Charting new depths

It’s hard not to wonder why Finance Minister Malusi Gigaba held his delayed media briefing on Thursday at all. He is, of course, a minister who is never backward about putting himself forward, so to speak. And the Cabinet had mandated him to brief the nation on the way forward for the economy, following the ratings downgrades and news of the recession. So he was, presumably, obliged to deliver.

But by Thursday, the Gigaba story was less about the economy and more about whether and how thoroughly the minister had been captured by the Guptas, whose naturalisation application he overrode his officials to approve while he was minister of home affairs.

And by the time he stood up to face the media on Thursday, his colleague Mineral Resources Minister Mosebenzi Zwane had just published the new Mining Charter. That made anything Gigaba said about the government’s commitment to restoring investor confidence look either naïve or cynical.

The market reaction to the charter has been savage. And as SA learned to its cost at the time of Marikana, what’s bad for mining is generally bad for the economy, even though the mining sector’s share has dwindled over the years.

When a draft of the first Mining Charter was leaked in July 2002, R57bn was wiped off the value of mining shares. But that charter was a complete surprise. This time, R50.69bn was wiped off the value of mining shares in the hours following its release on Thursday. Some of the new provisions had been expected, but several were not. And while further transformation in the industry is clearly an imperative, this is not the way to go about getting the ailing industry to transform in a way that will still enable it to attract the investment it needs to survive and grow.

Zwane claims there has been extensive consultation on this charter since a draft was released in April 2016. The Chamber of Mines, which represents 90% of the industry — including a long list of black-owned emerging miners — says it has never seen many of the provisions and its input on the ones it had seen has not been taken into account. It is going to court to stop the charter being implemented and is taking the whole thing on review. Chamber president Mxolisi Mgojo emphasised that it had no option. The charter, in this form, could destroy the industry, which has already suffered extensive job losses and a sharp decline in investment.

Investors will be spooked by the ultra-prescriptive ownership provisions. They will be spooked by the 1% off the top that mining companies will have to give to their empowerment shareholders regardless of profitability. And there are other clauses that could prompt as much concern.

It’s not clear who inspired some of the new provisions and hard not to wonder if some are not a licence for plunder by Gupta-linked Zwane and his team, via the new Mining Transformation and Development Agency, which will report to the minister. The agency will take charge of community trusts that are cut into ownership deals and will take a 1% cut of the turnover of foreign suppliers to domestic miners, as well as a 2 percentage point cut of mining companies’ skills levies. The effect can only be to erode the industry further. Mining was one of only two economic sectors that grew in the first quarter. That is unlikely to last. And Gigaba could be revising down his growth forecasts steeply. The recession could continue. Based on Gigaba’s Thursday media briefing, the government doesn’t really have any fresh plans to do much about it. The list of “interventions to stimulate inclusive growth” that the minister mentioned was old and tired and there is little or no action, just a string of meetings.

The government, the minister and the ANC can keep promising policy certainty and a commitment to advancing inclusive growth. But how long will anyone believe them?

INVESTORS WILL BE SPOOKED BY THE ULTRA-PRESCRIPTIVE OWNERSHIP PROVISIONS