MINING VENTURES DON’T HAVE A HAPPY ENDING

 WITH all the hype around Lufafa Gold Mine and the revelations that this country has vast deposits of gold, and not only that, but diamonds and God knows what else; my mind just raced back to recollect how some promising ventures ended in the past.

And, my conclusion was that most of these mining and other ventures for that matter, have had a tendency of not ending well in this country. And the lingering question that pre-occupies prospective mining investors, is why?

If I said I had all the answers to this question I would be telling the bluest of blue lies. Actually, it remains a mystery; a mystery that we have to unravel in order to attract more mining investors into this sector; be they local or foreign. I mean, at one stage we were amazed to learn that we have tonnes of precious metals whose deposits run into billions of Emalangeni, sometimes even better than the gold estimated in billions of Emalangeni. And you ask yourself why a country seized with high unemployment and acute poverty is not exploiting these.

Again, we understand that investors, particularly foreign were expected to do this and only now do we hear of an open invitation to local investors to participate. It seems that gold discovery has opened our minds in this sector. But the setback, apart from the ardours processes of prospecting;

we hear that investors are compelled in some instances to partner with government on a 50/50 basis or thereabout. And in this partnership, government’s contribution is just the land on which the mining has to take place; while the investor has to come up with all the capital. The question is, is this a fair and equitable way of doing it?

This model appears warped to me as a businessman. And over and above that, government still gets tax from the profits of such ventures. Meaning, on a good day, government stands to pocket about 77.5 per cent of the profits made, based on a 50 per cent stake and a tax regime of 27.5 per cent, leaving only 22.5 per cent for the investor. Is this an attractive return that investors would tolerate? As investors like to benchmark, how does this investment model compare with neighbouring States?

We have had a numbers of mining ventures leave this country unceremoniously, the likes of the recent Salgaocar disaster that left a number of transporters reeling from unpaid transportation bills. And the sad thing there was is that the State had a stake in that operation - which makes the transporters look to government for recompense. And, prior to that was Dvokolwako Diamond Mine (DDM), not so much about the defunct mine, but rather, the moves by Raux Shabangu to resurrect the mine, a plan that was a stillbirth from the beginning.

The last we heard was that he had done a lot of preliminary work trying to get Kimberly certification, but the thing could not progress further than that. Again here there was a dispute involving diamonds that he had apparently mined in his prospection that was now in contention. As the public, we were not convinced from the beginning that the man was up for the job, with scandals in his native land bordering on suspicions of corruption. Surprisingly, even amid news of this man turning out to be a fluke, the then Minister of Natural Resources and Energy, Princess Tsandzile, continued to throw her weight behind the man, assuring Parliament and the nation that jobs were on the cards at DDM; something that never materialised.

The previous DDM operation left the local community cold, with the mine having degenerated into a free for all; criminals were helping themselves to the diamonds. Again, it did not end well because they appear to have left unceremoniously as well. And now as it seems, government is running with the gold and is out with the diamonds.

Still linked to natural resources was the Jozini project, that to this day continues to be a mystery to many. I mean, out of the blue the thing was halted, calling to question a 99-year lease agreement given by the State.

And here, so many investors, both local and external, lost serious investments in this venture. And many years after, there is still no plausible explanation given for halting the multi-billion project. Again, the international community is watching and taking notes. This adds to the casualties of ventures that did not end well.

As I conclude, I have this suggestion; that in order to continue to be an attraction to  investment, particularly foreign direct investment (FDI) and complement the efforts of SIPA; government needs to manage the exit of investors in order to leave a good impression of the country.

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