JOHANNESBURG (miningweekly.com) – The South African government’s position of being both “player and referee” within the mining industry raises potential governance issues, says African Rainbow Minerals (ARM) executive chairperson Patrice Motsepe.

Motsepe, who was answering questions at ARM’s presentation of its 244 % higher headline earnings to R1 562-million for the six months to December 31, was commenting on the official launching by President Jacob Zuma on Saturday of South Africa’s new State mining company, the African Exploration Mining & Finance Corporation (AEMFC).

President Zuma said at the launch that the role of the State will not be confined to regulation of South Africa’s mineral resources alone, and that the State “must actively participate in the mining industry to ensure that our national interest is protected and advanced”.

Mining Weekly Online asked Motsepe to comment on the impact on private-sector mining companies of the government becoming both “player and referee” within the South African mining sector.

Motsepe expresses the view that, from a corporate governance perspective, the government will have to look “very carefully” at the issue of “being both referee and player at the same time”.

The ownership of mining assets by the State “complicates” matters.

“The rules of the game for both the State-owned mining company and for the private sector have to be the same,” he comments.

A recent survey, he says, reveals that “equality” before the mining law is high on the list of the requirements the world’s largest mining investors.

He says that the track record of State-owned mining companies is “extremely unimpressive”.

The countries that have attracted mining investment are those that have enabled the private sector and not those that have created “uncertainty, inconsistency, lack of confidence”.

“No country has a right to investment,” he says.

“In this global world, if governments want to do well for their people, they should make sure that they create absolute confidence in the minds of businessmen,” he adds.

In launching AEMFC, President Zuma said that South Africa’s government policy does not prevent the State from participating actively, and competing with other companies.

Talking from the same podium, Energy Minister Dipuo Peters said that it would be “wrong” of government not to have a “bias” towards a State-owned mining company, a comment that contrasts sharply with the often repeated assurances of Mineral Resources Minister Susan Shabangu that no preference will be shown to AEMFC, which has already been granted 27 prospecting rights by the State.

Currently, the company is taking steps to obtain more prospecting rights for platinum group metals and base metals.

Historically, AEMFC arises out of the apartheid government’s sanctions-busting subsidiary of the Central Energy Fund, which once acquired mines in the area to store crude oil.

President Zuma turned the first sod at the new R130-million 200-employee 800 000 t/y Vlakfontein coal mine 100 km east of Johannesburg, AEMFC’s first venture.

The State-owned Central Energy Fund has supplied the equity capital for the Vlakfontein venture, which has a 15-year life of mine, and AEMFC CEO Sizwe Madondo does not anticipate obtaining any financial assistance from the National Treasury.

AEMFC has already reached bankable feasibility on its proposed R2-billion coal/synthetic oil T-Project, also in Mpumalanga near Bethal, for which equity capital from the State-owned Industrial Development Corporation may be sought.

Madondo says that AEMFC hopes to produce between 10 000 and 15 000 barrels a day of synthetic crude oil from the third quarter of 2013 and employ 1 000 people.

AEMFC intends to commence new coal, limestone and uranium exploration programmes in this financial year.

It is also targeting Zimbabwe, Mozambique, Liberia, Guinea and Sudan as potential investment destinations.

Madondo says that AEMFC will be targeting large, long-life quality assets that will add value.

The vision of AEMFC in coal is to be a top-five producer by 2020.

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