Shirley Webber, Coverage Head of Natural Resources & Energy,

ABSA GROUP

"Many investors have a strong sustainability focus and capital will follow this route now."

Can you give an overview of Absa Group and the company’s role in the South African mining industry?

Absa Group Limited is listed on the JSE and is one of Africa’s largest diversified financial services groups, with a presence in 10 countries across the continent, representative offices in Nigeria and Namibia, as well as international offices in London and New York. We offer a wide range of products such as investment banking, corporate banking and risk solutions, with strong execution capabilities and access to critically important relationships.

Absa understands the complexities of the mining sector across Africa. We believe that investors will be looking at diversified portfolio investments with a clear strategy in decarbonisation, with transparency on economic impact, communities and the environment. Capital will follow sustainability.

How did the pandemic impact the Southern African mining industry, and to what extent are countries on their journey to recovery?

Although Covid and the lockdown regulations have had adverse and far-reaching effects for many sectors, it has accelerated the energy transition from fossil fuels to greener, more sustainable energy, particularly across Africa. As a continent we are rich in natural gas and energy minerals/metals such as copper and cobalt and these deposits will ensure that economic growth continues for Africa and that more governments will promote the use of greener energy technologies.

Many African countries had a lockdown period where the mines physically closed, and production was halted. However, the mining industry recovered rapidly and precious and base metals held their own when it came to price levels.

What are your recommendations for South Africa to regain its title as the mining giant of the region?

A stable political environment, regulatory certainty, labour peace and democracy are important to ensure that South Africa remains an attractive investment destination. The recent mining charter in South Africa was a positive regulatory turning point for the mining industry. This stability should continue with the country’s monetary and fiscal policies. Investment will also be dependent on the government’s behaviour during election years. Many investors now have a strong sustainability focus and capital will follow this route now. Protecting the environment and ensuring that rehabilitation happens will be crucial.

How is Absa assessing opportunities in the renewable energy space?

There are significant renewable energy investments in Africa. South African legislation has changed in terms of power generation, and mining companies can now apply to put up their own power plants with increased power production capacity limits. We have seen a surge in these types of requests, where Absa either considers balance sheet funding to the companies or funding via an Independent Power Producer with an offtake agreement. Water reuse is also essential for green mining, and most mining companies are recycling to ensure that extraction happens sustainably.

In September 2019, Absa signed up to the United Nations Principles for Responsible Banking, thereby undertaking to align business strategy with society’s goals. The key to unlocking growth in Africa is for all stakeholders, such as communities, corporates, financial institutions and governments, to collaborate responsibly and support environmentally, socially and economically viable projects.

Which countries pose the highest and lowest risks regarding mining investment?

The ratings methodology adopted by rating agencies for African countries places the continent at a scale that is relatively high. Absa is comfortable lending in countries where we have a physical presence, with us considering more aspects when lending in countries where we do not. Adequate electricity supply will impact the extent of investments as well. Financiers will have to start considering the non-traditional commodities such as most of the energy minerals and metals to ensure we assist with the energy transition. In terms of commodities, I believe that platinum and palladium have excellent prospects for the future, together with the rise of energy minerals and metals.