In conversation with
In Conversation with Mxolisi Mgojo
CEO | Exxaro Resources Ltd
FDI Spotlight: From a global perspective, how do you see the drop in commodities has impacted South Africa and how has the country adapted itself?
Mxolisi Mgojo: The last three years have definitely been a challenge to all economies across the world. The fact is that we are part of a global village and impacted by policies that are adopted by countries such as China, United States of America, and the United Kingdom. Events such as Brexit and Donald Trump as America’s president are things that we are not immune to.
This is especially true in terms of our reliance on foreign earnings, which are very much driven by the ability to continue to export our goods. South Africa’s fiscus has been under a lot of strain for a number of reasons, such as the fact that there has been a sharp decline in the government’s ability to generate a sufficient revenue base, a lot of companies have been under a huge amount of stress, we have high unemployment rates, and the high levels of inequality we have. These are all things that put a lot of pressure on the government’s ability to not only deliver the required services, but also render basic services.
The 2017 budget delivered by the Minister of Finance earlier this year is very much proof of that, showing that there has simply not been enough economic activities and growth in South Africa recently. Much like other countries, we have had to increase the amount of tax that citizens have to pay, especially the high earners because, unfortunately, a large part of South Africans simply cannot contribute to the economy due to living in poverty.
However, with the existing growing deficit in the economy, the question is whether or not making more debt is the right way to fund the country out of a very difficult and delicate situation.
We have to concede to the fact that some of our lack of growth and activity is self-induced, but also that global events and the global environment does play a big part. However, whichever way you look at it, South African companies such as Exxaro have to ask what we can do to spur on growth and improve the situation.
This is why there are a number of initiatives by many organisations that look at what can be done regarding South African education, infrastructure and small enterprise development. From our point of view, growing small businesses is especially important, because these are the businesses that create employment. Big companies do not create the same level of employment, and rather focus on innovation in order to remain globally competitive. Therefore we have put together a fund of over R1.5 billion of donations from various companies in order to grow and develop smaller businesses.
Government policies are also a major aspect in South Africa and our business environment that needs to be improved. We need to attract more foreign investment and realise that there are investors who are very interested in South Africa, but that there are improvements we should make. For example, we need to look how we manage our investor environment and how we can better the image we portray to the rest of the world.
Roger Baxter from the Chamber of Mines highlighted the fact that if South Africa wants to be truly competitive, there needs to be a real understanding of the available resource pool and that South Africans should start by looking at what the potential is. What are your thoughts on this, especially regarding the competitiveness of the mining sector?
I think he is very right; unless you know what is in the ground, you cannot know what to do with it and you do not know what potential exists.
Regarding resources such as gold, we have to keep in mind that mining has been active in South Africa for a long time. We have had to go deeper into the ground, which more easily put the miners at risk.
What I think is going to help South Africa going forward is finding the best way to extract the gold ores that were previously difficult to get to in the safest possible manner. Technology has advanced and is continuing to advance so much so that it allows us to extract resources from deeper in the ground. South Africa simply has to adapt to and keep up with the latest technology, it increases the life of mines and the resources.
One strategy of the Chamber of Mines is that they look at how South Africa can start looking at advancements of technology and utilising this to extract ores from those previously unexplored places.
Another strategy the mining companies have is looking at what we can achieve in 2030. However, for it to be achievable we need to write an environmental policy that us conducive, will attract investment and will promote the growth of the mining sector. Without this, it will be a challenge; we need a well regulated mining sector and well written and enforced policies.
We have to realise that there are certain imbalances from the past that still exist, such as the fact that mining was built on policies that subjected certain parts of our society to almost inhumane conditions. It is important that the mining industry acknowledge that it benefitted from Apartheid, because we cannot address it and write new policies without first acknowledging that it was there.
What are your strategic plans moving into the future?
Mxolisi Mgojo: We looked at energy security and energy supply, and saw that there are many new revenue streams we can tap into. The overall idea is that we want to come up with strategies and innovations that will disrupt the market and disrupt the industry, because that is the only way you will really achieve change.
If you really think about it, along with food and water, energy is a basic human need. Economies need it to survive just as much as humans do, and if you think about it like that there are many new areas to move into. The need for water and food is a good example.
Mining companies have a lot of money, and you can use that to create secondary economies for communities and for ourselves. In this way the people in those communities will be able to sustain themselves, we as mining companies will be doing something good, and the economy will grow.