The Minerals Council South Africa (MCSA) yesterday slated Mineral Resources Minister Gwede Mantashe’s draft Mining Charter, saying that in its current form it would not promote investment and growth.
With the minister increasing black ownership to 30% from where it had been lying stagnant for the past 14 years at 26%, MCSA spokesperson Charmane Russell said the council supported the new target on new mining rights, with shares allocated for communities, organised labour and black entrepreneurs.
“Most importantly, some of the elements of the Mining Charter do not promote competitiveness. Without competitiveness, investment in new exploration and mining will be limited and the current mining sector will continue to decline, to the detriment of all citizens,” said Russell.
“This is directly contrary to President Cyril Ramaphosa’s stated intention to attract $100 billion in foreign investment into South Africa in the next five years.”
Also, there were parts of the draft that were “unconstitutional and contrary to South African Company Law”.
Russell said the council does not support the free carried interest of 5% allocated to each of labour and communities.
“Given South Africa’s mature mining sector, a 10% total free carried interest on new mining rights will materially undermine investment, by pushing up investment hurdle rates and ensuring that many potentially new projects become unviable.”
MCSA also did not support the 1% earnings before interest, tax, depreciation and amortisation target to communities and labour proposed by the department of mineral resources (DMR).
“This was not agreed as a recommendation in the Charter Task Team, so it’s a surprise addition,” Russell said.
“The issue of topping up existing right holders’ BEE ownership to 30% within five years was never agreed as a recommendation in the Charter Task Team, and so this is another surprise inclusion by the DMR.”
Mining analyst Mamokgethi Molopyane said Mantashe was walking a tightrope between balancing the interests of investors and the ANC’s radical economic transformation (RET) goals.
“He now has to straddle the role of mining minister and consider the mine owners, while at the same time use the charter to address mining’s uncomfortable history of how it treated workers and how as an industry it was built,” Molopyane said.
“One has to also be cognisant that Mantashe is national chairperson of the ANC. That responsibility must have been weighing heavy on him, especially on RET. I wouldn’t say RET has lost, per se, but more of a case of it not being the dominant language in the Ramaphosa-led ANC.”
Molopyane said where pragmatism was the order of the day, the RET narrative in a mining context had to face the reality of its global economic impact on mining.
“Right now, SA mining is not doing great. The latest mining production figures put it at 4.3% down from this time last year.”
Another hurdle for mining companies was representation, Molopyane said.
“The 20% black women on boards as per the new draft charter might prove difficult to fill for mining companies,” she said. “It is now a prerequisite.”
Mantashe set a 30-day deadline for those wishing to comment on the draft bill.