There is an urgent need for a fresh start in mining to secure a new deal for the sector, says auditing and advisory firm BDO South Africa’s Africa desk leader Owen Murphy, suggesting that newly elected South African President Cyril Ramaphosa could be integral to this new start.
The local mining industry is in danger of being paralysed by litigation and adversarial relationships, which hinder the country’s ability to benefit from its resources, he adds. “There is a need for a fresh approach to find pragmatic solutions and unlock the sector’s potential.”
Mining has long been a mainstay of the economy, but its relative size has reduced in recent years. “Mining and quarrying currently contribute less than 10% of [gross domestic product], although a significant proportion of our foreign exchange earnings still comes from the sector,” adds Murphy.
Perhaps because of its historical significance and the recent commodities-cycle boom, there are many contentious and unresolved issues – with the mining charter chief among these – affecting the mining industry.
“The charter has been suspended, pending a court challenge. The Chamber of Mines believes that Mineral Resources Minister Mosebenzi Zwane overstepped his authority in imposing new charter terms at the last minute in the face of objections from industry, and with little consultation,” Murphy explains.
Further, the industry remains heavily regulated. “There are onerous – and contentious – regulations governing exploration permits, mining authorisations, taxes, royalties, labour relations, health and safety, community relations, environmental issues and rehabilitation,” he comments.
Murphy points out that many of these issues are mired in disputes and legal challenges, which waste the time and resources of the mining sector and government. “While a document like the Mining Charter is meant to resolve disagreement and map a way forward, it has, in fact, polarised stakeholders.”
He suggests that the industry needs a political solution rather than a legal solution that is inherently adversarial. “One approach might be for a new player, with enough cachet in government, business and labour, to broker a deal.”
Murphy says: “It would be great to see someone in government championing this approach.” He adds that the obvious candidate is Ramaphosa: “He has the respect of business and knowledge of the industry from almost a decade leading the National Union of Mineworkers.”
During the yearly World Economic Forum meeting, held in Davos in January, Ramaphosa said: “The mining charter is going to be thoroughly discussed with key role-players so that we find a solution that will unlock our mining . . . If the charter is holding us back, then we must deal with it and find commonality of purpose and views with potential investors.” Murphy says these encouraging words point to a renewed urge to find pragmatic solutions in the broader social interest.
He stresses that narrow political or populist agendas need to be put aside and that pragmatism is required to overcome the legal stasis of the industry.
“A negotiated solution could be something that is realistic from business’s point of view, but with aspirational transformational goals for the sector. The ultimate goal is a productive, profitable mining industry that can enhance inclusive growth for all stakeholders,” Murphy concludes.