Stakeholder cohesion crucial to change trajectory of South African mining

ROGER BAXTER Key to encouraging cohesion between mining stakeholders is a continued commitment to driving transformation in the industry at all levels

ROGER BAXTER Key to encouraging cohesion between mining stakeholders is a continued commitment to driving transformation in the industry at all levels

29th September 2017

By: Robyn Wilkinson

Features Reporter


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Chamber of Mines (CoM) of South Africa CEO Roger Baxter will consider the role that the CoM and mining companies can play in increasing investment in South Africa’s mining sector, despite current challenges, by creating an enabling business environment through the building of trust between mining stakeholders at the Joburg Indaba mining conference this year.

He stresses that key to encouraging this cohesion between industry players is a continued commitment to driving transformation in the industry at all levels to facilitate growth and ensure that the benefits of such growth reach all stakeholders.

“Our industry’s future and its ability to continue to provide employment and benefits to employees, depends on the ability of its stakeholders – government, labour and mining companies – to actively consult each other and work together to create a conducive policy, legislative and operating environment that facilitates transformation and realises the economic potential of the mining sector for the benefit of all South Africans,” says Baxter.

Trends in commodity prices and the performance of the rand have a significant impact on the South African mining sector’s profitability, but the sector’s diminishing performance over the past two years has been severely aggravated by additional uncertainties, including potential increases in cost pressures and the legal and regulatory uncertainty surrounding the Department of Mineral Resources’ (DMR’s) latest iteration of the Mining Charter, published on June 15, says CoM chief economist Henk Langenhoven.

Mining production data released by Statistics South Africa last month revealed a third consecutive monthly contraction for the period of April to June and the CoM says there is no doubt that this decline is largely explained by a combination of the uncertainty regarding commodity prices and the strengthening of the rand exchange rate against the dollar.

Although there are significant differences in the production performance of individual commodities, the chamber points out that rand commodity prices influence mining production volumes. The rand was, on average, nearly 16% stronger against the dollar over the first seven months of 2017, compared with last year and, by last month, it had strengthened by over 5% since January. “This appreciation of the rand has more than eroded the slight improvement in commodity prices, given that rand commodity prices fell by 4.5% since January,” says the CoM.

However, Langenhoven highlights that the economic pressure facing the South African mining industry has been intensified by the increasing costs of electricity, labour and materials, such as steel, combined with a slowdown in investment in the sector, as a result of regulatory uncertainty. These factors are further detracting from the sustainability of the mining sector, with announcements of mine closures and further potential closures “serious signs” of the severity of the effects of these challenges.

The direct impact of this regulatory uncertainty on access to capital in the mining sector will be a key topic of debate at the 2017 Joburg Indaba at the Inanda Club, in Sandton, Johannesburg, from October 4 to 5, where Baxter will also discuss why the new Mining Charter would be detrimental to South Africa if it were to be implemented in its current form.

Mining Weekly reported in August that the CoM had submitted a replying affidavit in the High Court, in Pretoria, responding to Mineral Resources Minister Mosebenzi Zwane’s August 7 affidavit, in an interdict application against the implementation of the reviewed Mining Charter. The chamber stated that unilateral development and implementation of the reviewed charter would not serve the interests of South Africa and its people and would only benefit a select few‚ while destroying investment, increasing costs, triggering further job losses and “causing irreparable damage to the mining industry”.

This followed the CoM’s first round victory against the DMR in July, when Zwane agreed to suspend the implementation of the controversial Mining Charter Three until after the High Court had pronounced judgment on what the legal fraternity had condemned as unconstitutional, contrary to the Companies Act and a taunting of the World Trade Organisation. On September 13, the CoM, moreover, reached an agreement with Zwane, in which the Minister of Mineral Resources gave a written undertaking that the Reviewed Mining Charter will not be implemented until judgment has been handed down in respect of the CoM’s review application, which has rendered the granting of an interdict by the court unnecessary at this stage. In the interests of expediting the review process, the CoM has agreed that the matter be heard on December 13 and 14 by a full bench of judges.

Edited by Tracy Hancock
Creamer Media Contributing Editor


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