The CEO of South African miner Sibanye Gold complained recently that, despite his company’s many positive credentials, it was “really disappointing” that its JSE- and NYSE-listed stocks were trading significantly lower than those of its contemporaries active elsewhere in the world.

Neal Froneman said he was concerned that investors were not seeing South Africa as the investor-friendly destination government made it out to be and that many were not comfortable with the country’s reputation for complex labour relations, as well as disruptive and potentially debilitating strike action.

“There is a perception that the labour market is inefficient and not as much in favour of investors as it is in favour of workers,” he commented during a panel discussion hosted by professional services firm Fasken Martineau at the Prospectors and Developers Association of Canada’s yearly convention. Officials from the South African Department of Mineral Resources (DMR) also participated in the discussion.

Fasken Martineau partner Nicole Jackson pointed out that many industry players did not know the rules of the game, especially when it came to the Mineral and Petroleum Resources Development Act (MPRDA), the Mining Charter and the broad-based black economic-empowerment (BBBEE) compliance scorecards.

For a mining company to be able to extract minerals in South Africa, it has to meet various requirements, including having a 26% BBBEE equity partner. When the first BBBEE deals were struck, many were done on a free-carried basis or on very soft commercial terms, prompting several BBBEE partners to sell their stakes for significant profits.

However, this meant several mining companies found themselves not complying with the Mining Charter, and this required the companies to conduct dilutive ‘top-up’ deals to maintain the stipulated level of black-held equity.

The South African Chamber of Mines, which represents miners such as Sibanye and AngloGold Ashanti, has filed a lawsuit against the DMR over whether companies could claim to have met black-ownership requirements, even after the beneficiaries had sold their stakes in assets.

Jackson said the case was due to be heard later this month, noting that government had indicated its intention to negotiate an out-of-court settlement. A separate application was filed, arguing that the Mining Charter, which lists the criteria that companies have to fulfil to obtain mineral rights, should be declared unconstitutional.

“The top priority for South Africa is to confirm regulatory certainty,” she stressed.

Deputy Mineral Resources Minister Godfrey Oliphant responded by emphasising the importance of ongoing transformation in South Africa’s mining industry.

According to him, the MPRDA had been one of the most solid pieces of legislation in South Africa. In his recent State of the Nation address, President Jacob Zuma urged that the long- delayed revised MPRDA be expedited. Oliphant estimated that the new MPRDA would be complete in the second quarter.

Oliphant noted that government preferred to talk about the Mining Charter rather than defending it in court. However, he reminded the panel that nowhere in South African legislation was there a provision for the concept of ‘once empowered, always empowered’.

“I don’t think we’ll lose this case,” Oliphant said.

South African High Commissioner to Canada Membathisi Mdladlana weighed in, asking why investors were seemingly so scared of working with South Africa’s labour unions, while a country such as Canada was home to much stronger trade unions.

He conceded that relations among South African trade unions was “very rocky”, as the two main mining unions – the National Union of Mineworkers and the Association of Mineworkers and Construction Union – were embroiled in a bitter and industry-damaging turf war, prompting many other groups to also splinter.

Froneman advised that a critical step to restore stability to the labour unions would be to encou- rage the use of secret ballots when members voted on union matters. This would make it increasingly difficult for union leaders to abuse workers by driving their “secret agendas”.

He noted that there was a perception that South Africa’s mining industry was a “sunset industry”.

“But, if you look at what Sibanye has achieved, it demonstrates just how much opportunity there is in the country.”

Oliphant said there was no “foreign investment strike” in mining in South Africa, noting that two billion-dollar platinum projects were currently being financed for development in the country.

Sibanye had, to date, produced 1.6-million ounces of gold from its operations in South Africa, and recently moved into the platinum space.

With 65 000 employees, Sibanye is the single largest employer in the country, outside government. Despite operational challenges, the company maintains one of the lowest-cost portfolios in the sector, maintaining the highest divi- dend yield globally at 4.2%.