South Africa
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The mining industry in South Africa is in danger of becoming paralyzed by litigation and adversarial relationships that hinder our country’s ability to benefit from our resources.

There is a need for a fresh approach to find pragmatic solutions and unlock the sector’s potential.

AUTHOR: Owen Murphy, Africa Desk Leader, BDO South Africa

Mining has long been a mainstay of the economy, but its relative size has reduced in recent years.

Mining and quarrying currently contribute less than 10% of the GDP, although a significant proportion of our foreign exchange earnings still come from the sector.

Perhaps because of its historical significance, and the recent commodity cycle boom, there are many contentious issues affecting the mining industry that remain unresolved.

The Mining Charter is perhaps chief among these.

The Mining Charter has been suspended pending a court challenge.

The Chamber Of Mines in South Africa, representing our country’s mineral producers, believes former Mineral Resources Minister, Mosebenzi Zwane, overstepped his authority in imposing new Mining Charter terms at the last minute in the face of objections from the industry, and with little consultation.

After two years of work on the new charter, with the case now in the courts and no engagement between the chamber and government, it is fair to say that the relationship between the minister and the industry broke down before he was removed from his position.

Aside from the Mining Charter, the industry in South Africa remains extremely heavily regulated.

There are onerous – and contentious – regulations governing exploration permits; mining authorizations; tax; royalties; labor relations; health and safety; community relations; environmental issues; as well as rehabilitation.

Many of these issues are currently mired in disputes and legal challenges that waste the time and resources of the mining sector as well as government.

While a document like the Mining Charter is meant to resolve disagreement and map a way forward, it has in fact polarized stakeholders in South Africa.

There is an urgent need for a fresh start on mining, with an eye to securing a new deal for the sector.

What we need is a political solution, not an adversarial legal one.

One approach might be for a new player, with enough cachet in government, business and labor to broker a deal.

One could identify the main points of disagreement, then establish an inter-ministerial task team with the power to call a moratorium on legal challenges and try to negotiate.

The obvious candidate to do this is President Cyril Ramaphosa.

He has the respect of business and knowledge of the industry from almost a decade leading the National Union of Mineworkers in South Africa.

Ramaphosa has also expressed sentiments along these lines.

In Business Day earlier this year, he wrote of the need for, “a new deal capable of unleashing the country’s competitive and entrepreneurial energies”.

During the World Economic Forum annual meeting in Davos, he said that, “The mining charter is going to be thoroughly discussed with key role players so that we find a solution that will unlock our mining... If the Mining Charter is holding us back, then we must deal with it and find commonality of purpose and views with potential investors.”

These encouraging words point to a renewed urge to find pragmatic solutions in the broader social interest within South Africa.

It would be great to see someone in government championing this approach, and it seems the President himself could be that person.

I would not be the first person to suggest this.

Such a political resolution is not without precedent.

The silicosis case brought by thousands of miners against gold mines in South Africa also seems to have been solved by negotiation.

That case was headed for the Constitutional Court.

Fortunately, the parties are close to reaching an out-of-court settlement and the case has been postponed until further notice.

Narrow political or populist agendas need to be put aside.

Pragmatism is required to overcome the legal stasis that we find ourselves in - and the silicosis cases shows this is possible.

A negotiated solution could be something that is realistic from business’s point of view, but with aspirational transformational goals for the sector.

The ultimate goal is a productive, profitable mining industry that can enhance inclusive growth for all stakeholders.