President Jacob Zuma’s decision to replace the minister in the Department of Mineral Resources (DMR), Ngoako Ramatlhodi with the inexperienced Mosebenzi Zwane in September last year came as a shock to the South African mining community.
Ramatlhodi, whose inclusive approach as mining minister restored some confidence in his historically maligned office, had been hands-on addressing critical matters such as the five-month long platinum strike of 2014, and, not long before the cabinet reshuffle, had begun talks between stakeholders to find a solution to arrest the spate of retrenchments happening throughout the sector.
Nevertheless, he was moved on to the Department of Public Service and Administration as minister, and replaced by Zwane, who had little to no experience in the sector and had reportedly been linked with the controversial Gupta family. Many argued that the move displayed an alarming lack of urgency in government’s approach to South Africa’s ailing mining sector and its ambiguous regulatory framework. Because, despite the need for regulatory certainty, the DMR was not able to advance policy direction, or lack thereof, until the new minister had a competent understanding of the sector.
Fast forward four months and the global mining sector has begun 2016 in the worst way. China’s economic woes saw mining stocks plunge to record lows last week. South Africa’s mining industry is arguably facing its toughest test ever, plagued by depressed commodity prices, increasing costs, continuing industrial, social and political action, high wage and electricity increases, power disruptions, dwindling global demand – the list goes on. This is the environment in which Zwane will have to steer the ship that is South Africa’s mining industry.
Cadiz Corporate Solutions mining analyst Peter Major says South Africa has sabotaged its own mining industry, which is now performing worse than it did during the low gold price Apartheid era, when sanctions, poor access to capital, high interest rates and inflation, poor technology and other inefficiencies made it ‘more’ difficult than should be the case today. He says that over the last 13 years everything was in South Africa’s favour with regard to commodity prices, international relations, interest rates, access to investment and much more.
“In fact, never in the past 100 years had the environment for business and growth been so attractive for South Africa than in this millennium,” he says. “Yet we closed down far more mines than we opened. Gold production fell from 600 tonnes per annum and is barely at 150 today. Platinum, iron ore and base metal production is down and will continue to fall as is the country’s steel production.”
Almost 90% of this demise, he adds, can be directly attributable to legislation, policies, ideology, corruption, inefficiency, political demagoguing, organisations not adhering to the constitution and draconian labour legislation.
The Chamber of Mines of South Africa (COM) will be looking to engage with the DMR on some critical issues this year; including the review of the Mining Charter, which lays out the obligations on companies to secure prospecting and mining rights, and will have to take account the need to advance transformation and the current economic environment in which the industry finds itself in.
Related to this is the resolution of the issues surrounding BEE ownership where the COM has applied to the High Court for a declaratory order, and the finalisation of amendments to the Mineral and Petroleum Resources Development Act (MPRDA). All of these are highly complex issues that need to be resolved sooner rather than later.
Says COM spokesperson Charmaine Russell: “The MPRDA Bill has been referred back to Parliament by the President on the basis of constitutional concerns. The COM raised the same constitutional concerns that were raised by the President during the consultation process. As such, the Bill is still under consideration by Parliament. It is likely that an extensive public participation process will take place at the National Council of Provinces (NCOP) level. Having said this, government has promised to progress the Bill early next year.”
Russell adds that the COM has been encouraged by the DMR’s announcement, under the leadership of Minister Zwane late last year, that the industry would be exempted from compliance with certain provisions within the Broad Based Black Economic Empowerment Act (2003), until the MPRDA amendments are finalised.
“This announcement indicates clear recognition by government that the mining industry and its stakeholders need continuity and certainty to be able to effect the transformation envisaged in the MPRDA and to continue to sustain and grow investment in our sector,” said the COM.
It’s too early to assess Zwane’s tenure as mining minster, but given the severity of last week’s decline, he is being put to the test. It won’t be long before we know whether his appointment will provide hope for the sector, or mark the beginning of the end of an industry that has been the driving force of South Africa’s economy.
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