Prevent SA becoming a mining backwater

LESS than 30 years ago SA was universally held up as the world’s leading mining country. Mining was our country’s only truly world-class industry, and a compelling target for both individuals and institutions seeking excellent returns on investments. Nobody will deny that the industry’s leadership position was due in part to its harsh exploitation of black workers, most of whom were recruited from rural areas and from other countries in Southern Africa. However, there were several other more acceptable success factors, in particular locally developed technology that delivered a deep-level mining expertise unmatched by any of SA’s competitors.

Earlier this year, Canada’s authoritative Fraser Institute conducted a survey of global mining countries, and SA was rated number 64 out of a total of 96 nations.

This alarming indictment presents devastating evidence of how the utilisation of SA’s vast trove of mineral resources — undeniably the country’s most precious national asset — has failed to engender the levels of wealth and prosperity so urgently needed since the advent of democracy.

Investor confidence has been eroded, and to steal a phrase used recently by one of this newspaper’s other columnists, mining in SA is faced with the unhappy prospect of “becoming a backwater”.

Can the industry, and indeed the country and its government, allow this perception to become a reality? The answer, most emphatically, is: No.

In identifying the main reasons for the unfavourable condition into which the mining sector has descended, it is clear there are several factors over which neither the industry nor the government have any control.

These include the global recession which has detrimentally affected the economies of several countries that are destinations for SA’s mineral products. But what is inevitable is that the global headwinds will ultimately change direction, and when that happens the challenge that will confront the industry is whether or not it is properly positioned to take optimal advantage.

Making sure that it is adequately prepared falls into a very different category to dealing with the damaging effects of the global recession, for it presents a situation in which the industry and its most important stakeholder partners — the government and organised labour — must find and implement the right solutions.

Above all, it is essential that agreements reached and adopted as products of the tripartite deliberation process have as their primary purpose the restoration of investor confidence. In the absence of acceptable levels of investment — which are governed to a large extent by clear evidence of security of tenure, certainty and workplace stability — the industry will be fettered in its capacity to help build a prosperous future for SA and all of its citizens.

Throughout the world it is unanimously accepted that the legislative and regulatory regime stipulating and enforcing the rules and principles under which mining activity takes place should incentivise mining companies, and provide the certainty that they need to make the capital decisions required to turn available ore bodies to account. With slightly more than six months to go before SA celebrates 20 years of democracy, the Chamber of Mines and the Department of Mineral Resources are in the middle of talks in an attempt to resolve the impasse related to several amendments in the Mineral and Petroleum Resources Development Act, the cardinal legislative enactment controlling the business of mining in SA.

It is imperative there is an outcome that will not further diminish the expectations of local and global investment institutions. This will be a critical determinant in the shortand long-term viability that the industry is able to accomplish. To reiterate, this industry does not need any ambiguity and uncertainty regarding the regulatory environment. Continuing amendments to statutory structures are contributors to uncertainty, and this compels investors to search for more reliable regimes.

There is a similar risk that is applicable to workplace stability, and over the past year, notably in the immediate aftermath of the Marikana tragedy, there have been sporadic killings, unacceptable incidents of illegal work stoppages, intimidation, violence and disruption.

The influential emergence of the Association of Mineworkers and Construction Union (Amcu) has brought with it unprecedented levels of inter-union rivalry which, if it is not amicably resolved, could have grave consequences for a sector in which there can be no departure from the fundamental need to have an effective, efficient, stable, peaceful and productive workforce.

This is an intention of the Framework Agreement for a Sustainable Mining Industry entered into by government, industry and organised labour and presided over by Deputy President Kgalema Motlanthe. The fact that Amcu has refused to sign the agreement, and last month also declined to endorse the wage negotiation settlement for the goldmining industry, that was the outcome of a process between the Chamber of Mines and employee organisations in the sector, could aggravate negative perceptions.

A final point of focus that demands unadulterated clarity if investor sentiment is to be improved is lodged in SA’s transformation imperative.

Black economic empowerment is a legitimate and necessary component of SA’s transformation agenda. What is clear is that there are two elements of empowerment that must be transparently evident for the process to achieve global acceptance. Firstly, transactions must be clearly founded on principles that genuinely promote broad-based economic benefits and not on the rapid enrichment of a small number of influential individuals. Secondly, there is an unimpeachable need for empowerment deals to be concluded not only in accordance with the laws of SA but also with best practice international conventions.

The National Development Plan (NDP) identifies mining as one of the main sectors with capacity to contribute to the realisation of these imperatives. The Chamber of Mines and its members are committed to a process of stakeholder engagement that will enhance NDP expectations, overcome investor uncertainties and re-establish SA’s reputation as the world’s leading mining country.