DON’T BUILD DE­STROY,

The re­vised Min­ing Char­ter will make it harder for com­pa­nies to en­sure progress in trans­for­ma­tion, but they need to per­se­vere and do the right thing, write Bo­nang Mohale and Jabu Mabuza

CityPress - - Business -

The trans­for­ma­tion im­per­a­tive in no way ex­cuses state cap­ture. But for busi­ness to speak out and for its voice to be heard against the lat­ter, it must also demon­strate – not just in words, but deeds – its com­mit­ment to lead trans­for­ma­tion. Busi­ness must de­liver a strat­egy to fun­da­men­tally change the so­cioe­co­nomic en­vi­ron­ment that has ex­cluded in­di­vid­u­als from pre­vi­ously dis­ad­van­taged groups.

Do­ing this will achieve gen­uine nation-build­ing, and al­low black peo­ple to ex­pe­ri­ence the div­i­dends of in­clu­sive eco­nomic growth and at­tain true so­cial co­he­sion.

Busi­ness must lead, not be­cause it is good for busi­ness, but be­cause it is the right thing to do.

The pain of re­main­ing the same far out­weighs the pain of change; trans­for­ma­tion re­quires a fun­da­men­tal break with the past.

On June 15, gov­ern­ment pre­sented to the world its re­vised Min­ing Char­ter.

In­vestors re­acted and R50 bil­lion was in­stantly wiped off JSE min­ing shares. That amount does not rep­re­sent the full ex­tent of the dam­age.

The cost of Min­eral Re­sources Min­is­ter Mosebenzi Zwane’s ob­sti­nate and in­ex­pli­ca­ble ap­proach to a re­vi­sion of the Min­ing Char­ter will be in de­layed, or can­celled, cap­i­tal ex­pen­di­ture by min­ing com­pa­nies.

It will lead to more job losses, beyond the 70 000 al­ready lost over the past five years in the sec­tor (and yet more jobs from busi­nesses sup­ply­ing the min­ers).

It will also mean for­gone revenue and for­eign earn­ings for South Africa, wors­en­ing the struc­tural weak­nesses in the econ­omy, such as our cur­rent ac­count.

Com­bine this with the credit down­grade that South Africa suf­fered a few months ago, gov­ern­ment is en­trench­ing the dam­age it has done to the econ­omy over the past seven years and fur­ther im­ped­ing trans­for­ma­tion’s progress.

With debt more ex­pen­sive, com­pa­nies that may have had plans to in­vest in min­ing ac­tiv­i­ties are al­ready being forced to re­view them.

Some will have lost funding they were ne­go­ti­at­ing with banks and, thanks to the new Min­ing Char­ter, the risk and un­cer­tainty to their in­vest­ment have deep­ened.

Fitch has al­ready in­di­cated that the char­ter is ev­i­dence of a change in gov­ern­ment pol­icy since the Cabinet reshuf­fle. The char­ter there­fore will not only neg­a­tively af­fect real in­vest­ment in min­ing, it will poi­son gen­eral in­vestor sen­ti­ment to­wards South Africa.

This mat­ters be­cause, over the past 17 years, the Em­ploy­ment Eq­uity Commission, The Jack Ham­mer Re­port and the Black Management Fo­rum’s Trans­for­ma­tion Barom­e­ter have demon­strated beyond any shadow of doubt that trans­for­ma­tion is not only not pro­gress­ing, but is go­ing back­wards.

While busi­ness has not yet done enough to make trans­for­ma­tion part of its man­date for do­ing busi­ness, for gov­ern­ment pol­icy to sab­o­tage in­vest­ment and growth in this sce­nario is un­con­scionable.

Zwane says that in­vestors should be pleased with the char­ter be­cause it pro­vides “cer­tainty”.

While the min­is­ter is un­der no obli­ga­tion to con­sult in­vestors, or ac­cept their rec­om­men­da­tions, he does have an obli­ga­tion to be hon­est with his stake­hold­ers. This char­ter does not pro­vide cer­tainty for the in­vest­ment com­mu­nity. It does the op­po­site.

South Africans will pay the price, as they have done over the past five years. We need for­eign in­vest­ment to achieve rad­i­cal and mean­ing­ful trans­for­ma­tion.

South Africa does not have the sav­ings to achieve the rate of in­vest­ment that will help cre­ate jobs, eco­nomic in­clu­sion and take mil­lions out of poverty, which should be the core aim of any rad­i­cal trans­for­ma­tion agenda. But we also need the will of busi­ness. In­stead of chal­leng­ing in court the “once em­pow­ered, al­ways em­pow­ered” principle, busi­ness could reded­i­cate it­self to the gen­uine in­tent of char­ters and, in­stead of op­pos­ing the “manda­tory au­dit­ing firms ro­ta­tion”, it must em­brace the op­por­tu­nity to use black au­dit­ing firms whose part­ners write the same board ex­ams as the oth­ers.

An op­por­tu­nity ex­ists in the insurance in­dus­try to use black con­struc­tion com­pa­nies and con­trac­tors to re­build Knysna.

Black peo­ple must have a sig­nif­i­cant stake in this econ­omy wor­thy of their con­sid­ered pro­tec­tion of it.

Gov­ern­ment plays a dif­fer­ent role, and must foster the en­vi­ron­ment for busi­nesses to flour­ish so that, as they trans­form, they grow.

With­out the will to do this, they can­not give ef­fect to the depart­ment of trade and in­dus­try’s state­ment that “no econ­omy can grow by ex­clud­ing any part of its peo­ple, and an econ­omy that is not grow­ing can­not in­te­grate all of its cit­i­zens in a mean­ing­ful way”.

So, Zwane is not alone in talk­ing about im­prov­ing the con­di­tions for in­vest­ment and en­act­ing poli­cies that do the op­po­site.

Gov­ern­ment has con­sis­tently claimed to want to at­tract in­vest­ment, but has fol­lowed this up with de­ci­sions that very clearly serve the in­ter­ests of a few to the detri­ment of the many.

For in­stance, aside from any­thing else, the 12-month time­line for com­pa­nies to in­crease their BEE share­hold­ing seems set to cre­ate fire-sale BEE trans­ac­tions to cronies.

Even as­sum­ing there was noth­ing wrong with the char­ter’s new own­er­ship re­quire­ments, the pri­vate sec­tor would struggle to con­clude the trans­ac­tions in that time­frame.

More im­por­tantly, the depart­ment does not have the ca­pac­ity to ap­prove these po­ten­tial trans­ac­tions un­less cor­ners are cut and ques­tion­able deals are approved.

The dam­age to the econ­omy of this kind of be­hav­iour borders on crim­i­nal.

Over the past six years, South Africa has lost nearly 2 mil­lion jobs.

For the past two years, eco­nomic growth has failed to keep up with pop­u­la­tion growth. Poor peo­ple have been get­ting poorer. And now we have en­tered a re­ces­sion. Our econ­omy is shrink­ing thanks, this time, to do­mes­tic pol­icy.

Even if gov­ern­ment some­how finds the political will to do the right thing, it will take many years, most likely a decade, to re­verse the self­in­flicted eco­nomic harm of the past six years.

There will be no rad­i­cal eco­nomic trans­for­ma­tion, cer­tainly none that re­sults in a better life for all. Those peo­ple who lost their jobs and those peo­ple who are out­side the labour market will not ben­e­fit. At the cur­rent rate, gov­ern­ment taxes will be lower be­cause of the shrink­ing econ­omy.

Lower taxes mean no in­creases in so­cial grants; in fact, it prob­a­bly means a re­duc­tion in so­cial grants.

It will mean less money for ed­u­ca­tion, health­care and hous­ing.

It will re­verse the so­cioe­co­nomic gains of democ­racy, and it will in­crease in­equal­ity and en­trench poverty. Ten years ago, South Africa was do­ing well. There was still deep in­equal­ity, but poverty was di­min­ish­ing.

Be­tween 2002 and 2006, we cre­ated 3 mil­lion jobs and un­em­ploy­ment fell to 22%.

To­day, it is above 27%.

A new black mid­dle class was cre­ated – this was broad-based trans­for­ma­tion.

Peo­ple could buy houses, cars and send their chil­dren to good schools.

There were still many poor peo­ple, but we were mov­ing for­ward. To­day, we are mov­ing back­wards. How long we en­trench poverty and re­verse the gains of the first 15 years of democ­racy de­pends on how soon and how quickly we start do­ing the right things.

Chang­ing this di­rec­tion of travel re­quires lead­er­ship and for South Africans to pull to­gether.

First, though, it re­quires that we stop scor­ing de­lib­er­ate own goals ei­ther be­cause of ob­sti­nate in­com­pe­tence or other mo­tives played out in the re­lease of the re­vised Min­ing Char­ter.

We ab­so­lutely agree that we need a new vi­sion for min­ing and we urge the stake­hold­ers to sit at a table and fig­ure things out.

If gov­ern­ment wants min­ing to lead to rad­i­cal eco­nomic trans­for­ma­tion, let us be­gin by ad­dress­ing the im­ped­i­ments to in­vest­ment in min­ing be­cause, with­out in­vest­ment, it is just stuff in the ground.

The five pri­or­i­ties that Busi­ness Lead­er­ship SA be­lieves will en­able min­ing to grow and trans­form in­clude:

En­trench­ing good gov­er­nance and eth­i­cal lead­er­ship in gov­ern­ment, es­pe­cially re­gard­ing the ad­min­is­tra­tion of min­ing laws.

Per­haps it is time to adopt an in­de­pen­dent min­er­als commission to ad­min­is­ter min­ing rights away from the political in­ter­fer­ence of the depart­ment of min­eral re­sources (as per the Ghana ex­am­ple).

Build­ing a real, trust-based part­ner­ship be­tween gov­ern­ment, busi­ness and labour to drive a prop­erly for­mu­lated growth and trans­for­ma­tion strat­egy (in­clud­ing a re­al­is­tic Min­ing Char­ter that pro­motes in­vest­ment and trans­for­ma­tion).

One key met­ric to as­pire to is for South Africa to land in the first or sec­ond po­si­tion in Africa in the Fraser In­sti­tute in­vest­ment at­trac­tive­ness in­dex (we are cur­rently ranked a dis­mal 13th in Africa).

Pro­vid­ing pol­icy and reg­u­la­tory cer­tainty that drive in­vest­ment and trans­for­ma­tion.

Mak­ing a sig­nif­i­cant ef­fort to mod­ernise the in­dus­try to im­prove its com­pet­i­tive­ness with re­gard, es­pe­cially, to skills de­vel­op­ment and innovation.

En­sur­ing glob­ally com­pet­i­tive and re­li­able in­fra­struc­ture and ser­vices.

Si­mul­ta­ne­ously, we can be­gin an hon­est dis­cus­sion about what has gone wrong in re­spect of all of the so­cial part­ners and how we can fix it.

We need a new vi­sion for South African min­ing, not the rad­i­cal eco­nomic destruc­tion un­leashed by gov­ern­ment last week. Mohale is the CEO des­ig­nate of Busi­ness Lead­er­ship SA

and Mabuza is its chair­per­son

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