SA's international image seems to be changing. One need look no further than growing tourism figures for proof. But mining companies are still battling against foreign preconceptions about their businesses here.
The perennial question fired at Anglo American Plc CEO Tony Trahar at presentation time is this: "What are you doing to diversify further away from SA?"
In March this year Anglo produced the best results of the three global resources giants listed on the London Stock Exchange, including BHP Billiton and Rio Tinto. For the year to end-December Anglo recorded a 10% rise in headline earnings compared with an 8% decline in "adjusted earnings" over the same period for Rio Tinto and BHP Billiton recorded a 14% drop in headline earnings for the six months to end-December.
Yet, as CIBC World Markets executive Jack Jones pointed out in March, "Anglo American stands on a 2003 p:e of 12 against 15 at Rio Tinto and BHP Billiton." The reason for that, in his opinion, was Anglo's greater exposure to SA than the other two groups.
Further, at the time he saw no reason for the discount to close, and he believed Rio Tinto's rating could be driven upwards to 17 because of its exposure to China, where Anglo is only now starting to develop a presence.
Anglo has made big strides in reducing its SA exposure. Only 31% of its assets were located in SA at the end of last year, compared with 67% at end-June 1999; 54% of the group's headline earnings were sourced from SA in 2002 compared with 72% in 2001.
By comparison, BHP Billiton sourced just 5% of its turnover and 23% of its profit before tax from "Southern Africa" in the six months to end-December. Those figures include the Mozal aluminium smelter complex in Mozambique.
Mick Davis, CEO of London-listed Xstrata, also put the SA factor in perspective this year when Xstrata, which has major ferro-alloy and coal investments in SA, opted to buy Australian coal group MIM for about US$3bn.
Davis says he is positive about SA "as a place in which to do business" but adds that "our shareholders do not have that same level of confidence and they have been uncomfortable about the extent of Xstrata's exposure to that uncertainty".
He adds: " I have no doubt that the large proportion of our assets in SA has prevented a number of potential shareholders investing in Xstrata."
