The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Ratings update: Anglo American, South Africa

Ratings update: Anglo American, South Africa

A decision tool for senior executives and investors, Critical Resource’s LicenseSecure™ model assesses the likely level of political and stakeholder risk (or the health of the ‘socio-political license to operate’) for resource projects. This ratings update provides a rapid, overview of a new or updated asset in the LicenseSecure ratings database, with a focus on projects in the news.

Please note that the ratings below are provisional, based in part on open source analysis and are not from client projects. (Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.)

LS rating Anglo SA

Key development

  • In early September, community demonstrations disrupted operations at Anglo American Platinum’s (Amplats) Mogalakwena mine in South Africa. Unrest saw protesters block access to the mine; an administrative office belonging to the local Traditional Leader, offices of a local contractor and the administrative block of a clinic built by the company were set alight. Police used rubber bullets to disperse crowds and made 36 arrests. The protests at Amplats’ largest and most profitable mine cost the group 8,600 ounces in lost production.
  • The unrest comes in the midst of major cutbacks for Anglo American. CEO Mark Cutifani has been targeting a $4bn disposal programme of underperforming assets globally, and Amplats sold its Rustenburg mine to Sibanye Gold on 9th September for $331m. Further South African assets are likely to follow as Amplats focuses on more profitable mechanised operations such as Mogalakwena at the expense of more labour-intensive assets.

Evaluation

  • Demonstrations at Mogalakwena were ostensibly sparked by the Department of Education’s decision to relocate a secondary school impacted by the mine’s blasting activity to new facilities built by the mine. Underlying community discontent however is frustration around a lack of broader economic opportunities, as well as perceptions of inadequate service delivery by the local government and political in-fighting. Mogalakwena had previously seen outbreaks of violence between protesters and police during a resettlement process launched in 2007.
  • Over the years, Anglo has made strong efforts to deliver socio-economic opportunities, including through the award-winning Zimele enterprise development initiative, and has engaged extensively with communities and the government to help address local needs. But amid the deep crisis facing South Africa’s mining sector overall and government failure to tackle some of the broader challenges, Anglo’s efforts appear unlikely to achieve a stable basis of local support in the foreseeable future. In such situations it can be beyond a company’s capacity, or arguably responsibility, to fix broader societal problems. The blockades and violent protests in late 2014 at Ivanhoe’s nearby Platreef project are further evidence of the underlying tensions in local communities.
  • South Africa’s mining sector, which directly employs around 440,000 people, has been devastated by low commodity prices and persistent labour unrest. Platinum has been hit particularly hard with a five-month strike in 2014 and a recent drop in prices to six-year lows. Ongoing moves away from labour-intensive operations may be essential to maintain profitability but will make it increasingly difficult to satisfy expectations for jobs.
  • Prospects for an improvement in the sector’s fortunes were dealt a further blow by President Zuma’s surprise replacement of mines minister Ngoako Ramatlhodi on 23rd September. Mr Ramatlhodi was instrumental in brokering a deal to end the Mogalakwena protests. He is also credited with ending last year’s platinum strike and uniting industry and labour behind a strategy to stave off mass redundancies. His removal has been questioned by labour unions and industry representatives alike. There is some concern that his replacement, Mosebenzi Joseph Zwane, a former provincial official with little mining experience, will lack the political clout to reconcile competing stakeholder demands in order to end the sector’s crisis.
  • In the run-up to next year’s municipal elections, the risk of further political manoeuvres worrying to the industry will increase. As Mr Zuma tries to avoid the fall-out from mass redundancies, pressure on companies to maintain employment will be high and the mining industry may become a political football as parties vie for votes.

 

Recent LicenseSecure ratings

  • Statoil, Tanzania (September 2015) click here
  • South Pars, Iran (August 2015) click here
  • Block AD-10, Statoil & ConocoPhillips, Myanmar (June 2015) click here
  • Sea Lion, Premier Oil, Falkland Islands (May 2015) click here
  • Solwara 1, Nautilus Minerals, PNG (April 2015) click here
  • Bunder, Rio Tinto, India (Mar 2015) click here