Be friendlier please, SA told
SA needs to offer a more conducive business environment to investors or they will turn to opportunities elsewhere. But mining minister Mosebenzi Zwane has made them feel particularly unwelcome
Mineral resources minister Mosebenzi Zwane earned a general thumbs down for his vague and defensive remarks at the opening of this week’s Mining Indaba in Cape Town and its subsequent interactive session.
He signally avoided addressing any of the industry’s burning concerns: the failure to promulgate amendments to the Mineral & Petroleum Resources Development Act, a unilaterally drafted mining charter which will be challenged in court by the Chamber of Mines later this month, and his department’s inconsistent application of existing regulations.
The annual indaba in Cape Town attracts about 6,000 delegates representing mining companies and investors from all over the world. Many more do not register for the conference itself but hold meetings on the sidelines.
The Chamber of Mines, in its latest "Facts and Figures" report on the SA mining sector, released at the indaba, estimates that the industry’s contribution to SA’s GDP narrowed to 6.8% last year from 7% in 2016, though in real terms it grew 3.17% and contributed R312bn to the economy.
Though fixed investment by the industry has fallen between 2007 and 2017, it still contributed R93bn, or 18.2%, of private sector fixed investment last year, the chamber estimates. Exports of minerals contributed just over a quarter of SA’s total exports by value.
Anglo American deputy chairman Norman Mbazima says gross fixed investment by the industry has declined by 5% over the past three years and net investment has halved since 2008. To turn the trends around, SA has to attract domestic and foreign capital back to the industry — but capital requires a competitive return.
Mbazima says SA has "anything but" a conducive regulatory environment.
He says he does not expect that new ANC president Cyril Ramaphosa will deal directly with the industry, but that Ramaphosa will put processes in place to tackle the important issues.
Zwane acknowledged the lack of investment in mining but attributed it to "balance sheet conservatism" after a prolonged period of low commodity prices. In his speech, he dwelt at length on government’s limited initiatives to encourage investment, such as its R20m investment in geological mapping, special economic zones to encourage local beneficiation of minerals and a policy of encouraging junior miners.
Zwane also reiterated the department’s "open door" policy, though this contradicts the experience of South32 and De Beers Consolidated Mines (DBCM). Last year South32 took court action to compel the department to amend the Klipspruit mining rights to allow for a US$265m investment in expanding the colliery. DBCM threatened to go to court to compel the department to process its application for prospecting rights in the Northern Cape, after extended delays, but has since had some rights granted.
Challenged on this point, Zwane cited the fact that Lonmin was granted a speedy section 11 approval to conclude its transaction with Sibanye-Stillwater and that Anglo American Platinum’s sale of its Union mine also received prompt attention. In the two years he has been minister, the department has granted 30 mining rights. "It speaks for itself," he said.
Deloitte Africa mining lead Andrew Lane says that despite the minister’s insistence that he has "an open door" policy, mining executives generally felt their concerns were not being addressed. While the industry also supported the minister’s intention to diversify ownership and promote junior mining, "the industry depends on the large mining companies for their capital and skills, and the investment environment should recognise this reality, otherwise they will seek friendlier recipients".
Herbert Smith Freehills partner Peter Leon says the minister’s claim of creating an enabling environment for mining is surprising. "Government urgently needs to create a proper enabling environment for mining in SA and will succeed in doing so only if it formulates a comprehensive strategy to lift the mining industry out of its current crisis and set it on a new path based on mutual understanding and benefit among all stakeholders," Leon says.
Zwane insisted he was not willing to compromise on safety and transformation of ownership of the industry, but Bridgette Radebe, president of the SA Mining Development Association — the so-called junior mining chamber — accused him of being too lenient in implementing the charter.
"We spoke about 51% and you spoke about 30% in the charter that is being suspended temporarily," she said. "We are talking about the charter 2014 deadlines that have not been met. Today we have not seen any companies that are being taken to task for what they have done. Now what have they done within our democracy? What are we going to tell the people of SA in 2019 if our government is so nice to the people who are not complying?"