Chamber of Mines
Chamber of Mines of South Africa Chief Executive Officer, Roger Baxter
The South African mining industry is in crisis, according to the CEO of the Chamber of Mines of South Africa - Roger Baxter.

Addressing the Paydirt 2017 Africa Downunder conference in Perth Baxter, representing the Chamber of Mines said business confidence in South Africa was at its lowest levels in more than three decades.

“The Chamber of Mines is adamant South African mining sector is renowned for its long cold winters and short hot summers,” said Baxter.

“There are a number of critical factors impacting South Africa’s investment attractiveness…including the fact the mining industry has lost confidence in the Department of Mineral Resources (DMR) Minister,” he said.

[quote]“Key governance and policy challenges in South Africa have eroded business and investor confidence, undermining investment,” he said.

“Policy and regulatory uncertainty have ‘frozen’ new investment in the sector.

“Real mining GDP in 2016 (R226 billion) is smaller than it was in 1994 (R242 billion).

“Real mining fixed investment has shrunk over the past two years.

“The industry made an accumulated loss of over R30 billion in 2015.

“In 2017, 65% of RSA platinum mining is loss-making.

“The DMR has provided no assistance to help the industry through the crisis.

“The economic opportunity cost of the failure to get the policy, legislative, administrative and operating environment right to promote investment, growth, transformation and job creation in South African mining is material.”

Baxter said that since 2013, South Africa’s policy perception index (report card of investment attractiveness of policies) has deteriorated to 84th out of 104 jurisdictions

He added that despite the country’s potential, policy and regulatory uncertainty were big deterrents to investment.

 He said critical factors affecting South Africa’s investment attractiveness, included:

  • Uncertainty regarding the ownership element of the mining charter
  • Uncertainty created by the DMR’s unilaterally developed and imposed reviewed Mining Charter (RMC17)
  • Uncertainty regarding the finalisation of the MPRDA Amendment Bill which is incomplete after being published nearly 5-years ago (e.g. remaining uncertainty on s11 approvals)
  • Uncertainty regarding the Minister’s proposed s49 moratorium on new right and s11 applications
  • Uncertainty created by double financial provision for environmental rehabilitation

“Significant corruption allegations have not been cleared and the proposed judicial commission of enquiry into state capture has not been established,” he said.

“The industry does not believe that the approaches adopted by the DMR are serving the national interest of the country. The negative impacts of the unilaterally imposed RMC17, the proposed s49 rights moratorium, the non-resolution of the charter ownership issues, imposition of inappropriate s54 safety stoppages, etc, are a major crisis for the sector.

“In essence, there is a freeze on investment (it is extremely difficult to get an investment committee to approve any new Greenfields project in South Africa).

“The industry is of the firm view that the DMR’s RMC17 is designed to benefit a select few at the expense of the whole country.”

Chamber of Mines and its members have lost confidence in the Minister of Mineral Resources and his leadership of the DMR

Baxter had three clear messages for investors:

  • Mining is important for South Africa
  • The South African mining sector is in crisis
  • There are solutions to ‘restoring the dream’ of a prosperous, growing, and transformed mining sector.

Baxter noted that key governance and policy challenges in South Africa have eroded business and investor confidence.

Baxter also noted that it was very concerning that the Minister of Mineral Resources paid scant attention to this crisis in his conference presentation, but that perhaps this is because the DMR has provided no assistance to help the industry through the crisis.

He further noted that the industry is very surprised that the minister claims to have received positive feedback from any investor on the DMR’s Mining Charter, or the state of the industry.

This has not been the industry’s experience, and it is the industry that engages with investors and raise capital on a regular basis.

The economic opportunity cost of the failure to get the policy, legislative, administrative and operating environment right to promote investment, growth, transformation and job creation in South African mining is material.”

 Some of the key uncertainties being perpetuated by the DMR include:

  • Uncertainty regarding the ownership element of the mining charter
  • Uncertainty created by the DMR’s unilaterally developed and imposed Reviewed Mining Charter
  • Uncertainty regarding the finalisation of the MPRDA Amendment Bill which is incomplete after being published nearly five years ago (remaining uncertainty on section 11 approvals)
  • Uncertainty regarding the Minister’s proposed section 49 moratorium on new right and section 11 applications
  • Uncertainty created by double financial provision for environmental rehabilitation

“Significant corruption allegations against the minister and the DMR have not been cleared and the proposed judicial commission of enquiry into state capture has not been established.

“The industry does not believe that the approach adopted by the DMR is serving the national interest of the country and the negative impacts of the unilaterally imposed Reviewed Mining Charter, the proposed section 49 rights moratorium, the non-resolution of the charter ownership issues, imposition of inappropriate section 54 safety stoppages, for example, have created a major crisis for the sector.

The industry is of the firm view that the DMR’s Mining Charter is designed to benefit a select few at the expense of the whole country.”

But, noted, Baxter, the ‘dream of a prosperous, growing, and transformed mining sector that contributes materially to meeting the goals of South Africa’s National Development Plan can be restored.

To get mining back on track requires policy and regulatory certainty, and government oversight that recognises mining’s unique characteristics, including:

  • That mining is a high risk industry, with long lead times from exploration through to mine development and ultimately closure
  • That mining is very capital intensive, with a large portion of capital being spent in development of the mine
  • That the sector is exposed to cyclical commodity markets, and is generally a ‘price-taker’ that cannot pass on cost increases to the final consumer; and
  • That mining is geographically determined, and requires access to cost competitive and efficient infrastructure

He concluded that: “To encourage investment into mining, policies need to recognise the characteristics of mining and help reduce the risks of investment in long term projects. The Chamber of Mines remains committed to finding workable solutions in the national interest.

“This is a resilient industry. Its stakeholders – including business, government, unions, communities and civil society– have reached a precipice in the past, but then realised that mutually agreeable solutions are possible. But, this will require ethical leadership and a focus on the national interest by all parties.”

Feature image credit: Chamber of Mines

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