JOHANNESBURG (miningweekly.com) – The ultimate outcome of South African mining industry policy could be decided next week when the National Policy Conference of the ruling African National Congress (ANC) takes place from June 26 to 29.
On the eve of the conference, Mineral Resources Minister Susan Shabangu has expressed the hope that South Africa’s marathon debate on the nationalisation of its mining industry will be finally “laid to rest”.
Shabangu has herself expressed the strongest “not in my lifetime” views about mine nationalisation and President Jacob Zuma and leading members of his Cabinet have consistently reiterated that nationalisation is not government policy.
However, while the ANC top brass pulls antimine-nationalisation levers at the highest level, Mining Weekly learns that a surprising number of grassroots ANC members are continuing to call for mine nationalisation so forcefully at times that they have to be subdued, even with Malema out of the picture.
In fact, some say that the calls appear to be growing rather than receding.
The ANC says on its website that 3 554 delegates are down to attend next week’s policy conference at Gallagher Estate, north of Johannesburg, where many policy decisions are due to be taken ahead of the ANC’s watershed Mangaung conference, in the Free State, in December.
Like Shabangu, some political analysts are also expressing the hope the policy conference can finally close the nationalisation chapter, which was introduced so vociferously by the now-expelled former ANC Youth League president, Julius Malema.
Meanwhile, some see Shabangu’s prolonged reviewing of the Mineral and Petroleum Resources Development Act (MPRDA) over more than 18 months as being deliberately designed to allow next week’s ANC policy conference to deal with fundamental regulatory reform.
The Minister says that the main objectives of the review and the proposed amendments are to improve the MPRDA’s current construct and to remove ambiguities.
Webber Wentzel partner and Africa mining and energy projects head Peter Leon has reiterated many times over that the MPRDA, the Mining Charter and black economic empowerment are fraught with vague and ambiguous provisions, which has led the National Treasury to criticise South Africa’s mining regulatory and administrative regime as being both opaque and inefficient.
Because of the complexities, prospecting and mining rights take longer to process than in competitor countries.
The introduction of an integrated licensing system will seek to streamline government’s administrative processes and ensure that the requisite mineral inputs are made available to support local beneficiation in strategic value chains.
“I emphasise again that the review in no way seeks to introduce any major changes in the governance of the exploration and exploitation of South Africa’s mineral resources,” Shabangu tells Mining Weekly.
The other key piece of work in the governance space is the review of the Mine Health and Safety Act (MHSA), passed in 1996, the objective of which is to achieve zero harm and align the MHSA with the MPRDA.
“Again in the governance arena, we will continue to place the necessary resources and focus in order to ensure a smoother, more efficient and transparent administrative regime,” she adds.
In April of 2011, her Department of Mineral Resources introduced an online application system, known as South African Mineral Resources Administration (Samrad).
Shabangu says that Samrad’s initial problems have been addressed and, to date, well over 3 500 applications have been lodged in the new system.
Plans are afoot to expand the system by developing additional modules as part of the development of a fully fledged mining cadastral system that integrates all mining and geological information with other critical data, such as infrastructure.
Several mining conferences have taken place ahead of the important ANC policy conference, including the Mining Lekgotla, the Mining For Change series of seminars and the conference on the future of mining at the Gordon Institute of Business Science (Gibs) and comments on policy have been aired by mining leaders including Anglo American CEO Cynthia Carroll and more recently by the generally reserved Bafokeng community leader Leruo Molotlegi, who is chairperson of Royal Bafokeng Nation Holdings, which has considerable interests in mining.
At a time when the ANC’s own State Intervention in the Minerals Sector (Sims) document is calling for greater taxes from the mining industry, some mines are being closed and some mining projects are being halted in the face of a persistent global economic downturn, high costs and uncertainty in that very area in which the ANC will be immersed next week – policy.
But, while they deliberate belatedly, the mining bulls are being chased away and the mining bears are taking over, unfortunately.
Although the suspension by platinum miner Aquarius of its Marikana platinum mine and Eastplats’ suspension of two projects are not actions by mining majors, it is always the juniors who are quicker off the mark to give the warning signs of an impending industry crisis.
Moreover, even some majors have decelerated project development and a commentator like Eunomix MD Claude Baissac told the Gibs conference last week that platinum mining and mining in general are moving away from the production of high volumes towards value production, which is jobs negative.
At the same time, many mining analysts are calling for even fiercer production cutbacks, particularly platinum production cutbacks, in order to protect falling commodity prices, which are becoming too low to make mining an attractive pursuit.
Baissac reminded the policymakers that marginal mines were facing closure and the industry in general was no longer benefiting from the super cycle and were thus not in a fit state to be hit by the new resource rents tax advocated in the Sims document.
“The message to government and the ANC should be clear,” Baissac wrote in an opinion piece in the Sowetan newspaper recently.
“The South African mining industry is at risk of becoming a sunset proposition, in part because of geology, but in larger part because of policy.
“By letting costs grow uncontrolled and by not creating a stable and good practice investment climate, government has allowed a growing share of the country’s mineral bonanza to be sterilised. As a result, investors have been looking away from South Africa,” he adds.
Carroll has urged that the policy choices be directed towards creating a globally competitive South African mining industry in order to make the country the destination of choice for mining investment.
J&J Group mining executive Michael Solomon calculates that the resource rents tax will render the South African mining industry uncompetitive.
The former Wesizwe Platinum CEO says that the tax, if implemented, would be debilitating and result in lower-grade ore being left unmined and wasteful high-grading becoming the order of the day.
Leon, who is also the immediate past chairperson of the International Bar Association’s mining law committee, sees the mainstay role of the South African mining industry as being under threat.
If the Sims recommendations are accepted, he sees the tax rate lifting to 55% from the present 35%.
Shabangu is against a change being made to the current tax system, which she sees as fair and competitive.
“It’s working well,” she says and correctly regards the creation of certainty and stability as being key.
In view of the bulk of modern investments being made from pension and provident funds, executives would be reckless to invest in a South Africa bereft of clear laws and policies, which have to be definite and consistently applied owing to the high risk of mining, which requires large capital outlays well ahead of actual production.
Leon makes a further point that investors are always wary of corruption in developing countries, particularly as a lack of legal certainty may allow get-rich-quick oppor-tunists to manipulate the legal system, as well as those who regulate it, for their own ends.
With MPRDA ambiguities officially acknowledged, Leon wants to see gaps in the law closed.
The intensely vigilant shareholders of mining majors strongly resist long-term capital investments being made in unpredictable environments.”
A key component of Sims is beneficiation, which seems to be growing in acceptance, provided it has a business case.
Taken as a whole, many see merit in what Sims proposes, particularly with regard to research and development promotion, proper skills development and employment creation.
Shabangu sees the future of South African mining as being predicated on sustainable growth and meaningful transformation.
She has led the joint venture approach of government, business and labour coming together under the auspices of the Mining Industry Growth and Development Task Team to turn mining into a sunrise industry and she continues to be insistent on fostering a thriving State-owned mining company.
Shabangu was very much a part of the launching by the State mining company of the Vlakfontein colliery, in Mpumalanga, on February 26, 2011.
She reports that the mine’s 250 employees have produced 844 000 t of coal and says the new project in the pipeline of the African Exploration Mining and Finance Corporation is the so-called T Project, which plans to produce 4.6-million tons of coal a year for 33 years and create a 1 000 jobs.
The decision to build a State mining company was taken at Polokwane to stave off demands for full-blown nationalisation.
That appears still to be the case as Mangaung approaches and hopes are rising that next week’s policy conference will be the final arbiter.