SA loses lustre as mining investment hot-spot

South Africa is no longer the preferential hot-spot in Africa for foreign investment it once was, according to David Eliakim, partner in Australian law firm, Mallesons Stephen Jaques. And he’s not just talking about investment from Australia, but with his company now representing a lot of Oriental investors and having a large Chinese office, he is also focusing especially on China, but also the east’s other big player, India. He also said he saw a strong link between these two investment giants, his home country of Australia, and investment in SA. “Most of the investment from China and India tends to be where natural resources are found,” he told FTW. “A lot of companies that are in resources in SA have an Australian interest. “So Chinese and Indians investing in SA will have to buy into Australian companies and assets.” But a current reason for SA not having top spot in the African resources investment stakes is the present uncertainty about the government policy stance on the mining industry. “I’ve spoken to a number of clients and investors,” Eliakim said, “and there is a degree of concern about the SA government approach to mining houses – for example who will hold mining rights and licences.” At the same time, the rest of Africa is increasingly coming into focus for Chinese and Indian investors. It’s no longer a forbidden continent for them, according to Eliakim. “Australians have always been risk takers,” he said. “But the Chinese and Indians are also tending to take more risks. If there’s political doubt or conflict in an African country it will be a no-go. “But,” said Eliakim, “investors are no longer just going to SA, but going to where the resources are.” However, there is still a link between Australia and SA – and a fair amount of capital investment and trade involving both these southern hemisphere main players. According to Eliakim, most of the investment money running between the two countries tends to be related to the likes of mining services – where he noted that Australia had the expertise to service mines in SA. “Australian companies do buy companies in SA with no mining interest,” he added, “but not so frequently.” On the other hand, South Africans have been investing in Australia for some time now. “But we’re not seeing as much corporate interest in investment,” said Eliakim. “Indeed, more SA corporates are getting rid of their assets in Australia. “The difference is that you’ll always have SA’s entrepreneurial spirit buying Australian companies to get business going there.” He also notes that SA property companies that have big portfolios have recently been making some acquisitions in Australia. On this visit to SA, what is Eliakim’s message? “First of all,” he said, “that miners in Africa need to look to Asia, both as a potential to raise capital and as a potential partner for their business. That’s the first one. “The second is that Australian listed companies are very interested in doing business with Africa – they have a real understanding of the issues around investing overseas, including in Africa. There are real opportunities to partner with those people in driving your business forward.”