On un­cer­tain ground

Finweek English Edition - - COMPANIES & INVESTMENTS - David Mckay

The re­solve of min­ing in­dus­try in­vestors will have been sorely tested last week, at least those at­tend­ing the three days of pre­sen­ta­tions at the sec­ond an­nual Min­ing Lek­gotla – an event backed by the Cham­ber of Mines and Govern­ment.

In­tended as a place to f ind com­mon ground, the Lek­gotla re­vealed a deep chasm in in­ter­ests. Unions railed against em­ploy­ers, em­ploy­ers vented their frus­tra­tion with Govern­ment over-reg­u­la­tion, while in­ter­na­tional com­men­ta­tors urged the coun­try’s sec­tor to abide by a set of rules ev­ery­one could un­der­stand.

At one point pre­sen­ters con­sisted en­tirely of for­eign­ers af­ter the South Africans failed to pitch up. Mines min­is­ter, Su­san Sha­bangu, had de­cided to at­tend a con­fer­ence in Perth, but her pre-recorded video couldn’t be de­liv­ered. Sen­zeni Zok­wana, pres­i­dent of the National Union of Minework­ers (NUM), was late.

So the podium was oc­cu­pied by an Aus­tralian, al­beit the for­mer SA res­i­dent and CEO of An­glo Amer­i­can, Mark Cu­ti­fani, and a Cana­dian from the Fraser In­sti­tute.

Zok­wana’s pre­sen­ta­tion was worth wait­ing for, how­ever. To stunned si­lence, he imag­ined him­self an off­shore in­vestor: “If I was sit­ting in Canada with bil­lions of rands, and ask­ing where I should put money, I don’t think I would say South Africa.” His rhetor­i­cal de­vice may have back­fired, but he was at­tempt­ing to pro­vide an in­sight into the depth of dis­sat­is­fac­tion the union felt with em­ploy­ers, now about to em­bark on a gold-sec­tor strike over wages.

The real dis­sat­is­fac­tion, how­ever, was in­ter­nal, one sus­pected. Zok­wana’s nor­mal f ire and brim­stone had been re­placed by an un­ease and back foot de­fi­ance with which the NUM f inds it­self well ac­quainted. “Some­times, when peo­ple ask me how I feel, I f ind it dif­fi­cult to keep a straight face, es­pe­cially when our mem­bers are be­ing at­tacked. I don’t know where this in­dus­try is go­ing to as there are peo­ple who are break­ing the rules,” Zok­wana said.

Fred McMa­hon is some­one who “sits in Canada”. As the di­rec­tor of glob­al­i­sa­tion stud­ies for the Fraser In­sti­tute, the Cana­dian think-tank that rates min­ing ju­ris­dic­tions for pol­icy cer­tainty, he only had warn­ings for SA.

“Even the most rad­i­cal po­lit­i­cally, and the most gung-ho of min­ing should agree on this: there has to be reg­u­la­tory cer­tainty so peo­ple know what the reg­u­la­tions are. It re­duces pol­i­tick­ing and in­creases in­vest­ment,” he said, adding that in the in­sti­tute’s lat­est risk rank­ing, SA’s min­ing sec­tor fares only slightly bet­ter than those of Guinea and Zimbabwe.

Some of the con­cern is cap­tured in pro­posed amend­ments to the Min­er­als and Pe­tro­leum Re­sources De­vel­op­ment Act (MPRDA), which are ex­pected to hand more dis­cre­tion to the mines min­is­ter on im­por­tant sub­jects such as ben­e­fi­ci­a­tion. The State would there­fore be able to de­clare cer­tain min­er­als strate­gic, giv­ing it in­flu­ence over trade f lows.

There’s also un­cer­tainly over the min­ing char­ter. Writ­ten in 2004, it sets down tar­gets for em­pow­er­ment in min­ing, most of which will have been ful­filled by the 2014 due date, said Sipho Nkosi, CEO of Exxaro Re­sources. “As of to­day, all the big deals are done in terms of own­er­ship. Can we ar­gue that the min­ing char­ter is rel­e­vant go­ing for­ward?” Nkosi asked.

An over­haul of the ta x regime, be­lated com­ments about the mi­grant labour sys­tem, and fears about the sus­tain­abil­ity of the deputy pres­i­dent Kgalema Mot- lan­the’s frame­work agree­ment, which set down a type of deco­rum be­tween l abour, Govern­ment and in­dus­try were all thrown into ques­tion. The min­ing sec­tor was “a disas­ter in­dus­try”, said Mike Fa­fuli of NUM, who also con­sults to the pres­i­dency. It takes ac­tion re­ac­tively, only when there’s catas­tro­phe, he said.

Elec­tronic se­cu­rity posts were erected, body­guards ar­rived, snif­fer dogs swept through the au­di­to­rium, and sud­denly it was Mot­lanthe’s turn to speak: “Sadly, the min­ing sec­tor is a pris­oner of its apartheid past,” he said. “No amount of eq­uity em­pow­er­ment plans has been able to over­come this past,” he added, sug­gest­ing that the min­ing char­ter and the MPRDA had, in some ways, failed to trans­form the sec­tor.

And mar­kets had now turned against the sec­tor, mak­ing con­di­tions for rap­proche­ment dif­fi­cult. “Govern­ment’s pri­mary re­spon­si­bil­ity is to cre­ate an en­abling en­vi­ron­ment. So Govern­ment has no de­sire to mi­cro­man­age min­ing com­pa­nies,” said Mot­lanthe.

Tell that to Cu­ti­fani. In a speech at a gala din­ner, aimed at wrap­ping up the event, the An­glo boss was at his most forth­right. “We must re­move un­cer­tainty and that means the state must stop threat­en­ing own­er­ship,” Cu­ti­fani said in a clear ri­poste to a threat last year in which Sha­bangu threat­ened to re­peal An­glo’s min­ing per­mits fol­low­ing its pro­posed re­struc­tur­ing of An­glo Amer­i­can Plat­inum.

“Once you stop threat­en­ing own­er­ship, you will set a start­ing foun­da­tion for new in­vest­ment,” he said. “Stop chang­ing the rules,” he added. “This type of thing is ter­mi­nal for any­one con­sid­er­ing in­vest­ing in our min­ing in­dus­try”.

Mark Cu­ti­fani

Kgalema Mot­lanthe

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.