Roger Bax­ter’s miner chal­lenge

Roger Bax­ter’s ap­point­ment as CEO of the Cham­ber of Mines might have sur­prised some, but the for­mer COO has worked with the Cham­ber for much of his ca­reer. Gi­uli­etta Talevi caught up with him

Financial Mail - Investors Monthly - - Front Page - Roger Bax­ter CEO-des­ig­nate: Cham­ber of Mines

Q Is mak­ing the South African min­ing sec­tor at­trac­tive to in­vest­ment one of your tasks as the Cham­ber’s new CEO?

A One of our pri­mary func­tions is to cre­ate as con­ducive a pol­icy, op­er­at­ing and labour en­vi­ron­ment as pos­si­ble.

What’s re­ally im­por­tant at the mo­ment is agree­ment from gov­ern­ment’s side that [they] will work to a “min­ing lab”. In other words, they are go­ing to ap­ply Project Phak­isa to the min­ing sec­tor. It looks at all the con­straints af­fect­ing the sec­tor’s abil­ity to grow, to at­tract in­vest­ment, to achieve its po­ten­tial, and those plans are de­vel­oped in this lab process.

Q What would you say are the ma­jor con­straints? Isn’t gov­ern­ment one of them?

A The ex­oge­nous things we can’t change. [Do­mes­ti­cally] we’ve got reg­u­la­tory is­sues that need to be re­solved, for ex­am­ple the Min­eral & Petroleum Re­sources Devel­op­ment Amend­ment Bill that has been sent back to par­lia­ment. We will try to make sure that what­ever comes out of the process is con­ducive to at­tract­ing and grow­ing in­vest­ment in SA.

The same on the min­ing char­ter declara­tory or­der process with the depart­ment of min­eral re­sources (DMR), which is to try to de­fine greater cer­tainty. And then we’ve got some very spe­cific is­sues around elec­tric­ity, rail and ex­port fa­cil­ity ca­pac­ity.

This min­ing lab process is im­por­tant [in] cre­at­ing that gel that holds the col­lec­tive to­gether. If you don’t have elec­tric­ity you can’t grow. If you have reg­u­la­tory chal­lenges or pol­icy un­cer­tainty it cre­ates fur­ther chal­lenges. If you have labour mar­ket in­sta­bil­ity, you have even fur­ther chal­lenges.

Q Do you think the min­ing com­pa­nies have been un­fairly leaned on to cut out­put, sim­ply be­cause they had the sys­tems in place to deal with the power short­age since 2008?

A That’s right. The large industrial cus­tomers, of which min­ing and the re­fin­ing and smelt­ing in­dus­tries are a sub­stan­tial part, have been unof­fi­cially load-shed since 2007, and that’s been con­tin­ual all the way through to 2015.

The big industrial users have car­ried the bur­den and they don’t get much credit for do­ing so. But now the pain is be­ing shared in the rest of the econ­omy. Point­ing is not go­ing to help us. How do we as team SA help get Eskom back on track? That means cre­at­ing the room for them to get their main­te­nance right.

But then also to have the con­ver­sa­tion about bring­ing greater pri­vate sec­tor gen­er­a­tion on stream so we have a more di­ver­si­fied, less risky bas­ket of power sup­ply into the net­work. With­out elec­tric­ity we can’t grow.

Q SA failed to take full ad­van­tage of the last boom in min­ing. How might the Cham­ber make sure that doesn’t hap­pen again? And do you think that su­per­cy­cle will be re­peated?

A My per­spec­tive is that we do go through com­mod­ity cy­cles and we do go through pe­ri­ods of de­pressed prices, so we mustn’t be fix­ated on the short term. Yes, there are chal­lenges in terms of pric­ing but in due course cy­cles will turn, economies change and so on. As­sum­ing the next com­mod­ity cy­cle starts its uptick in the next three to five years, what are the things we need to at­tract the nec­es­sary in­vest­ment to grow our busi­nesses, to ex­port our prod­uct to the global mar­ket­place, to en­sure there’s suf­fi­cient do­mes­tic sup­ply?

We’ve made some progress around the reg­u­la­tory is­sues but we have a lot more work to do to have the pol­icy and reg­u­la­tory cer­tainty which en­ables us to take things for­ward. For ex­am­ple, on the en­vi­ron­men­tal per­mit­ting side, gov­ern­ment has put in place a one per­mit­ting sys­tem, ad­min­is­tered by the DMR. That’s a demon­stra­tion of the progress … to make sure we have smart tape, not red tape.

Q What about min­ing rights? It’s an area that seems to need work — deals have been scup­pered be­cause of the DMR.

A Part of the amend­ment bill that went through par­lia­ment last year was try­ing to rec­tify some of those chal­lenges. We’re go­ing to have to live with a lit­tle bit more un­cer­tainty un­til that leg­is­la­tion is tabled and prop­erly en­acted.

Q Is it go­ing to be a prob­lem for you — es­pe­cially in your ne­go­ti­a­tions with gov­ern­ment and unions — that the face of min­ing is white? Does it even oc­cur to you?

A I’ve al­ways had the at­ti­tude of look­ing at my­self through the prism of be­ing a South African, as op­posed to be­ing a racially clas­si­fied South African.

I was one of the orig­i­nal ne­go­tia­tors on the min­ing char­ter back in 2002. I’ve been in­tri­cately in­volved in the process of trans­for­ma­tion. [It’s] not a his­tor­i­cally dis­ad­van­taged South African thing only: it’s about what all South Africans can do to trans­form our econ­omy. I’m mak­ing a con­tri­bu­tion in try­ing to progress the agenda for get­ting min­ing to re­alise its po­ten­tial and I hope that will come through in my deal­ings with gov­ern­ment and unions. I think it’s a priv­i­lege to be asked to lead the or­gan­i­sa­tion at such a chal­leng­ing time, but I’m go­ing to be do­ing it as a South African: no more, no less.

Q One of the crit­i­cisms of the min­ing roy­al­ties regime is that the roy­al­ties don’t get fed into devel­op­ment in the ar­eas from which they come — they go to the na­tional fis­cus. Is that some­thing you would want to change?

A The min­er­als in the ground are un­der the cus­to­di­an­ship of the sovereign state of SA. The sovereign state rep­re­sents all peo­ple in the coun­try, so if you take a rev­enue stream from min­ing and you iso­late it just for the min­ing com­mu­nity, then what about the rest of so­ci­ety that should de­rive ben­e­fit? That’s been na­tional trea­sury’s ar­gu­ment, but a view from in­dus­try [is] that a por­tion of the roy­al­ties should be ded­i­cated to the re­gions they come from, in con­junc­tion with what the min­ing com­pa­nies are try­ing to do to en­hance com­mu­nity devel­op­ment. That’s an ar­gu­ment which trea­sury has re­sisted, but I still think it’s valid. But gov­ern­ment is not averse, with in­dus­try, to fund­ing big tier projects — I guess that’s some­thing to fo­cus on in due course. Min­ing com­pa­nies are do­ing a lot with so­cial and labour plans and gov­ern­ment could have played a big­ger role in com­ple­ment­ing those.

Q Wage talks are com­ing up in gold and coal. Does Gold Fields’ South Deep wage deal — with in­creases of up to 21% — throw a span­ner in the works?

A The Cham­ber does vol­un­tary cen­tralised ne­go­ti­a­tions on be­half of the gold and coal sec­tors, so none of the par­ties are com­pelled to be in­volved. We don’t nor­mally com­ment on the in­di­vid­ual com­pany but [Gold Fields] is a more mech­a­nised, skills-in­ten­sive op­er­a­tion, which is vastly dif­fer­ent from a num­ber of the gold min­ing com­pa­nies. The com­pa­nies will work to­gether un­der the Cham­ber’s um­brella to try to achieve a prag­matic and eco­nom­i­cally fea­si­ble wage deal.

Q Would you agree with the view that the Cham­ber doesn’t rep­re­sent ju­nior and ex­plo­ration min­ers, and isn’t do­ing enough to ad­vance their needs?

A We’ve ex­panded our membership base to in­clude a lot of emerg­ing com­pa­nies. I think the Cham­ber rep­re­sents more small-scale min­ers than any other as­so­ci­a­tion pur­port­ing to rep­re­sent smaller play­ers.

Over the last cou­ple of years we’ve tried to en­gage gov­ern­ment on things like flow-through shares, to en­cour­age ven­ture cap­i­tal to be spent on ex­plo­ration. They’re not keen, but we’ve been do­ing a lot in­ter­nally. We have our own men­tor­ship pro­gramme where we have re­tired se­nior ex­ec­u­tives giv­ing back their ex­pe­ri­ence and skills to smaller play­ers. We en­cour­age gov­ern­ment to adopt the right poli­cies and we’ve es­tab­lished an emerg­ing min­ers desk.


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