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