Great investment potential lies in SA’s mining towns

The South African economy – one of the strongest in Africa – was built on the back of mining. As a country with a rich supply of mineral reserves, considered to be some of the world’s most valuable, South Africa is estimated to have the world’s fifth-largest mining sector in terms of GDP value.

South Africa lays claim to the world’s largest reserves of manganese and platinum group metals (PGMs), according to a US Geological Survey, and among the largest reserves of gold, diamonds, chromite ore and vanadium.

Despite the fact that the South African mining sector is currently experiencing various economic setbacks, it remains a cornerstone of the economy. This is according to Dirk Conradie, CEO of Cranbrook Limited, a property development company active in Limpopo mining boom towns of Burgerfort and Lephalale. “The mining industry continues to contribute considerably to the country’s overall economic activity, job creation and foreign exchange earnings and remains a crucial component in South Africa's socio-economic development.”

He says that with the focus now on the Limpopo Province and minerals it has to offer, investment in the development of coal, chrome and platinum mines have made Burgersfort and Lephalale two of the fastest expanding nodes in the country.

The growing trend of mining companies rushing to develop mineral deposits has meant that towns such as Burgersfort and Lephalale (formerly Ellisras) will need as many as 20 000 new houses within the next 10 to 15 years to accommodate its growing population.

In his State of the Nation address earlier this year, President Zuma also spoke of government plans to develop and integrate rail, road and water infrastructure, centred around two main areas in Limpopo: the Waterberg in the Western part of the province and Steelpoort in the eastern part. “These efforts,” he said, “are intended to unlock the enormous mineral belt of coal, platinum, palladium, chrome and other minerals, in order to facilitate increased mining as well as stepped-up beneficiation of minerals.”

The mining industry value chain has been prioritised as an economic growth node in Government’s New Growth Path, which highlights a path for the industry out of its depression until 2020.

In addition, a Presidential Infrastructure Coordinating Commission, comprising cabinet ministers, provincial premiers and metropolitan mayors, and led by the President and the Deputy President has identified several regional investment plans. These plans aim to open up agriculture, mining and industrial opportunities that are dependent on energy, water and transport capacity, including for example rail, road and water infrastructure investment in the Waterberg and Steelport regions of Limpopo to support expansion in mining activity and exports.

It’s easy to see why the mining sector accounts for roughly one-third of the market capitalisation of the JSE, and continues to act as a magnet for foreign investment in the country.

According to the South African Chamber of Mines, mining accounts for the creation of 1 million jobs, about 18% of the country’s GDP and is a critical earner of more than 50% of foreign exchange.

Conradie also points to the 2011/12 Fraser Institute Survey which ranked South Africa 54th out of 93 countries and provinces, showing a solid climb from 67th out of 79 the year before. The Fraser Institute is a leading Canadian think tank which measures the policy attractiveness of mining destinations by polling mining company executives.

It is in these mining boom towns where there are a great number of opportunities for savvy investors, he says.

“Mines mean rising employment figures and improved income,” says Conradie. “They also demand more houses, water, electricity, and more roads.” Conradie says that due to the expected influx of people to these areas, Cranbrook Limited has answered the call for increased numbers of long-term accommodation in the region with its housing developments namely Spekboom River Estate and the Motaganeng Lifestyle Development in Burgersfort and the Ledibeng Eco Estate in Lephalale.

Properties within any one of the Cranbrook Limited estates can be purchased as a primary residence or as part of a rental portfolio, upon which investors can expect healthy returns. In addition, the company has recently opened a prospectus releasing 2 300 000 shares in order to raise R260 million, which will be used to service the high demand for housing in Limpopo.

“With the mining towns geared to be the powerhouses of economic growth in the future, vast development within the Limpopo region has created an opportunity for forward thinking investors who have a chance to benefit from this unique investment offering,” Conradie concludes.

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