a given month—rose to 2.4% in July, according to the BLS’s Jobs Openings and Labor Turnover report, released Tuesday. That translates to 3.6 million people who voluntarily left their jobs in July.

This is the highest the quits rate has been since April 2001, just five months after the Labor Department began tracking it. According to Nick Bunker, an economist at the Indeed Hiring Lab, the quits rate tends to be a reflection of the state of the economy.

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“The level of the quits rate really is a sign of how strong the labor market is,” he says. “If you look at the quits rate over time, it really drops quite a bit when the labor market gets weak. During the recession it was quite low, and now it’s picked up.”

The monthly jobs report, released last week, revealed that the economy gained 130,000 jobs in August, which is 20,000 less than expected, and just a few weeks earlier, the BLS issued a correction stating that it had overestimated by 501,000 how many jobs had been added to the market in 2018 and the first quarter of 2019. Yet despite all that, employees still seem to have confidence in the job market.Today In: Leadership

The quits level, according to the BLS, increased in the private sector by 127,000 for July but was little changed in government. Healthcare and social assistance saw an uptick in departures to the tune of 54,000 workers, while the federal government saw a rise of 3,000.

READ MORE | 5 Questions You Should Never Ask During A Job Interview

The July quits rate in construction was 2.4%, while the number in trade, professional and business services, and leisure and hospitality were 2.6%, 3.1% and 4.8%, respectively. Bunker of Indeed says that the industries that tend to see the highest rate of departuresare those where pay is relatively low, such as leisure and hospitality. An unknown is whether employees are quitting these jobs to go to a new industry or whether they’re leaving for another job in the same industry. Either could be the case, says Bunker.

In a recently published article on the industries seeing the most worker departures, Bunker attributes the uptick to two factors—the strong labor market and faster wage growth in the industries concerned: “A stronger labor market means employers must fill more openings from the ranks of the already employed, who have to quit their jobs, instead of hiring jobless workers. Similarly, faster wage growth in an industry signals workers that opportunities abound and they might get higher pay by taking a new job.”

Even so, recession fears still dominate headlines. According to Bunker, the data shows that when a recession hits, employers pull back on hiring and workers don’t have the opportunity to find new jobs. Thus, workers feel less confident and are less likely to quit.

READ MORE | South Africa’s Informal Sector: Why People Get Stuck In Precarious Jobs

“As the labor market gets stronger, there’s more opportunities for workers who already have jobs. So they quit to go to new jobs or they quit in the hopes of getting new jobs again,” Bunker says. He also notes that recession fears may have little to do with the job market, instead stemming from what is happening in the financial markets, international relations or Washington, D.C.

So what does the BLS report say about the job market? “Taking this report as a whole, it’s indicating that the labor market is still quite strong, but then we lost momentum,” Bunker says. While workers are quitting their jobs, he says that employers are pulling back on the pace at which they’re adding jobs. “While things are quite good right now and workers are taking advantage of that,” he notes, “those opportunities moving forward might be fewer and fewer if the trend keeps up.”

-Samantha Todd; Forbes

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Current Affairs

Roadmap For African Startups

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Francois Bonnici, Head of the Schwab Foundation for Social Entrepreneurship, explains how African impact entrepreneurs will continue to rise.


Does impact investment favor expats over African entrepreneurs? If so, how can it be fixed?

There is a growing recognition all over the world that investment is not a fully objective process, and is biased by the homogeneity of investors, networks and distant locations.

A Village Capital Report cited that 90% of investment in digital financial services and financial inclusion in East Africa in 2015-2016 went to a small group of expatriate-founded businesses, with 80% of disclosed funds emanating from foreign investors.

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In a similar trend recognized in the US over the last decade, reports that only 3% of startup capital went to minority and women entrepreneurs has triggered the rise of new funds focused on gender and minority-lensed investing.

There has been an explosion of African startups all over the continent, and investors are missing out by looking for the same business models that work in Silicon Valley being run by people who can speak and act like them.

In South Africa, empowerment funds and alternative debt fund structures are dedicated to investing in African businesses, but local capital in other African countries may not also be labelled or considered impact investing, but they do still invest in job creation and provision of vital services.

There is still, however, a several billion-dollar financing gap of risk capital in particular, which local capital needs to play a significant part in filling. And of course, African impact entrepreneurs will continue to rise and engage investors convincingly of the growing and unique opportunities on the continent.

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What are the most exciting areas for impact investing and social entrepreneurship today?

After several decades of emergence, the most exciting areas are the explosion of new products, vehicles and structures along with the mainstreaming of impact investment into traditional entities like banks, asset managers and pension funds who are using the impact lens and, more importantly, starting to measure the impact.

At the same time, we’re seeing an emergence of partnership models, policies and an ecosystem of support for the work of social entrepreneurs, who’ve been operating with insufficient capital and blockages in regulation for decades.

Francois Bonnici, Head of the Schwab Foundation for Social Entrepreneurship. Picture: Supplied

The 2019 OECD report on Social Impact Investment  mapped the presence of 590 social impact investment policies in 45 countries over the last decade, but also raises the concern of the risk of ‘impact washing’ without clear definitions, data and impact measurement practices. 

In Africa, we are also seeing National Advisory Boards for Impact Investing emerge in South Africa and social economy policies white papers being developed; all good news for social entrepreneurs.

READ MORE | Naomi Campbell: Africa Is One Of The Leading Continents In The World

What role does technology play in enabling impact investing and social entrepreneurship?

The role of technologies from the mobile phone to cloud services, blockchain, and artificial intelligence is vast in their application to enhancing social impact, improving the efficiency, transparency and trust as we leapfrog old infrastructures and create digital systems that people in underserved communities can now access and control.

From Sproxil (addressing pirated medicines and goods), to Zipline (drones delivering life-saving donor blood to remote areas of Rwanda) to Silulo Ulutho Technologies (digitally empowering women and youth), exciting new ways of addressing inclusion, education and health are possible, and applications are being used in many other areas such as land rights, financial literacy etc.

While we have seen a great mobile penetration, much of Africa still suffers from high data costs, and insufficient investment in education and capacity to lead in areas of the fourth industrial revolution, with the risk that these technologies could negatively impact communities and further drive inequality.

READ MORE | Why Now Is The Time To Invest In African E-commerce

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Economy

Towards One Africa

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In the alphabet soup of regional African trade blocs, will the AfCFTA ease the cost of doing business on the continent?


Ghana has been named the host of the African Continental Free Trade Area (AfCFTA) following four years of talks to form a 55-nation trade bloc. It will be the base for the AfCTA secretariat.

The opportunities for Africa with this new trade bloc are immense. The Economist Intelligence Unit estimates that the AfCFTA will create the world’s largest continental free-trade area, provided all 55 African Union (AU) members join, and has the potential to create an African single market of 1.2 billion consumers whilst eliminating about 90% of tariffs on goods over the next five years.

So far, 44 African countries have signed up for the historic agreement, the world’s largest free trade area since the formation of the World Trade Organization.

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The AfCFTA is expected to boost the economies of African countries through employment creation and the promotion of made-in-Africa goods. But Kayode Akindele, a partner at TIA Capital, a pan-African investment partnership focussed on credit-based investing across sub-Saharan Africa, is not opening up the bubbly just yet.

“We already have ECOWAS [Economic Community of West African States] which doesn’t seem to be working and so why don’t we sort that out first before we enter a continental trade agreement for Africa?”

And he is not alone in his concerns.

“There are other factors we need to also consider. Firstly, with the implementation of the AfCFTA, goods made in other continents could be disguised as made-in-Africa to qualify for duty free treatment. There could also be a reduction in government revenue and also this trade bloc also threatens the profitability and survival of infant industries,” says Vincent Acheampong, an economist based in the United Kingdom.

READ MORE | Ghana Hopes To Benefit From Hosting Africa’s Free Trade Area Secretariat

Of the regional blocs in Africa, including EAC (East African Community) and SADC (Southern African Development Community), the ECOWAS has some way to go in terms of performance, according to Muda Yusuf, the Director General of the Lagos Chamber of Commerce and Industry, in an interview with CNBC Africa. But he believes there is still reason to be optimistic.

“A continental trading bloc is going to build on the success of the regional blocs like ECOWAS and other blocs across Africa. So, this integration is going to build on those blocs. In terms of performance, of course ECOWAS is the least performing because East Africa is doing very well and South Africa is doing far better also. But there is no perfect time for things like this, what is important is for us to get a conviction that economic integration will work for us and also if we can get our institutions to make it work,” says Yusuf.

Amongst the many challenges of the ECOWAS is its failure to implement its vision of a single currency, the ECO, which is part of its plans to make Africa a more integrated continent. That vision has been postponed several times by the 15-member group with the newest target date set for 2020 although most experts believe the date to be unrealistic.

The success of the AfCFTA requires not only a trade policy but also a manufacturing agenda, competition, industrial policies and property rights to work well according to Vera Songwe, the Executive Secretary of the UN Economic Commission for Africa, in a statement at the launch event that took place in Niamey, Niger.

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The ninth edition of the flagship Assessing Regional Integration in Africa report (ARIA IX) stipulates that AfCFTA’s success will be due to its ability to actually change lives, reduce poverty and contribute to economic development in Africa.

In support of the new trade bloc, Ghanaian President Nana Akufo-Addo pledged to donate $10 million to the AU to support the operationalization of the secretariat of the AfCFTA.

Although the AfCFTA will be economically transformative for Africa in the long-term, the immediate benefits will be restricted due to the macro-economic uncertainties of regional trade.

“Most African countries are currently not producing the goods and services that their neighbors import, as a result we do not trade a lot with each other. It is easier for an African country to trade with a country in Europe than a country that lies right next to it and these low levels of intra-African trade need to be addressed before we can reap the full benefits of the AfCFTA,” says Acheampong.

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