* South Africa mining no longer the draw at Indaba gathering
* Labour, power costs, political risk curb enthusiasm
* Asia, South America, elsewhere in Africa tempt investors
By Ed Stoddard
CAPE TOWN, Feb 9 The industry executives
who pile into Cape Town every year for the annual African mining
conference love the sun, wine and stunning mountain backdrop the
But South Africa's once towering mining industry is no draw
and investors flocking to the "Indaba", as it is called, have
their sights set on alluring prizes elsewhere on the continent.
Gold and diamonds built Africa's largest economy, which also
boasts 80 percent of the world's platinum reserves, but outside
investors remain wary of sinking money into an industry that
appears in a state of terminal decline.
Soaring labour and power costs which are not matched by
productivity gains, not to mention the world's deepest shafts
for those mining gold, are all making South Africa a treacherous
place for miners who are finding less headaches elsewhere.
Political risk and policy uncertainty have also dampened the
enthusiasm of an industry that must invest millions and even
billions to build mines before it can recoup any profit.
"You look at any of the major mining companies and they are
very happy to spend billions of dollars to develop mines and
related infrastructure in countries like Mongolia, Indonesia and
Guinea, and are willing to spend billions of dollars on
acquisitions, and a multi-year investment programme in
Mozambique," said Adam Brett, a London-based investment banker
with JPMorgan who focuses on mining.
"And just next door is South Africa. There are resources in
South Africa, there are opportunities but frankly it is
perceived to be easier to go to Asia, South America or indeed
other parts of Africa," he said.
South Africa reassured investors on one front this week by
delivering a hammer blow to a nationalisation drive by radical
elements within the ruling African National Congress (ANC).
A study expected to become official ANC policy said
nationalisation would be an "unmitigated disaster." But it also
proposed a "resource rent" that would effectively be a super tax
of 50 percent on earnings.
"It is fairly clear nationalisation is not a way forward,
and clearing that out of the system is a very good thing but it
has raised various other areas of uncertainty... and any policy
uncertainty for a business investor is not a good thing," said
Ian Farmer, chief executive of Lonmin, the world's third
largest primary platinum producer.
Platinum miners have little choice outside of South Africa
because that is where the stuff is found but others have far
At one of the lavish dinners put on for delegates, a senior
mining executive said he feared South Africa was following the
statist path taken by other African countries after they gained
their independence from colonial rule.
But he praised other African mining states like Burkina Faso
and Ivory Coast for opening their doors to mining investment.
Still, there are concerns in frontier Africa as a wave of
resource nationalism surges across the region.
Nick Holland, chief executive of South African-based Gold
Fields, the world's fourth biggest bullion producer,
told Reuters that "resource nationalism is my number once
concern at the moment".
Holland said in December that looming tax changes in Ghana
have put a question mark over $1 billion in Gold Fields' planned
investments in the country and he told Reuters that his company
remained in talks with the government about the issue.
South Africa does remain a mining gateway to the rest of
Africa, for both investment and manpower, with the continent
drawing on the country's executives and engineers to get
projects off the ground and running.
Where there is a mine in Africa you are bound to hear
Afrikaans, the Dutch-based language of South Africa's earliest
The chief executives driving the looming $90 billion tie-up
between commodities giant Glencore and miner Xstrata
, Ivan Glasenberg and Mick Davis, are both South African