South Africa all but off BHP Billiton’s radar screen – by Martin Creamer (MiningWeekly.com – August 21, 2013)

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JOHANNESBURG (miningweekly.com) – South Africa has all but fallen off the radar screen of BHP Billiton, the world’s biggest mining company, which on Tuesday reported an 8.7% fall in revenue to $65.9-billion for the year ended June.

The name of the country did not cross the lips of new CEO Andrew Mackenzie and one got the impression that this region’s aluminium, thermal coal and manganese interests are hanging on by a thin thread in a company dominated by iron-ore, oil, copper and coking coal.

When BHP and Gencor/Billiton of South Africa merged at the start of the new millennium, the South African assets helped to lift the chin of a then downcast BHP.

The performance of then standalone BHP, which in merged form has paid out more in dividends than the rest of the mining world put together, was so mediocre that the Economist of London scoffed that the letters BHP really stood for Broken Hearted People, and not Broken Hill Proprietary.

But the powers that be are clearly in no mood to return the favour; instead they are directing any tender, loving care they still have towards potash risk at Jansen in Canada, which is still a cost centre.

South Africa, a long-standing profit centre, has gone ex growth and no longer features at all on the company’s pipeline of 21 projects.

Such short shrift by the world’s biggest mining company, and indeed others too, does not augur well for South Africa, given that the country has come to rely on the multiplier benefit that the mining sector provides to the rest of the economy.

Mining has the potential to grow South Africa’s gross domestic product (GDP) significantly, which is its main potential contribution to the country.

But it needs investment flow and currently investors are deserting it, and the huge advantage of capital inflow is being lost to South Africa.

In the mining sector as a whole, hundreds of millions of dollars of planned capital investments in projects are being delayed or cancelled.

The industry is going ex growth, which is the ugly anti-developmental story of 2013.

How can South Africa reverse this devastatingly dangerous trend?

The main objective of governments the world over is, or should be, to improve the incomes of every single one of their citizens.

But in order for South Africa to achieve that goal, it needs investor confidence, political certainty and the capacity to deliver, without which there can be no economic growth and thus no economic transformation, as has been proved globally.

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