LEK­GOTLA

Re­fer­ring to min­is­ter of min­eral re­sources Mosebenzi Zwane, whose re­cent ac­tions smack of po­lit­i­cal tin­ker­ing.

Finweek English Edition - - Indepth - By Jonathan Veeran and Rita Spald­ing ed­i­to­rial@fin­week.co.za Jonathan Veeran and Rita Spald­ing are part­ners at Web­ber Wentzel, spe­cial­is­ing in min­eral and min­ing law.

This pay­out may not be used to set­tle debt and would have to be paid be­fore div­i­dends and based on turnover, not prof­its. Thus, a min­ing com­pany could find it­self in a po­si­tion where it is obliged, un­der the Min­ing Char­ter, to pay out large sums of cash re­gard­less of whether or not such pay­ment is com­mer­cially vi­able.

Again the ob­jec­tive be­hind this move is ad­mirable and de­signed to get money flow­ing into the hands of BEE share­hold­ers now. Not to­mor­row, or in a decade’s time. This is in­deed in the spirit of trans­for­ma­tion, but bas­ing it on turnover is yet an­other ex­am­ple of a fail­ure to un­der­stand the fi­nan­cial in­ner work­ings of min­ing com­pa­nies.

Sim­i­larly, the pro­posal of a Mine De­vel­op­ment and Trans­for­ma­tion Agency, run un­der the aus­pices of gov­ern­ment but funded by the in­dus­try as part of a new levy, cre­ates more ques­tions than an­swers. With re­spect, this is a pa­tri­ar­chal and pa­tro­n­is­ing move, which as­sumes that com­mu­ni­ties can­not man­age their own af­fairs. Fur­ther­more, it would give a sin­gle agency a say on ev­ery sin­gle min­ing com­pany, which opens up com­pe­ti­tion law is­sues and con­fi­den­tial­ity is­sues, as well as con­cerns around how the agency would be staffed.

If you want to in­crease black own­er­ship in the min­ing in­dus­try, then lock­ing black share­hold­ers into th­ese trusts is not the way to go. This pre­vents the flow of as­sets and forces black share­hold­ers to sell to a closed pool. If the point of trans­for­ma­tion is to put money into the hands of black cit­i­zens, then this ap­proach of­fers no flex­i­bil­ity.

Again, this high­lights the ten­sions be­tween re­al­i­ties on the ground and pol­icy. In de­vel­op­ing pol­icy in SA we of­ten forego proper eco­nomic anal­y­sis. We don’t assess what mar­kets can with­stand and what in­vestors are look­ing for. We de­vise pol­icy in a vac­uum, di­vorced from the work be­ing car­ried out in other gov­ern­ment de­part­ments and in ig­no­rance of the real-world pres­sures on the econ­omy and busi­ness.

Right now the in­dus­try is poised on a knife’s edge. So much de­pends on what the DMR does in the weeks and months ahead. Right now is the time for level heads, not pos­tur­ing. It is vi­tal that all stake­hold­ers ap­pre­ci­ate that the coun­try faces a far more daunt­ing fu­ture with­out a healthy min­ing in­dus­try. Labour has to ap­pre­ci­ate the im­pact of very real cost con­straints. Min­ing com­pa­nies must ac­cept that there is a his­tor­i­cal cost of do­ing busi­ness in South Africa; yes, it is ex­pen­sive and BEE com­pli­ance is es­sen­tial. Gov­ern­ment, too, needs to play ball, not pol­i­tics. With apolo­gies to Win­ston Churchill, we should not let this cri­sis go to waste! ■

In de­vel­op­ing pol­icy in SA we of­ten forego proper eco­nomic anal­y­sis. We don’t assess what mar­kets can with­stand and what in­vestors are look­ing for.

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