In their 2023 annual report, which was just released, DRDGold's CEO, Niël Pretorius, and chairperson, Timothy Cumming, discussed South Africa as an investment jurisdiction and expressed their belief that capital investment was viable due to the country's vibrant private sector.
“We pause to reflect on South Africa as an investment jurisdiction, especially in view of the very large investments and capital commitments we plan for the near and medium term. The picture is far from ideal with the Fraser Institute’s 2022 mining survey placing South Africa very close to the bottom of the list of the world’s investment jurisdictions.
“However, our view is that the potential of a jurisdiction from an investment perspective is not just a function of political and mining regulatory governance,” they said.
South Africa had an exceptionally influential and dynamic private sector, and many companies in South Africa matched the performance of their international peers on the back of solid performance and results.
They dId so by finding innovative solutions for gaps in political delivery and are becoming increasingly prominent in the high-risk areas of combating crime, especially illegal mining and theft in the mining industry, and the ‘construction and ‘tender mafia’, restoring logistics and supplementing our failing national electricity utility, Cumming and Pretorius said.
By way of example, there were reports that private investment in photovoltaic power in South Africa had doubled the output of renewable power in the 12 months from March 2022, and that there was now an estimated 4.4 gigawatt of installed solar power capacity in the country – the equivalent of two stages of load shedding - where South Africa currently experiences very daunting electricity loading shedding that varied between Stage 2 and Stage 6.
“The private sector is systematically extending its influence over strategic services and infrastructure and in so doing, reducing the risk of an absent and incompetent state. Naturally, we would prefer that we did not have to expend capital and effort on addressing these kinds of external challenges, but doing so nonetheless improves our resilience as a company and places a premium on our ability to innovate as well as mitigate the prevailing risks - which is something that this company has thrived on.
“We are also witnessing, although gradually and, at the moment, mostly at local level, the emergence of a younger, externally-focused political leadership eager to collaborate with the private sector and intent on lifting the quality of service delivery. So, while we are by no stretch of the imagination out of the woods, it is clear that the mindset of South Africans is changing toward a more independent, doing-it-for-themselves attitude. This has certainly been our attitude for quite some time, and it has stood us in good stead thus far,” they said.
In 2023 DRDGold generated a cash operating profit of R1.8 billion and after paying R515.3 million in dividends, it re-invested R1.1bn in capital expenditure and paid R314.8m in income tax.
The executives said two key areas of investment it was aiming at was tailings storage facility (TSF) capacity (increasing capacity at both Ergo and FWGR) and electricity.
After submitting an application to amend the design of the Regional Tailings Storage Facility (RTSF) on the Far West Rand to specify a synthetic liner, it believed the firm stood a good chance of receiving approval for the amendment to the license conditions during 2024. If so, it would start construction in 2024.
This accounted for a portion of its budgeted capital spend for the year (R284 million of R3.5 billion).
In terms of DRDGold addressing the “very substantial hindrance of unreliable electricity supply:, both from Eskom and municipalities, it had started construction in2023 of a 60MW photovoltaic power plant at Ergo together with work to link this facility to the national grid in order to facilitate electricity wheeling.
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