Mining Industry South Africa

Mining Industry: South Africa
Executive Summary

South Africa is not only the most modern country of the southern part of the African continent; it is also the only African country participating in the G20 summits. Part of the reason why South Africa is so influential is its abundant resources, and especially its precious metal.
For all the positive externalities associated theorganization of the 2010 Soccer World Cup and the investments of the government, the national infrastructure has improved a lot in the last couple of years, and especially when it comes to transportation issues, it doesn’t represents an obstacle to the mining activity. Yet the government has recently integrated the environment part in its policy, and it is enforcing more and more strictenvironmental regulations to limit the impact of the industry, which may represent a challenge for industrial companies, but most certainly not a major obstacle.
In fact the South African economy is currently recovering from the global recession, and so is the mining industry. This sector is even predicted to expand in the years to come. Besides most international trade signals like the exchange rate,the South African export growth and regulation are attractive. The only negative aspect of the South African economic background would be the inflation rate, which has always been very high in the country, and is predicted to get even worse.
From a more general standpoint, there are almost no restrictions on foreign investments, and the government is making some important efforts to tacklethe corruption issues.

From the political perspective, South Africa proves to be a surprisingly stable country, with good performance in terms of governance and with a very low risk of discontinuous policy implementation. The current controversy about the nationalization of the South African mines which arose this year, lead to an intense political debate, and even though the risk is low,the threat does exist and must be taken into account. To add to this political unrest, to address several cases of regulatory problems which damaged the country’s reputation, the principal legislation governing mineral rights in South Africa is currently being reviewed to make easier and more efficient to proceed with investments in the mining sector.


These two very last aspects of theSouth African business environment, which directly affect the mining industry, make it too risky to proceed with an investment now. Yet the South African mining industry remains a very attractive sector. This is why the best option for our company is to wait for the review of the regulation and the political debate surrounding it to come to an end. In about six months, we will have to proceedwith further work to see how our proposal is impacted. Depending on this, we will have to decide whether to proceed with the investment, or to carry on with the same analysis on other African countries offering mining resources.
The Republic of South Africa is a country located at the southern tip of Africa well-known for its cultural diversity. About 79.5% of the South African population is ofblack African ancestry[1]. Along with the rising industrial Asian market and dwindling natural resources, the mining industry is an attractive option for investments. South Africa, known throughout the world as a treasure trove boasts an abundance of mineral resources, producing and owning a significant proportion of world’s minerals. It has nearly 90% of the platinum metals on Earth, 80% of themanganese, 73% of the chrome, 45% of the vanadium and 41% of the gold[2]. Assuming the home country of the firm is Canada, this document analyzes and recommends the investment options in mining industry both from a macro and micro analysis perspective. The decision on other forms of Foreign Direct Investments such as setting up a business and partnerships are not covered.


The Macro Analysis...