South African elections pose reputational risk to mining

South Africa is entering a new political period with significant reputational implications for foreign-owned mining companies. The once indestructible hegemony of the African National Congress (ANC) is slowly eroding under the weight of a very different body-politic bolstered by a new generation of voters that have less loyalty towards the liberation struggle and more towards a burgeoning working-class labour movement. This phenomenon is epitomised by the success of unions such as the Association of Mineworkers and Construction Union (AMCU), as well as the divisive Economic Freedom Fighters (EFF). Furthermore, whilst the ANC’s twenty-year triumph at the ballot box is diminishing, so too is the reputational position of the country’s many mining companies.

This is due, in part, to an increasingly dominant perception that the interests of the ANC and those of large multi-national mining companies are two sides of the same coin. As such, the governing party has come to be seen as incapable of tackling industry issues such as the migrant labour system, the perceived shortcomings of black economic empowerment legislation, and an inability to foot-the-bill for a “living wage”. The international media witnessed probably the most poignant symbol of this discontent when, in 2012, 44 miners were shot dead at a Lonmin mine in the Marikana area, the single most lethal use of force against civilians since the Sharpeville massacre during apartheid.

As a result of all this, mining companies with operations in South Africa face the most serious reputational risks witnessed since then end of apartheid rule. Whatever the outcome of this dynamic, it is certain that the industry will come under increasing scrutiny and an additional pressure to justify its economic contribution at a time when many are hell-bent on undermining the sector.

The emergence of the EFF and Julius Malema has worked to add an additional dimension to this phenomenon. Whilst the EFF’s prescriptions for South Africa (which include the nationalisation of mining) may appear alarming to some, alva has monitored a consistent increase in both volume and positive sentiment associated with the movement within regional specific content in the run-up to May’s election. Consequently, the policies of the EFF, as well as the ideology that motivates them, have become increasingly difficult to cast aside as extremist, or, on the fringe of South African politics. As a result of increasing discontent and sympathy for the EFF’s agenda, it may be that in his last term in office, Jacob Zuma has no choice but to make a number of concessions to this agenda in order to appease voters and reaffirm his and the party’s commitment to the labour movement, a commitment once central to the ANC’s existence.

This can only be bad news for mining companies and there exists little to no reputational upside to this phenomenon. However, whilst next month’s election will elucidate exact support for the ANC and South Africa’s opposition parties, the ANC’s five-year term that follows will be crucial in determining future reputational trends regarding the role of mining in South Africa. Companies that embrace this change and endeavour to create innovative solutions for the needs of a new stakeholder, namely, a predominantly young generation, with sympathy for the notion of nationalisation and radical plans to enfranchise the black population, stand to mitigate the worst of the negativity in the coming years.