SA mining industry 'still a closed shop'
MINERALS AND ENERGY
DRAMATIC changes in the structure of South Africa's mining industry in the past five years have concentrated power in even fewer hands - and it remains difficult for foreign groups to gain entry to a country with a treasure chest of mineral resources.
This is one of the important conclusions in a new study by South Africa's Minerals and Energy Policy Centre - a think tank that has as its chairman Cyril Ramaphosa, the former secretary general of the African National Congress - and the Raw Materials Consultancy of Sweden.
The study notes that most restructuring has been carried out by the South African industry itself. "This is a sign of how closed the industry still is," it says . "No corporate raider has been able even to enter the shop.
"In part, this is due to the country's financial system that permits pyramid-ownership control arrangements through relatively small direct equity holdings."
The number of mining finance houses has fallen from six to four - Anglo-De Beers; Gencor-Gold Fields; JCI and Anglovaal. Two are still family-controlled: the Anglo group by the Oppenheimers and Anglovaal by the Hersov and Menell families. This is "an extraordinary situation in international mining" , the study says.
The four groups own much of the prospective ground in South Africa and until this is changed by new mineral legislation, foreign interest in the country will remain low, it suggests.
The South African groups are spending most of their exploration and development money outside the country - another reason to raise capital.
South African companies intend to spend about $400-million on exploration this year and, of that, $250-million will be spent in other parts of Africa - representing 40% of the global industry's expenditure on the continent.
The study notes that in the past three years mergers and acquisitions involving South African companies have "reached proportions that will have a long-term, definitive influence on the global mining industry. The South African industry might be down-scaling, but it is far from dead."
The study predicts that South Africa will remain one of the power centres of mining in spite of the problems.
It says the most profound internal changes are being attempted by the mining groups, with initiatives to flatten management hierarchies, to reorganise work patterns and to improve the creation and application of skill. "The true value of the changes in ownership will need to be judged by the extent to which they will accelerate or impede internal reorganisation."