Warren Thompson
4 minute read
16 Jun 2017
9:56 am

Zwane’s Mining Charter just another pro-Zuma gambit

Warren Thompson

This populism on steroids cares little for the actual health of the industry or the country.

The fractures and fissures between the department of mineral resources and the mining industry, as represented by the Chamber of Mines, will become a grand canyon with the release of the new Mining Charter.

The chamber had long ago expressed its dissatisfaction with the process that was employed in designing the charter, and ahead of its release, declined to attend a meeting convened under the  Mining Industry Growth Development and Employment Task Team (MIGDETT) umbrella for fear of appearing to grant the charter legitimacy.

Whether the charter even classifies as legislation is disputed. In the past, it was a compact thrashed out and ultimately agreed to between industry and government that set the target for socioeconomic transformation. It had to have the buy-in from industry as it is they who must implement it. But as the chamber has so stridently argued, the same process employed in previous iterations of the charter was not followed in this version.

Minister Mosebenzi Zwane, in presenting the charter, said they did listen to all the people of South Africa (including the industry) and the time had come to act. He believes the certainty provided by the charter outweighs any disagreements over its content.

So to it then. On the first point of whether past empowerment would be recognised, the new charter says no. All holders of a mining licence will have 12 months in which to get black shareholding to a minimum 30% level. For those that are currently empowered at the 26% level – which is a large swathe of the industry – this will require another 4% increase.

The composition of the shareholding needs to change too. Eight percent of the total shareholding must be held by employees of the company, and 8% by the mine communities themselves. Another 14% must be held by black entrepreneurs. To possess a prospecting licence, an operator must be 50% plus one share black-owned.

Employment equity is equally prescriptive. Little thought or acknowledgment of the current demographic composition of the skills pool in the industry was made, never mind utilising scientific means to conduct a skills audit. Companies must just meet the following requirements:

But it becomes even more stringent with procurement:

For procurement, there will be a transitional period of three years to reach these targets. If foreign suppliers are used, 1% of their annual turnover must be paid to the newly created Mining Transformation and Development Agency (MTDA).

This ability to create and impose levies is a feature of the charter that will inevitably be challenged in court. It crosses into the domain of National Treasury, which is the department that has powers to impose taxes and levies. The MTDA will get a further 2% of the 5% mining companies pay towards the skills development levy.

Also, and out of the blue, comes the requirement for the holder of a mining right to pay 1% of its annual turnover to the 30% black person’s shareholding prior to, and before, any distributions are made to shareholders.

“This 1% payment is meant to ensure real economic value in the hands of black persons, but it is always subject to the solvency and liquidity test as provided for in the Companies Act,” Zwane said.

Of course, it is easy to see why we have a charter as ill-conceived and prescriptive as this, given the minister’s short tenure in the industry and highly compromised position as a result of his links to the Guptas. The current political environment also plays a role, and was described by Patrice Motsepe as being “one ripe for populism”.

The president and aligned factions have launched “radical economic transformation” to position themselves as the champion of the people and deflect attention away from the poor performance of government under the Zuma administration.

There is also the small matter of the ANC elective conference in December and the general elections around the corner in 2019.

Zwane is a Zuma man through and through. He cares little for the long-term health of the industry, because if he did, the idea of being globally competitive would have resulted in some very different policy choices in my opinion.

And resources are as global as they get – you don’t choose your selling price, the only thing you have control over are your costs.

You are also competing with every other producer the world over.

If the minister believes this charter is going to spur investment, economic growth and job creation, he is sadly mistaken.

All this document will do is lead to more stagnation and withdrawal by the large mining companies that have the skills and wallets to undertake big projects at a time we could use all the investment we can get.

Unsurprisingly, the Chamber of Mines will launch an urgent interdict to challenge the charter.

Brought to you by Moneyweb