On uncertain ground
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 Zokwana’s normal f ire and brimstone had been replaced by an unease and back foot defiance with which the NUM f inds itself well acquainted.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”.