The extent of Government’s ambition to take a more handson approach to the mining sector will be given a full public airing in the Department of Mineral Resources’ (DMR’s) current f inancial year.
In his maiden budget speech, Minister of Mineral Resources Ngoako Ramatlhodi said that the DMR intended to introduce a State Owned Mining Company bill or SOMCO, another acronym the mining sector may start to dread along with SIMS (State Intervention in Mining) and the MPRD Amendment bill.
All three pieces of legislation propose that Government take a direct hand in either setting prices, controlling export trade f lows or, in the case of the SOMCO bill, becoming an active participant in the mining sector as well as regulating it.
The problem is, no-one yet knows what might be in the bill. “I’ve not seen sight of the bill, but it’s certain that Government wants to get involved in mining directly,” said Jonathan Veeran, an attorney at Webber Wentzel in Johannesburg.
“All of the coal rights currently in AEMFC will be transferred into SOMCO. I don’t know what the bill will look like but I don’t think the company will be much different in terms of the structure of a normal State-owned mining company in South Africa,” said Veeran.
AEMFC is an acronym for the Afri- can Exploration & Mining Fi na nce Company, the name of the current Stateowned mining company which is currently housed in the Central Energy Fund (CEF).
The AEMFC is essentially a coal company with a single operating mine, Vlakfontein in Mpumalanga, which supplied about 1.6m tons of coal to Eskom, according to the CEF in its 2012/13 annual report.
It has plans to build two new coal mines – one is actually an expansion of Vlakfontein and the other is a commercially questionable coal-to-liquids type coal deposit once owned by BHP Billiton Energy Coal South Africa.
The question is what AEMFC will become once the SOMCO legislation is passed?
Will it be an operating company, or an operating and investment company which raises the prospect that it could house the mining investments in the Industrial Development Corporation as proposed by SIMS. And might Alexkor, the diamond firm, be wrapped up into SOMCO as well? Government has already suggested Alexkor move into coal production.
Ramatlhodi had t his to say of SOMCO: “One of the critical instruments of the democratic development state is greater participation by the State in the mainstream economy. The establ ishment of the state mining company represents a positive step in the right direction.” Roger Baxter, COO and senior economist at the Chamber of Mines of South Africa, said that the SOMCO would be squarely positioned to provide coal to Eskom, although he had not seen the proposed legislation.
“It will be focused on the coal space, but it also needs to compete on equal footing in South Africa, especially in the area of environmental control. It’s not producing much coal at the moment, but I think it will be an operating company rather than investment entity,” he said.
There’s also the question of whether SOMCO will envelop another mining company in which Government has a stake, the Pan African Mining Development Company (PAMDC), an entity the late Brett Kebble wanted to list, but which also includes the interests of the governments of Zambia and Zimbabwe.
Said DA Shadow Minister of Mineral Resources James Lorimer: “It looks as if several different departments are going into business on their own. I think this is a confusion and I cannot see it ending well.”
Minister of Mineral Resources Ngoako Ramatlhodi