Mining CEOs' Confidence in African Economic Conditions Drops

The confidence of African Mining CEOs in Africa's economic conditions decreased by 19.28% during Q2 2013, according to the African Mining CEO Confidence Index. This decrease could represent instability in the industry resulting from a resurgence of mining disruptions and labour disputes during the quarter in South Africa.

The mineral industry is one of the largest foreign income earners in Africa. South Africa in particular is a world leader in mining and accounts for a significant portion of the world's mineral production and reserves. Mining companies including Glencore Xstrata Plc and Anglo American Platinum Limited are key players in the global industry but even these companies have dealt with some major issues that have affected productivity and performance. 

Glencore Xstrata, the world�s fourth-biggest mining company laid off close to 1 000 workers in May after wildcat strikes at the Helena, Thorncliffe and Magareng mines in Mpumalanga, South Africa.

Anglo American Platinum Limited (Amplats) announced plans to cut 14 000 jobs earlier in the year. After strong opposition from the country's governing party the African National Congress and the Congress of South African Trade Unions (COSATU), Amplats announced their plan to reduce the number of proposed job cuts to 6 000. Commenting on the job cuts Amplats' CEO Chris Griffith said, "The industry is in a lot of trouble". Illegal strikes in response to the restructuring are ongoing.

Other factors which may have impacted the confidence of CEOs in the economic conditions of the African mining industry include; changes in mining policies and codes and the introduction of new legislation.

In an effort to end tax avoidance in the country, Zambia plans to implement a legislation that will ensure companies return foreign currency earned from exports to the country. Through this legislation, the government aims to increase contributions from the mining sector to Zambia's economy up from 5% to 20%. This new legislation may have a negative effect on foreign investment in mining in the country as the opportunity to sell mined materials is limited as was the case when Zambia's Minister of Mines, Energy and Water Development distributed a press statement restricting Gemfield Plc's subsidiary Kagem Mining Limited from auctioning its produce in Singapore.

Guinea has introduced a new mining code which will use the government's entitlement stake in mining projects to encourage local processing of minerals by mining companies. The code includes a clause which will give the country a free 15% stake in mining projects with an option to purchase an additional 20% stake at a later stage. Russian aluminum producer United Co. Rusal Plc commented, "Rusal continues to believe that the new Mining Code will decrease the attractiveness of investment into Guinea's mining sector."

Zimbabwe recently proposed a new mining policy which would limit the marketing of mineral commodities and restrictions on the production of diamonds and other strategic minerals to state-run companies. It is believed that this new policy will effectively close the country to private exploration.

About the African Mining CEO Confidence Index

The African Mining CEO Confidence Index which consists of six components collates views from CEOs of top African mining companies, and provides a leading indicator of economic conditions and insights into how business leaders perceive the African mining industry going forward.