The new president of the Chamber of Mines of South Africa wants mining to be the mainstay of the South African economy once again, as it was in the past.
Dr Xolani Mkhwanazi, 55, who takes over from outgoing president Sipho Nkosi, says that the mining industry needs enabling infrastructure, transformation and improved competitiveness.
His two vice-presidents are Mark Cutifani, CEO of AngloGold Ashanti, and Neville Nicolau, CEO of Anglo Platinum.
Mkhwanazi, whose doctorate is in applied physics, spoke to Mining Weekly shortly after his election at the chamber’s 120th annual general meeting (AGM), in Johannesburg.
The executive chairperson of BHP Billiton in South Africa says: “Mining should still be the mainstay of our economic development and growth in South Africa.”
He draws attention to this year’s Citibank conclusion that South Africa is by far the most endowed country, with $2,5-trillion worth of metals and minerals in the ground.
As a former National Electricity Regulator of South Africa, his aspiration around infrastructure development is a given.
“We should not lose that competitive advantage. We need to fix infrastructure, to transform the industry and improve competi-tiveness. Most of all, we need to dig and support growth,” says Mkhwanazi, who grew up as a poor boy in KwaZulu-Natal, only putting on his first pair of shoes as a teenager.
As the former CEO of project house Bateman Africa, Mkhwanazi saw significant future mining opportunities in Africa and has been intimately involved with opportunities for BHP Billiton in the Democratic Republic of Congo, in particular.
He served at the former Atomic Energy Corporation and the Council for Scientific and Industrial Research before helping to restructure South Africa’s electricity supply as its regulator.
He is a former head of the physics department of the University of Swaziland and obtained a PhD from the University of Lancaster, in the UK, in nuclear physics.
He spent four years as an academic refugee in Perth, Australia, after being deported from Swaziland in 1988 for “activities incompatible with his status”.
None of the Southern African countries could give him asylum and he finally chose Australia over Canada to avoid the cold.
He attended university as a research fellow in Australia and returned to South Africa in December of 1992.
He was born in the St Lucia area of KwaZulu-Natal and went into exile in 1971 as a 16-year-old.
He completed his schooling in Swaziland and obtained a scholarship to do a BSc in Botswana.
At one stage, he would visit schools in the rural areas to encourage children to pursue careers in mathematics and science.
On such visits, he was wont to reminisce to pupils that he only put on his first pair of shoes at the age of 13, when he began attending high school.
Lately, he played a leading role in BHP Billiton being awarded petroleum exploration rights off South Africa’s West Coast, where the world’s largest mining company intends to drill for oil and gas.
BHP Billiton has a 60% interest in block 3A/4A and a 90% interest in block 3B/4B, and is the operator of both blocks. BHP is continuing to evaluate data acquired over the blocks and will start well planning activities, including assessing the availability of suitable drilling rigs required during the initial period of the exploration rights.
The AGM formed an interesting platform for the ‘changing of the guard’ at the Chamber.
Zoli Diliza, after 13 years of diligent contribution as one of the most persevering postdemocracy CEs, and Nkosi, after serving a three-year term as president, are both bowing out.
Twinning with Mkhwanazi as the new CE is Bheki Sibiya, a former Business Unity South Africa CE.
New CE-designate Bhekokuhle ‘Bheki’ Sibiya comes to the chamber from the University of the Witwatersrand’s Graduate School of Business. He chairs the JSE-listed Brait hedge fund, has occupied positions at Transnet, Tongaat-Hulett Sugar and South African Breweries.
He holds a B Admin degree from the University of Zululand and a Master of Business Administration accolade from Western Michigan University, of the US.
Before handing over at the AGM, Nkosi made a sobering point about mine national- isation, pointing out that, had the South African mining industry been nationalised, the South African government would have been accountable for the R67-billion postmeltdown deficit that the industry suffered in 2009.
The total income of the mining sector in 2009 was R332-billion, down 9% on the figures for 2008, and its total expenditure R399-billion, requiring the R67-billion deficit to be covered by retained earnings.
But his message to those advocating national- isation that the cyclical nature of the mining business presents a wide range of attendant risks drew a harsh response, the ANC Youth League spokesperson Floyd Shivambu accusing Nkosi of spreading “misleading, pathetic” lies on behalf of his “white bosses”.
This followed Nkosi condemning nationalisation as an “antiquated” and “discredited” practice that “has never been an enduring, successful system anywhere and it has impoverished many countries, several of them in Africa”.
Nkosi, who heads the JSE-listed Exxaro as CEO, has presided over this year’s historic declaration of intent by government, organised labour and the mining business and the deliberations around the Mining Charter and in the Mining Industry Growth, Development and Employment Task Team (Migdett).
He believes that the partnerships that have been created to produce consensus on matters of relevance and concern to all mining sector constituencies are a demonstrative manifes-tation of the invaluable process of collaborative tripartism.
The primary aims of the Migdett process are to develop strate-gies for the sustainable growth and meaningful transformation of the South African mining industry.
A fundamentally significant stakeholder acknowledgement that emerged during the Migdett process, says Nkosi, is that transformation and growth are mutually inclusive concepts.
“It is recognised that the transformation of an industry in which there is an absence of growth will never be effectively, or acceptably, accomplished,” he adds.
The Migdett process put the spotlight on the need for competitiveness and led to the commitment by Mineral Resources Minister Susan Shabangu to overhaul the flawed Mineral and Petroleum Resources Development Act (MPRDA).
Infrastructural inefficiencies are other areas of concern that have prevented South Africa from benefiting during the pre-economic-meltdown global mining boom.
Discussion within Migdett led to the establishment of a long-term infrastructure planning mechanism for the mining sector, the primary purpose of which is to research the infrastructural needs of the industry and provide inputs to all other national infrastructural processes.
“The ultimate intention of this project is to fast-track specific infrastructural interventions so that mining commodities can be conveyed to global demand destinations more effectively and in greater quantities,” says Nkosi.
The Revised Mining Charter
Intrinsically linked to the realisation of transformation and growth is the revised Mining Charter, which, in contrast to the original version, is a Department of Mineral Resources- (DMR-) produced policy document.
The Chamber’s view, says Nkosi, is that the DMR has succeeded in producing a “reasonably balanced” revised Mining Charter.
However, he emphasises that the interpre-tation of some of its provisions will be critically important, including the need for clarity on the continued recognition of empowerment transactions that have established independent and viable black mining companies.
The requirements and possible offsets relevant to beneficiation also remain unclear, especially when the restrictive impact of poten- tial future electricity supply constraints on possible beneficiation activities are taken into account, and the procurement requirements will also be quite challenging, he adds.
He sees as a good addition the elevation of health and safety performance to charter level.
Nkosi reports that the immediate future presents some encouraging signs for both the global and South African mining sectors.
He sees the world’s economy as having weathered the international financial crisis into a growth rate of more than 4%.
In addition, the World Trade Organisation has estimated that global trade could grow by more than 13% this year.
“If this happens, it will be the biggest and fastest expansion in world trade since records started being kept in the 1950s,” he adds.
The major proportion of South Africa’s cross- border trade is in the movement of its mining- sector products. The anticipated growth should present valuable opportunities for the producers of virtually all our mineral commodities.
It is still early days but, in the first six months of this year, total primary mineral sales were showing a sharp recovery and are estimated at an annualised R274-billion. Should this level be achieved, it will represent an improvement of nearly 14% over the 2009 sales total.
Mining Rights Issues
Mkhwanazi is intent on continuing to strengthen the relationship that the Chamber has with the DMR.
“I would like us to engage with the depart- ment on licensing. The licensing process is currently suspended and I would like to work, together with the department, towards a watertight licensing process that would add credibility to the department and which, in turn, will then bring investments into this great industry,” he says.
An audit conducted by the DMR found 120 anomalies in the awarding of prospecting licences and the DMR itself is in the process of introducing a new system during a moratorium period on licence awards.
There have been instances of double granting and overlapping of prospecting rights, which South Africa’s acting chief inspector of mines, David Msiza, told the Chamber AGM is partly the result of the limitations of the national mining promotion system, which reportedly failed to detect boundary changes during the demarcation process.
Problems unearthed during the audit included the inability of the DMR’s administrative system to avoid the double granting and the overlapping of rights; an increase in litigation and appeals as well as letters from applicants relating to delays in processing their applications; and a lack of transparency in decision-making leading to perceptions of too much official discretion and perceptions of impropriety.
“In an effort to systematically address these problems internally, we started a process of dealing with cases of double granting and overlapping rights. This took the form of high-level visits to the regional DMR offices and working through all the cases with the rights holders.
“In addressing these cases, we involved applicants with a view to demonstrating to them that there was no malicious intent. The process was done in a transparent and accountable manner,” says Msiza.
Cases of double granting that were attended to – including unregistrable rights that were identified – amounted to fewer than 120 out of a total of 26 000 applications that were pro- cessed since the implementation of the MPRDA.
Msiza says that the new electronic management system for the administration of mineral rights is designed to allow applicants to view progress online and provide acceptance letters instantaneously.
The Minister is expected to announce a launch date for the new system early next year. To prepare for its implementation, current data is being cleaned up.
The preliminary results of the clean-up of prospecting rights, in particular, “are not encouraging”, says Msiza.
The finding is that there is “gross non- compliance” on the part of rights holders in the form of late action on site, unsustainable mining transactions, illegal drilling in some areas leading to increased hazards to communities and land owners, liquidations, and the sale of rights without Ministerial consent.
“We are conducting these audits with the intention of restoring integrity to our regulatory system, which is currently under attack because of perceptions of inefficiencies and irregularities,” Msiza adds.
The Minister has instructed DMR officials to conduct a roadshow focusing on community engagements to address these matters in a sustainable manner.
With the new government Growth Path listing mining as a top four priority, steps are being taken to increase mining output, provide support for mineral beneficiation programmes and adopt ‘green mining’ technologies.
Many are holding thumbs that Migdett can do its job and that far more can be done with South Africa’s mineral wealth.
Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
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