Mining indaba not all about you, SA
• Uncertainty in domestic mining sector has led investors to seek other African opportunities
Delegates attending this week’s Investing in African Mining Indaba might be hit by a bout of depressing déjà vu, because little has changed in SA since the indaba in 2016, except a hardening of attitudes between the industry and Department of Mineral Resources.
But there will be plenty of deals to pursue outside of the formal sessions for mining opportunities in other countries.
At 2016’s indaba — a gathering of 6,000 delegates — Mineral Resources Minister Mosebenzi Zwane had been in his position for only four months, plucked from obscurity to replace Ngoako Ramatlhodi, who had barely become comfortable in the role.
Zwane said at 2016’s gathering that he had held “robust discussions” with participants in the South African mining industry and had come away from them with an “understanding of the pertinent issues facing the industry — issues that you, as stakeholders, consider to be essential to moving the mining industry into new and sustainable heights”.
He said regulatory certainty and political stability topped the agenda of those talks.
“I appreciate the importance of regulatory and policy certainty. I assure you that the democratic government as led by the ANC has prioritised the processing and finalisation of the Mineral and Petroleum Resources Development Amendment Bill as a matter of urgency in order to entrench the necessary certainty,” he boldly proclaimed.
One year on and he will have to deliver exactly the same message to indaba delegates. The amendments were not finalised and the regulatory uncertainty persists, compounded by deepening uncertainty about transformation following a review of the Mining Charter and the drafting of a third — and far more demanding — iteration of the document by the department in a process that the Chamber of Mines says neglected to recognise its many concerns.
A deep cynicism has set in among several industry players about how relevant or pertinent Zwane’s keynote speech will be at the indaba.
“You have to remember this is an African mining conference and just because it’s held in Cape Town doesn’t mean everyone hangs on every word the South African mines minister has to say. When last did anything of import come from those speeches over the years?” asks a foreign delegate from a large brokerage who declines to be named.
“The mines minister usually focuses so narrowly on South African issues when this is actually an African mining conference, with dozens of African ministers and mining companies operating on the continent, but that seems to be ignored in favour of fairly parochial matters that could and should be addressed elsewhere.”
Nedbank senior banker Paul Miller says his meeting diary is full for the four days of the indaba as more companies are attending than in 2016. “It’s never been a multistakeholder, solve-SA’s-problems kind of conference, which the unions and [nongovernmental organisations] have misunderstood.
“For most of the foreign audience coming in, this indaba is not about SA. They’ve written this country off and they’re not particularly interested in it. It’s about Africa.”
The foreign delegate says SA is regarded “as just too difficult and uncertain to do business in. There are other places in Africa which are simply easier and more welcoming.”
The deepening regulatory uncertainty reflects the disconnect between Zwane’s ideological wish list and the realities of SA’s mining industry.
“Springing surprises on mining companies — particularly surprises of the magnitude of those contained in the draft third charter — does nothing to enhance the relationship between the department and the industry,” says Allan Reid of Cliffe Dekker Hofmeyr.
“That the courts are having to play arbiter between the regulator and the mining industry is illustrative of the schism between miners and the department, which ought to be creating a framework conducive to mining development in SA.”
At the release of industry safety statistics in January, Zwane said the amendments should be finalised by the end of March and the charter by the end of June.
Chamber of Mines CEO Roger Baxter says: “We have seen progress in the finalisation of the [amendment bill]. And while we would have hoped that it would have been enacted by now, it does seem that there is an end in sight. Also on the positive side, you would have seen a great deal of support for Treasury by business in averting a ratings downgrade. In terms of the Mining Charter, discussions with the Department of Mineral Resources have continued this year, and we still hope that we will reach a mutually acceptable outcome.”
Hogan Lovells mining lawyer Warren Beech says it is worth taking another six months to consider the Mineral and Petroleum Resources Development Amendment Bill if there are opportunities for proper consultation and inputs.
Judgments in favour of AngloGold Ashanti and Aquila Resources in November against the department, in which officials came in for a tongue lashing from the judges about safety stoppages and the awarding of a mining right, are evidence of a hardening of attitudes.
ISSUING SUMMONSES
Sibanye Gold has subsequently taken its frustration with the department a step further, issuing summonses against Zwane, the acting chief inspector of mines and two senior inspectors for R26.8m in damages stemming from the prolonged closure of its Kroondal platinum mine in 2016.
“The chamber believes that stakeholders should not be afraid of litigation, as sometimes the legal system can and must be used to resolve disputes and bring about clarity,” Baxter says.
Mining Indaba delegates with exposure to SA will be listening closely to Zwane’s speech on Monday morning to judge the mood of his department.
“Look at his statements and here we are, a year later, in exactly the same position. Doesn’t that leave the minister with something of a credibility problem?” asks Peter Leon, a partner at law firm Herbert Smith Freehills.
Baxter says he hopes that Zwane’s speech will provide a strong signal of support to companies and investors from around the world.
“It is the Department of Mineral Resources’ role to ensure that the industry prospers within the appropriate regulatory framework and that all stakeholders benefit from its efforts.”
The department has failed to appoint a director-general, chief inspector of mines and other senior officials for more than a year, which is exacerbating difficulties in finalising the outstanding regulatory issues and developing relations with mining companies, he says.
On Tuesday, the Malan Scholes court case to declare the Mining Charter void will start in the High Court in Pretoria. Some lawyers believe the case stands a chance of success.
The chamber has suspended an application for a declaratory order on the ongoing benefits of past empowerment deals as credits towards their transformation credits. Zwane made it clear in 2016 that he wanted the matter settled out of court, but there has been little progress since on clarifying this issue.
For most delegates, the indaba has over recent years become a trade show. It is shunned by several mining company executives and investors, who prefer to conduct their meetings in hotels and restaurants rather than buy expensive tickets for the event.
THE MINES MINISTER USUALLY FOCUSES SO NARROWLY ON SOUTH AFRICAN ISSUES WHEN THIS IS AN AFRICAN MINING CONFERENCE
Alex Grose, the new MD for the indaba, has listened to their gripes and has revamped the structure and format of the 23rd conference to allow investors to attend free of charge.
He has also slashed the costs for small and mid-tier mining companies, while pushing hard the engagement between investors, African mining officials and mining management to make the formal sessions relevant again.
“A good and strong indaba is good for everyone. They can meet everyone they need to in one place rather than spending time in taxis driving around Cape Town to various meetings. It’s not the easiest thing in the world to do and we didn’t get it right in the past, but we are getting there.
“Confirmed attendance by the middle of last week was 2% up from the same period a year earlier, showing there has been a bottoming out as exceptionally tough global commodity markets have eased, Grose says.
“Historically, the cost of attendance has been a barrier. The reduction of these costs is a significant step forward” Baxter says.
THERE ARE OTHER PLACES IN AFRICA WHICH ARE SIMPLY EASIER AND MORE WELCOMING