Can South Africans expect to witness an end of an era, as AngloGold Ashanti expects to withdraw from South Africa in the first half of 2020?
Currently, the business is expecting to agree to a sale of its South African assets within the next few months. This will bring about the end to the mining company’s exposure to South Africa.
But why is AngloGold looking at pulling out of South Africa?
According to analysts, the company’s shares will see an upward re-rating if it eliminates exposure to South Africa.
To certain foreign investors, South Africa is considered as a risky investment destination for miners because of regulatory uncertainty. This includes Eskom electricity price increases and constraints, as well as labour unrest, and rising and untenable levels of debt in state-owned companies which continue to threaten the local economy.
What does this mean for South Africans? How will locals be impacted?
In May this year, Gideon du Plessis, the general secretary of the union Solidarity, claimed that while it is disappointing that the business considers it has better growth opportunities outside of South Africa, Solidarity was not surprised by the news.
However, he says the possible sale of its remaining mining operations will not only prejudice job security but will also create major uncertainty among employees, directly impacting employee morale.
The sale of its remaining SA operations will include Mponeng Mine, the company’s only remaining mine in the country. According to Du Plessis, Solidarity has just over 1000 members working at the mine. The bulk of these members are skilled workers, all of whom will face possible unemployment if the mine shuts down.
Du Plessis says AngloGold has been streamlining its business, which he feels is a way of a way to prepare for the sale.
He claims the most common explanation AngloGold has given the union, is that the company must compare the return of investment it would get from South Africa to investing the same capital somewhere else.
During the month of May, AngloGold issued a statement stating there is always an ongoing review of its portfolio and a disciplined approach to the allocation of capital and other resources to ensure it generates maximum value for all its stakeholders.
But with the end of potential sale lurking closer, the company looking at greener pastures, it seems South African officials will need to implement legislation and methods to establish a sense of security for potential investors.
Is there any possibility of convincing AngloGold to stay? It seems not.
This follows AngloGold Ashanti senior VP Mike Erickson addressing delegates at the Diggers & Dealers conference held in August this year.
He said one of the reasons for AngloGold leaving was due to the investment required at Mponeng, which would likely run into the ‘hundreds of millions” of dollars.
He also noted it was operational safety also played a major part. Erickson explained they had to consider the political climate, the Reserve Bank, and other aspects which come into play in the decision.
With AngloGold looking at leaving South Africa, what are your thoughts and opinions? Do you feel the closure of AngloGold in South Africa will have a negative impact on the country? Or do you feel South Africa will recover?
Share your views and opinions with us in the comment section below.