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In today's blog we ask whether mining and investing in mining companies is still the way to go for South African investors? SA's mining has a long and checkered history but its still around after all this time. Or is the "new way of mining" the way to go? Read more below.
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"Super Pit Kalgoorlie" (CC BY 2.0) by Eulinky
Mining is and probably always will be one of the driving forces in the South African economy. When you scroll through the list of South Africa 40 companies and check out those in the top ten, mining outfits are always strong performers. In fact, even in light of a struggling economy, the mining industry has managed to remain buoyant and, therefore, an attractive investment opportunity.
Indeed, if you take Richard Baker's point of view of the "South Africa deserves your attention" as an investor, you'll be hot on the mining industry. Using IG's South Africa 40 index as a marker, Baker asserts that the top mining companies bringing in the value are doing so because of a boom across Africa. With The Economist listing nine African countries among the world's fast growing economies, South Africa is likely to become a direct beneficiary of this growth.
Indeed, if you take Richard Baker's point of view of the "South Africa deserves your attention" as an investor, you'll be hot on the mining industry. Using IG's South Africa 40 index as a marker, Baker asserts that the top mining companies bringing in the value are doing so because of a boom across Africa. With The Economist listing nine African countries among the world's fast growing economies, South Africa is likely to become a direct beneficiary of this growth.
Mining Still a Strong Player in the Financial Markets
"Secondary mining of Phosphate in Nauru," (CC BY 2.0) by DFAT photo library
As Baker points out, South Africa 40 index mining companies, such as BHP Billiton, are perfectly placed to serve the industrial needs of these emerging economies. Naturally, as these countries require more resources, South Africa 40's mining outfits will be on hand to help. This will drive up the value of each company and, therefore, the index as a whole. Based on this assessment, mining is clearly is still a strong investment opportunity for anyone sizing up South Africa.
However, as strong as this market is, it's also an industry with a shelf life. While it may not be a problem in the immediate future, it's true that natural resources are on the decline and, therefore, investment opportunities are on the decline. What's interesting though is that this doesn't mean the end of mining in South Africa if you're willing to recalibrate your expectations.
Instead of mining natural resource, mining in the virtual world is now starting to emerge as a hot investment prospect in South Africa. For those not in the know, the process of producing cryptocurrencies such as Bitcoin is known as mining. While this type of mining might be a world away from the mining South African investors have become accustomed to over the last few decades, it's an area you should be interested in.
However, as strong as this market is, it's also an industry with a shelf life. While it may not be a problem in the immediate future, it's true that natural resources are on the decline and, therefore, investment opportunities are on the decline. What's interesting though is that this doesn't mean the end of mining in South Africa if you're willing to recalibrate your expectations.
Instead of mining natural resource, mining in the virtual world is now starting to emerge as a hot investment prospect in South Africa. For those not in the know, the process of producing cryptocurrencies such as Bitcoin is known as mining. While this type of mining might be a world away from the mining South African investors have become accustomed to over the last few decades, it's an area you should be interested in.
A New Way of Mining
"Cryptocurrency Art Gallery" (Public Domain) by Namecoin
On a global scale, Bitcoin's value has increased dramatically in 2017 thanks to growing acceptance from governments as well as the influence of the technology behind Bitcoin: the blockchain. The good news for South Africa is that the government is hot on the cryptocurrency as well as fintech as an industry. Finance Minister Malusi Gigaba recently said that National Treasury is working on ways to build legal and regulatory frameworks around emerging fintech.
Beyond this, the South African Reserve Bank (SARB) has partnered with blockchain company Bankymoon to explore the opportunities between cryptocurrencies and banking. Although there is still a long way to go until cryptocurrencies have a stable base in terms of regulation, the seeds have been planted and that's something an investor can't ignore. Although the growth of fintech in South Africa is hardly a secret anymore, it's still an emerging entity and that makes it something you should be taking seriously. Indeed, if you're looking for a new opportunity away from mining, then Bitcoin mining is a fantastic alternative.
Beyond this, the South African Reserve Bank (SARB) has partnered with blockchain company Bankymoon to explore the opportunities between cryptocurrencies and banking. Although there is still a long way to go until cryptocurrencies have a stable base in terms of regulation, the seeds have been planted and that's something an investor can't ignore. Although the growth of fintech in South Africa is hardly a secret anymore, it's still an emerging entity and that makes it something you should be taking seriously. Indeed, if you're looking for a new opportunity away from mining, then Bitcoin mining is a fantastic alternative.