Platinum Supply Threatened by S.A. Policies
Source: Mining Weekly, Loni Prinsloo (6/29/11)
"The proposed indigenization policy requires 51% of all investments to be in the hands of locals."
The sustainability and growth of the world's platinum industry were being threatened by political issues such as South Africa's debate on the nationalization of mines and Zimbabwe's talks around indigenization, said Impala Platinum CEO David Brown.
Speaking at the Gordon Institute of Business Science in Johannesburg, Brown noted that investor worries spurred by policy uncertainties are especially worrisome, considering that about 80% of the world's platinum-group metals are located in these countries.
"We have noticed a definite unease from investors in Europe and the U.S. as the debate around the nationalization of South Africa's mines continues and this will eventually also flow through to investment decisions," warned Brown.
He believed that the debate around nationalization had been fuelled by the unsatisfactory level of transformation that had taken place since the dawn of democracy in South Africa in 1994.
"The idea of black-economic empowerment had not worked as well as the people wanted it to, with a lot of narrow-based empowerment taking place.
"This was compounded by the industry not reaching targets set out by South Africa's Mining Charter," said Brown.
He stressed the importance of the mining industry rectifying burdens caused by the country's past, but stated that government also needed to play a role by allocating funds to further transformation and development of mining in South Africa.
Brown warned that if nationalization were implemented as suggested by the African National Congress Youth League leader Julius Malema, it would result in a severe reduction in world platinum output.
Under the country's proposed indigenization policy, 51% of all investments must be in the hands of locals. "While we are not opposed to some form of indigenization, we do not believe that is reasonable for a 49% stakeholder to take 100% of the risk."