The mining industry cannot move forward unless new leadership is established within the Department of Mineral Resources (DMR), says law firm Cliffe Dekker Hofmeyr (CDH) mining head Allan Reid, who suggests that such a change could re-establish “some degree of optimism and trust in the mining industry”.
“That optimism in itself would be good for the industry and would result in . . . a more positive outlook going forward, [with investment] . . . into development and exploration [taking place],” he tells Mining Weekly.
Believing DMR leadership change to be the catalyst needed to bring the mining sector and government back together on a realistic and workable basis, Reid envisions a potential turnaround in the industry, at least with regard to attitude and a willingness to cooperate within a relatively short time.
“There is a need for a credible and honest broker who understands the industry,” Reid continues, highlighting the significant “breach of trust” between the industry and government created by the promulgation of the controversial Reviewed Draft Broad-Based Black Economic Empowerment Charter for the South African Mining and Minerals Industry, also known as Mining Charter III.
Reid suggests that, if the industry continues to be “strangled” to such an extent that it cannot generate income to address the concerns and aspirations of labour and local communities in terms of aspects such as black economic empowerment (BEE) and community upliftment, any remaining faith and trust on the part of stakeholders will be lost.
He also fears that pending litigation, which will proceed this month, may lead to greater disharmony between government and the industry.
Industry body the Chamber of Mines (CoM) applied for a review of the DMR’s reviewed Mining Charter, which was published on June 15. The hearing of the review application by a full bench of the High Court is set for December 13 to 14.
The turmoil and increasing tensions between the CoM and the DMR as the industry regulator, which have led to declining constructive engagements and the ensuing cases of litigation, paradoxically, have brought the mining industry and labour closer together, as they currently understand the industry best, avers Reid.
The understanding between the two is the result of an awareness of the gravity of the situation, bought about by the combination of depressed and now generally low commodity prices, resulting in financial losses in the billions in the past two years, credit downgrades, political uncertainty and a lack of credible leadership within the regulator, as well as the joint appreciation of the lack of understanding the DMR is displaying, which has created “an almost perfect storm for the mining industry”, according to Reid.
This has resulted in investors losing confidence in South Africa, with a dramatic decrease in new foreign direct investment, Reid laments, noting that, with the money not being spent on further exploration and prospecting, knock-on effects will eventually impact on the mining industry.
“Mining resources are finite and, if exploration is not continued, the industry will, at some stage, hit a wall,” Reid says.
Reid believes that the industry is at a point where an ever-increasing number of mines will either be closed, liquidated or placed on care and maintenance. While there are currently various processes by mining companies to sell either entire mines or portions of operations, the appetite to take up those assets on sale seems to be dwindling, not least as a result of decreased access to funding, says Reid.
Simultaneously, South African mining companies are exploring other African jurisdictions for mining investment, rather than spending development capital locally.
The mining industry, nevertheless, remains resilient, says Reid, adding that South Africa retains vast reserves.
In time, the mining industry, having seen its way to surviving the current state of affairs, will once again be a very strong industry that can contribute to the fiscus, the uplift communities and strengthen BEE, as well as provide employment, he says.
“However, we need a new Minister, a clear, unambiguous and transparently applied legislative framework and a friendly fiscal environment for investors,” Reid says.
These elements should further be supported by communication and meaningful consultations to build and strengthen the partnerships within the mining industry and among government, labour, industry, investors and communities.
“All the stakeholders need to take a step back, have a healthy dose of reality, assess their positions, and come to the table again with an open mind to try to put aside the acrimonious relationships that have built up, particularly over the last year,” Reid concludes.