Remember, the horse goes in front

ineral resources minister Ngoako Ramatlhodi has shown a welcome urgency about returning the potentially ruinous Mineral & Petroleum Resources Development Amendment Bill to parliament for a major overhaul.

In particular, he wants the provisions of the bill, rushed through parliament last year, rid of the strictures it imposes on SA’s nascent oil and gas industries.

That is good. Oil and gas, besides being relatively new to the country, have got nothing to do with mining, other than that they involve extracting commodities out of the ground. Oil, for whatever it might one day be worth, remains the fantasy it has always been. There isn’t any yet to extract.

At last, a minister who recognises that ours is fundamentally a mining economy. Mining has given us universities and infrastructure, wealth and prospects.

“Time is of the essence,” Ramatlhodi said recently. “The world is not waiting for us. In this climate it is so bad that we really have to provide certainty quickly to the industry and to would-be investors in SA. Otherwise they won’t come here.” Well said. The oil and gas provisions of the bill, never signed by President Jacob Zuma, threaten to impose conditions on mining most companies would not be able to sustain — the state wants a free carry of 20% and the ability to raise its stake beyond 50% in any new gas or oil business. That would be impossible for an established miner.

The odd thing about the return of the legislation to parliament is that it has been welcomed by the oil and gas industry and criticised by the Chamber of Mines. Why? The chamber would have us believe that it had reached agreement on nine key sticking points that would cover mining. Primarily these would have concerned provisions to allow the minister to declare certain minerals strategic and thereby enable him to control their export.

In addition, the bill chases a policy fantasy that asserts that if only ores were available more cheaply, they would automatically trigger the growth in SA of manufacturing industries. Thus, the prices of ores would be lowered to “factory gate” levels so local manufacturers could buy them and beneficiate them.

But the chamber is being naive. Low commodity prices soon lead to mine closures. Coal is the current example. And while the chamber may have satisfied itself in talks with the minerals department that the regulations accompanying the unsigned bill’s provisions would be reasonable, it has reckoned without the ANC.

The party has more than once insisted that it controls government. It has just agreed, for instance, to prevent non-SA citizens from buying land here and anyone from owning a farm of more than 12 000 ha.

The ANC is under fierce political pressure from the Left and the Right. It is capricious and panicked. If it were to decide to further lower “factory gate” prices or to increase the number of minerals deemed strategic, then it has the power simply to order the minister to make it so.

The state wants “developmental” ore prices from the miners. It so badly wants “developmental” steel prices it is going to sink billions into doubling SA’s steel making capacity with a Chinese partner. But one can distort the market only so far. We live now with the havoc “developmental” electricity prices have caused. Soon we will have to have “developmental” port tariffs to handle the exports all this industrialisation will magically create.

It may be too much to hope that Ramatlhodi will excise the mine pricing provisions from a new bill, though he should. If, as he says, he wants to bring “certainty” back into mining in SA he needs to have a frank talk with his comrades in cabinet.

They have put the cart before the horse. We have no idea whether we are able to make new exports that others will buy — beyond socialist ministers trying to squeeze a market economy into their own precepts.

What miners want and what SA needs is a set of unambiguous rules (not regulations) on which our most critical industry can plan its long-term future.

The way to do this is to create an environment of freedom and trust, not curtailment and hostility.