Rising violent crime plaguing gold industry deters investors
Mining has historically been at the heart of the economy, and will continue to play a critical role. Though considered by some as a “sunset industry”, mining still contributes about 7% to GDP and makes an indirect contribution of 17%.
The debate about whether mining in SA is a sunset or sunrise industry continues to be significant. The key issues that have taken centre stage have been the remaining ore reserves and the costs of mining those, labour costs and all matters associated with labour legislation, and regulatory certainty or lack thereof. The area of transformation, including broad-based BEE (BBBEE), has also been an uncomfortable issue.
SA has some of the world’s biggest and highest-quality reserves of platinum, gold, iron ore and coal, but their contribution to GDP and employment has been falling. Gold accounts for a third of exports and the mining sector accounts for almost a third of the JSE’s market capitalisation.
Production output from SA’s gold mines has been declining over the past seven years, by 14% year on year, Business Day reported on January 30 2019. Mining companies are positioning themselves for the future by realigning their portfolio of assets with their long-term strategies. This has resulted in disposals of noncore assets and an increase in acquisitions.
The Minerals Council SA has provided useful data, including how important it is to support electricity generation through coal production, rail and port activities that depend on it, and its role as a critical earner of foreign currency.
The big debate should, however, be about the rising, well-organised and extremely violent crime that plagues the gold industry in particular.
The situation is becoming so dire that unless this issue is made the priority SA runs the risk of being unable to persuade anyone to invest in the sector.
A paradigm shift is needed if SA is to successfully tackle the growing infiltration of industrial gold mines by organised syndicates, and zama-zamas in particular
In 2018, Sunday Times reported that SA’s gold is looted on an “industrial scale”, with research indicating the country is losing about R14.4bn annually through illegal gold mining. The illicit trade, which is led by international criminal syndicates and an estimated 30,000 illegal miners known as “zama-zamas”, is reportedly driven by rising commodity prices, the limited capacity of the SA Diamond and Precious Metals Regulator’s inspectorate, and the closure of the SA Revenue Service’s illicit economy investigative unit.
In December 2019 national police commissioner Khehla Sithole announced the establishment of a new unit to curb illegal mining. At the time, he said the new unit would work with the department of mineral resources & energy and use high-risk forces, which include the task force, the national intervention unit and tactical response teams, in mining hotspot areas.
A paradigm shift is needed if SA is to successfully tackle the growing infiltration of industrial gold mines by organised syndicates, and zama-zamas in particular. They represent the face of a new phenomenon that is confounding SA’s law enforcement, mining officials and the industry at large.
Interpol and the Global Initiative against Transnational Organised Crime say illegal mining in SA is one of the most violent in Africa. Most of the illicit gold is exported to Dubai, while more enters international markets via neighbouring countries.
It is alarming that the violence in affected areas is similar to that in illegal artisanal mine sites in active war zones such as the Democratic Republic of the Congo.
Zama-zamas are emblematic of a changing SA landscape. They stem from the unanswered socioeconomic inequalities faced by the country. The Mineral and Petroleum Resources Development Act of 2002 acknowledges artisanal miners, but it is far removed from the reality that gave birth to the emergence of zama-zamas operating illegally.
The most plausible solution to curb the growing scourge of illicit gold and illegal mining is for the SA gold industry to apply a risk assessment to its supply chain. SA would greatly benefit from learning from and emulating its counterparts in the Brics community.
With government support, the industry should also design and implement due diligence measures aligned to those of conflict-ridden areas. India and China are already doing so, offering SA an opportunity to align its mineral regime with global best practice.
The Mineral and Petroleum Resources Development Act should be urgently amended, and law enforcement should be given more authority to deal decisively with the criminality in this industry. Amending the act would give law enforcement such as the new unit as proposed by Sithole greater latitude and oversight to spot trends, monitor and proactively tackle syndicates.
The syndicates are not small-time chancers. The precision with which they operate, and the sophistication of the weapons and ammunition they use, point to well-organised criminals who do not care how many lives are lost as long as they lay their hands on the gold.
While the phenomenon of illegal mining and zama-zamas is not unique to the mining sector in SA, the violent and highly organised attacks on the gold mining industry, the lacklustre response from the government to these violent organised crimes and the lack of proper regulation and monitoring (the situation could almost be described as a free-for-all) will increasingly drive investors away from the sector.
The future of this sector, once a beacon of the SA economy, hinges on the willingness of all stakeholders to eradicate criminal elements and therefore attract future long-term investment.
• Ntsaluba is a founding member and chair of NMT Capital.