Platinum stands a good chance of being identified by South Africa’s leading political party as a strategic national asset, which might require State ownership to increase development potential, says Pan-African advisory firm africapractice senior consultant Vukani Mde.
Following a recommendation outlined in the African National Congress’s (ANC’s) ‘State Intervention in the Minerals Sector’ (Sims) report, the ruling party adopted the term ‘strategic State ownership’ at its five-yearly elective conference in Mangaung last year, as it rejected the idea of outright nationalisation.
“The ANC dropped any reference to nationalisation in all its policy documentation to further emphasise that there would be no mandatory, ideology-driven State control of the sector,” Mde says.
He explains, however, that the State will be directed to intervene when social and industrial development goals need to be pursued.
Mde adds that there are existing examples of strategic State ownership in some areas of the economy, such as State- owned power utility Eskom, which owns and operates mines that produce coal, its key input asset.
“As our primary power producer, Eskom is a strategic State asset. One can, therefore, argue that platinum is an asset to South Africa – not only economically, but also geostrategically, given the country’s 80% share of global supply,” he explains.
On whether South Africa has used this position to extract maximum benefit from its abundant platinum reserves, Mde responds that “government seems to think it hasn’t”.
State of the Industry
The local platinum industry has started this year on unsure footing, which has more to do with market conditions than it does with the policy environment, says Mde.
“The industry ended 2012 in a funk, owing mainly to a sustained downturn because of soft demand.”
Mde believes the outlook will not change until the global economy does and until demand increases. “To this, local policy questions are secondary.”
He told Mining Weekly last year that, prior to the elective conference mid- December, the platinum industry had adopted a wait-and-see-approach, owing to the uncertain policy environment, especially in the midst of violent wage strikes.
“Platinum producers want to know how [the decisions made at] Mangaung will impact on their balance sheet, as well as on the future profitability of existing projects and any future investments they might make,” he said at the time.
Postconference, however, Mde believes that the national conference provided industry stakeholders with enough clarity to move on this year.
“The mining industry knows what the ANC wants – the recommendations of the policy conference and the economic transformation resolutions of the national conference were stated quite clearly in the Sims report,” he says.
“Mining companies may seem reticent because they do not like policy direction, but that’s a different matter. There is no policy confusion or uncertainty,” he avers.
State Intervention: A Compromise
The Sims report, which was released in February 2012 and condensed into a discussion document at the end of July 2012, rejects wholesale nationalisation, estimating that it would cost the State well over R1-trillion to acquire a 51% controlling share of listed companies, which exceeds government’s budget.
Mde argues that, besides a lack of State funds, government is not inclined to buy out the mining sector either.
“What the ANC has always wanted, realistically, is greater State control over the invested assets of the mining sector to redirect them towards defined social and industrial development goals.”
Further, the electoral conference called for a more equitable share of mining profits through resource rent taxes, royal- ties and licence fees, which, in turn, calls for a review of the country’s strategic minerals.
“The ANC clearly wants mining, as a key sector of the economy, to play a more pronounced ‘multiplier’ role, and to be the catalyst for growth in other sectors of the industrial economy,” says Mde, who is adamant that the party’s policy goals do not require direct State ownership of every mine in the country.
At a seminar hosted by the South African Institute of International Affairs in August last year, mining and energy law firm Webber Wentzel’s Africa mining head Peter Leon discussed the Sims report in his keynote address, ‘The South African mining industry on the road to Mangaung’.
He mentioned that the Sims report identifies iron-ore and platinum-group metals, among others, as strategic minerals.
Leon further explained that, should the Sims report be fully supported, these strategic minerals could be subject to export and infrastructure tariffs to ensure secure supply to State-owned entities and cheaper supply to the domestic industry, which would stimu- late job creation and greater industrialisation.
However, he highlighted the irony that the National Planning Commission’s National Development Plan 2030 “iden- tifies the platinum sector as the champion of our mining industry when, in fact, it is a sector facing a perfect storm of plummeting global prices and rising local costs”.
After elaborating on the crisis in which the platinum industry currently finds itself, Leon stressed how important it was that the ANC leadership “turn their minds from Marikana to Mangaung, where the party’s December 2012 elective conference will decide on how the State should, in the language of its 2007 Polokwane resolutions, ‘intervene strategically … to drive the growth, development and transformation of the mining sector’”.
Mde suggests that, since these decisions have been made, the ANC convene with the broader extractive industry in South Africa, developmental nongovernment organisations, mining commu- nities and labour to discuss the needs of mining in the twenty-first century.
He maintains that the mining industry still operates like it did in 1910, especially in terms of labour relations – the core of unhappiness in the mining industry.
“One of the things that Marikana reminded us of is that mining in South Africa has changed little from when it was founded at the dawn of the industrial age. Migrant labour, single-sex hostels, low-skill levels, an appalling safety record and a racially stratified work environment – all of these are still the defining characteristics of South African mining,” says Mde.
Edited by: Megan van Wyngaardt
Creamer Media Contributing Editor Online
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