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Opinion: Brexit Will Benefit South African Tourism, The New Gold

From MoneyWeb. Story by Unathi Sonwabile Henama, tourism lecturer at South Africa’s Tshwane University of Technology.

South Africa has strong political, economic, cultural and social ties with its former colonizer, the U.K.

The financial markets suffered in the aftermath of the historic referendum to leave the European Union. Brexit has implications for the South African economy, and South Africa must focus on what it can control.

South Africa has been experiencing a currency crisis with the rand losing value against major currencies. This has hurt economic growth. South Africa is likely to enter a recession as the economy won’t grow more than 1 percent this year.

South Africa imports more than it exports, and this has led to a huge trade deficit as a percentage of GDP. The economy depends on foreign direct investment to drive growth, in line with the country’s export-led economic policy. The economy is also suffering from job shedding in mining as commodities prices have plummeted, and labor costs have increased, increasing the cost of doing business. The rand’s weakness has increased the cost of living.

The rand’s value loss means that South Africa becomes much more attractive as a value-for-money destination. Tourism is an export product that is consumed at the destination, because it is a service that is simultaneously produced and consumed. This means that the majority of value addition can happen within the country, in contrast to exporting raw materials and importing the final product — so prevalent in the mining sector.

South Africa has adopted a flexible currency model, therefore when the rand loses value, it’s time to sell South Africa more.

Tourism is the only industry that has the ability and potential to create labor-intensive jobs that can change the gloomy reality of poverty. Tourism is the “new gold” — it produces more foreign exchange receipts than gold mining.

The U.K. is the No. 1 international inbound tourism market to South Africa according to Stats SA’s Tourism and Migration April 2016, with 18.4 percent of all tourists. The U.S. is No. 2. Europe as a whole produces 58.8 percent of tourists to South Africa.

South Africa is the third cheapest destination for U.K. tourists after Portugal and Bulgaria. Tourists can counter the decline in the South African economy.

Read more at MoneyWeb.
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Source: afkinsider


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SAfrican gold mines set date for wage talks

The wage negotiations in the gold mining sector will start in two weeks, the Chamber of Mines said on Tuesday.

“The industry is at a crossroad. We need a measured and strategic conversation between partners with the aim of jointly considering ways to achieve a sustainable industry that attracts investment and offers a level of employment security within realistic parameters,” said Chamber of Mines chief negotiator, Elize Strydom.

“This clearly requires a different approach to negotiations – an approach that provides for in-depth, focused engagements and joint solution-seeking discussions. The gold companies will be tabling a proposal on an economic and social sustainability compact for the long-term benefit of all the stakeholders.”

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Representatives from AngloGold Ashanti, Evander Gold Mines, Harmony, Sibanye Gold and Village Main Reef met on Tuesday with representatives from the Association of Mining and Construction Workers Union (Amcu), the National Union of Mine workers (NUM), Solidarity and Uasa to discuss the parties’ approach to the 2015 wage negotiations and the process to be followed.

The gold producers proposed to the unions that engagement be conducted at a venue that provided for both large plenary and focused meetings that could not be provided for in the Chamber of Mines’ building, as well as an independent chairperson.

“These proposals were accepted by all four unions. On this basis, the companies advise that gold wage negotiations will commence on 22 June 2015, and are scheduled for three days,” said Strydom.

Source: citizen


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Mining compact ignores crucial players

The state of the nation address was a missed opportunity to begin the process of healing our democracy and restoring trust in its institutions. Instead it will go down in history as the moment in which the state tried to obstruct journalists, and police forcibly removed MPs. However, in the analysis of what transpired that night, a number of other human rights issues have been overlooked.

The address was also a wasted opportunity to open a dialogue on a genuinely inclusive social contract for the mining sector. On the contrary, a bias towards the concerns of elites over those of the poor and marginalised, and the status quo over change, was quite apparent.

Particularly troubling was the continued failure to recognise mine-affected communities as a stakeholder with legitimate interests and a right to take a seat at the bargaining table. The Draft Framework for Sustainable Mining was recently concluded between the government, mining sector and organised labour. Its most widely known flaw is that the Association of Mineworkers and Construction Union, the dominant union on the platinum belt, has not signed it.

Equally significant but less well known is the exclusion of organisations representing mine-affected communities. The organisation of communities into formal nationwide networks means engagement with this sector is far easier than previously. Yet their voices are still missing from negotiations.

While President Jacob Zuma said the streamlining of the mining, environmental and water licensing processes was in response to business requests, there were no corresponding examples of responsiveness to the requests of communities. While investors will now have a “one-stop departmental clearance house” to attend to complaints, communities will have no equivalent body to assist them in responding to violations of their environmental and other rights.

The disproportionate attention to the concerns of the industry and investors results in an incomplete picture of the effects of mining. For example, while mining-related environmental degradation threatens the health and livelihood of communities across SA, there was no mention of the environmental costs of mining.

This approach goes against that required by the constitution, which is founded on the values of respect for the dignity of all and the equal enjoyment of rights and freedoms. To realise this vision, the constitution enshrines the right to political participation, just administrative action, access to a basket of socioeconomic goods and to an environment not harmful to health or wellbeing. These values require a human rights-based approach to governance in which the voices of all are valued, and vulnerable citizens get particular attention.

The exclusion of communities also runs contrary to the National Development Plan, which stresses active citizenship.

Mr Zuma sought to clearly communicate that his government was sensitive to the needs of investors. However, by sidelining the needs and priorities of key stakeholders, the government is doing investors no favours because the main requirement of investors is a stable environment in which the return on their investments is secure. If affected groups are excluded from decision-making and do not see their concerns addressed, they will be more likely to seek to disrupt the system. Stability in the system requires a social contract that addresses the needs and concerns of communities, all organised labour, the government, mining companies and investors.

While the debate over jammed signals continues in Parliament, another form of signal jamming is being overlooked: the inattentiveness of the government to concerns expressed by mining community organisations.

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Chamber of Mines Welcomes Plans to Revitalise Mining Towns

The Chamber of Mines of South Africa has welcomed government’s plans to revitalise distressed mining towns in the country, as announced by President Jacob Zuma during his State of the Nation Address.

“We believe that the industry can better assist government when infrastructure and basic services planning is a shared responsibility so that we begin to see the critical mass change in so far as addressing human settlement and other community needs,” said Vice President of the chamber, Khanyisile Kweyama.

On Thursday night, President Zuma announced that government had ring-fenced a total of R2.1 billion to revitalise distressed mining towns with R290 million having being approved for informal settlement upgrading in Mpumalanga, North West, Gauteng, Northern Cape, Limpopo and the Free State.

The Chamber of Mines said its member companies were implementing the Municipal Capacity Building Project which seeks to assist municipalities within mining provinces with scarce skills that were needed for better planning and project implementation.

The chamber was also pleased with government’s intention to fast track the establishment of the Mining LAB for the country.

“This initiative is a demonstration that indeed we are over talk shops but more focused on collective actioned premised on sound economic and administrative decisions and actions that can drive investment, growth and transformation in mining,” said Chief Operating Officer of the Chamber of Mines, Roger Baxter.

Baxter said the chamber was focused on working at a leadership level with government and other stakeholders to promote transformative change to grow investment in the mining sector.

The Chamber was encouraged that government was critically addressing the energy crisis facing the country.

“We are pleased by the pronouncements but we would like to hear more about what will be done on Eskom in the medium term so that that business gains the confidence that its production schedules will not be compromised,” said President of the Chamber of Mines, Mike Teke.

The Chamber said the mining industry was already playing a key role in electricity load reduction and was committed to working with government on sustainable solution, which included the supply from the Grand Inga Project.

“It is critically important for the mining sector and country that we drive collective solutions that restore Eskom’s reserve margin and builds competitive, stable and available electricity supply for the country in the medium and longer term,” the Chamber of Mines said.

The Chamber of Mines has appointed experts who will represent its members in dealing with illegal mining.

“This is a scourge and poses an intrinsic risk to companies, employees and the economy. From a safety point of view as companies we need to guarantee our workforce that these rouge elements will not put them at risk as they go on with their daily work and we have had to increase security measures,” said the second Vice President of the chamber and champion for the elimination of fatalities task team, Graham Briggs.

Source: All Africa


 

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Balancing productivity, profitability and headcount in mining

By Craig Hook

Productivity is a hot topic in South Africa with economists frequently advising that productivity has not grown as well as it should have in the last few years. One sector where productivity is always in the spotlight is the Mining industry.

According to the South African Reserve Bank (SARB), the nation’s productivity has grown on average between 1970 – 2013 by a mere 1.02% a year. It measured growth in productivity of 1.92% per annum between 2010 and 2013. Despite the recent economic slowdown, productivity in the country has grown by an average of 2.8% a year during the 18 years spanning 1995 – 2013.

For many organisations, the one simple solution to balance costs against profits, is to cut-off the dead wood. This begs the question, is it possible to attain sustainable profit beyond headcount reduction? And if so, how do organisations strike the balance between productivity and maximum profitability?

According to Chamber of Mines chief executive Bheki Sibiya, labour costs were escalating to higher levels while productivity was not improving.” If the salary is growing at 10%, productivity should also grow at 10%.” In an interview with the Sowetan, Sibiya –  who is unhappy that President Jacob Zuma has returned the Mineral and Petroleum Resources Development Act to parliament for further consultation –  warned that the mining industry was a long-term industry and needed to operate in an environment that did not change too much.

One should ask though, is this a fair statement in the South African environment which is constantly in flux? With challenges such as a striking workforce, and load shedding impacting on the sustainability and long term profitability of the mines, it is not hard to explain why productivity would also be severely impacted.

Sustaining profits is about identifying and managing the economic drivers of costs (reduce) and revenue (increase) during the business cycle to achieve a desired profitability target.  Reducing headcount (people resources) can lead to sustainable profit contribution if it is linked to an economic driver. For example, if an economic driver is truck productivity and you can implement an operational improvement to reduce cycle time which means less truck hours to mine the same quantities of ore then headcount can be reduced. If however, headcount reduction is done without changing the operational processes to improve productivity then quantities of ore mined and sold may drop and profits will be impacted.

Likewise, reducing support function headcount without a corresponding process change may increase risks to product quality, reserves replacement, safety, etc.  In the medium to long term it is productivity improvement not headcount reduction that sustains profits and allows you to react to upturns in commodity demand.

Source: BizNews


 

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South Africa industry group warns energy minister of reduced mine output

JOHANNESBURG (Reuters) – A South African industry group has told the country’s energy minister that further power constraints would lead to reduced mine output and plant closures, according to minutes from the meeting seen by Reuters.

The meeting, which took place on Tuesday, was between Energy Minister Tina Joemat-Pettersson and members of the Energy Intensive User Group (EIUG), an industry body that includes major mining companies operating in South Africa such as AngloGold Ashanti and BHP Billiton.

The ministry noted the meeting in a statement on Tuesday but provided few details about it.

South Africa is currently facing its worst power crisis since 2008, when rolling power outages cost the mining industry in the world’s top platinum producer billions of dollars in lost output and brought misery to retailers and households.

South Africa‘s state-run power utility Eskom [ESCJ.UL] last Friday implemented rolling blackouts in some parts of the country, the first such power cuts this year, and has warned that more are certain as demand threatens to outstrip its capacity to keep the lights on.

Minutes from Tuesday’s meeting obtained by Reuters show the minister indicated that she was exploring the idea of getting the private sector to reboot power plants mothballed in the past, such as those owned by local municipalities.

On the subject of Eskom‘s precarious financial situation, she was quoted as saying that the utility was “burning cash faster than it is making it” and that the company needed to rein in costs.

Even with a 20 billion rand ($1.7 billion) cash injection from the government and permission to raise electricity tariffs, Eskom has said it needs more funds to ensure liquidity.

The minister also said the high cost of diesel to run Eskom‘s open cycle gas turbines was unsustainable.

An Eskom spokesman said last week that if the cash-strapped utility was unable to purchase diesel supplies, it would lose 5 percent of its capacity and blackouts would then occur on an almost daily basis until the end of March.

Controlled power cuts are used to prevent a total collapse of the grid.

Source: Reuters Africa


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There is bright future in the mining sector: Mining Indaba

There is a bright future in the mining sector; this is according to the Mining Indaba’s managing director Jonathan Moore.

Moore in an exclusive interview with CNBC Africa said he believes that there is potential to grow the mining investment in Africa.

“The resource opportunities here in South Africa are some of the best in the World and that is not disputable,” said Moore.

“When you couple that with long term supply and demand economics that drives this industry there is a very bright future.”

Moore said South Africa was in a down cycle now but all indications suggested that mining will continue to be a positive thing for the country for years to come.

He added that what investors needed in any decision making process was understanding what the supply and demand economics were and what the risk-reward economics are and make intelligent decisions from that knowledge.

Moore said the Mining Indaba creates that perfect platform from a combination of economists that understand the industry, ministers who speak on jurisdictions and also mining executives who understand the sector well.

He also said the current headwinds faced in the sector presented opportunities for the sector in the future.

“The commodity sector has been hit hard, mining stocks have been particularly hit hard and the Indaba will speak about long term proposition of those affected companies,” he said.

Moore said the jurisdictional uncertainties vary from country to country adding that this was going to be discussed at the Indaba.

A diverse group of investors are expected at the Indaba next year with some coming from Europe, China and Canada.

According to the SA chamber of mines, the mining sector accounted for eight per cent of the country’s GDP in 2012 demonstrating the importance of the sector to the South African economy.

Source: CNBC Africa