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Fraser Institute Annual Survey of Mining Companies 2020

Survey respondents give South Africa a resounding thumbs down.

The survey is an attempt by Canada's Fraser Institute to assess how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment. It was released today, 23 February 2021

Minister Gwede Mantashe was appointed by President Cyril Ramaphosa at the beginning of 2018 - with his appointment being much lauded by a fawning South African mining industry. Minister Mantashe then rushed to gazette a revised Mining Charter III, insisting that what came with it was regulatory certainty - and that was all that would be required to improve mining investment.

But the actual score on the board is beginning to tell a different story, especially regarding exploration spending - that vital leading indicator of the health of any country's mining industry.

The S&P Intelligence survey of budget exploration spending has shown that South African budgeted exploration spending hit a two decade low in 2020, and is now less than 1% of global exploration spending. It is also at its lowest percentage share of all African exploration spending - down to 7.8% in 2020 from 35% in 2002.

The SA Reserve Bank's own data for "Gross fixed capital formation: Mineral exploration and evaluation" has flatlined at less than R600 million a year since dropping off an investment cliff, down from R2.9 billion, in 2009.

And now the 2020 Fraser Survey shows that South Africa has dropped from 40 of 76 (2019) (2018: 43/83) countries ranked to 60 of 77 (2020) countries ranked in terms of the survey's Investment Attractiveness Index.

That is down from the 52nd percentile to the 78th percentile - a precipitous drop. The fact that this drop in ranking was driven mainly by other countries' improvements, rather than South Africa's raw score materially declining, just serves to emphasise that attracting exploration investment is a competitive endeavour. There is a tiny pool of speculative exploration capital out there - and it does not pause to negotiate terms of entry, it simply goes to where it is made more welcome.

South Africa is also now ranked 11th of the 13 African countries included in the survey, ahead of only Zimbabwe and Tanzania and immediately behind the Democratic Republic of the Congo.

Standing still is clearly not good enough - countries must constantly improve to attract investment - something South Africa's policy makers and administrators have clearly failed to realise.

The full survey results can be accessed here.

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