Mineral Resources Minister Mosebenzi Zwane

Mosebenzi Zwane, the DMR minister, “made all the right noises” during his speech on Monday morning, which opened the 2016 Mining Indaba.

This is according to Peter Leon, a partner and co-chair of Africa at international law firm Herbert Smith Freehills, which has opened an office in Johannesburg.

He promised:

  • To address regulatory uncertainty in the mining and resources sector;
  • That he and the Chamber of Mines were working to settle the Chamber’s  court application over the Mining Charter out of court; and
  • That he would address concerns around the oil and gas industry, as well as fast track the MPRDA Amendment Bill which was sent back to Parliament by the President last January.

“Unfortunately the Minister provided very little detail as to how he was going to give effect to any of these undertakings, leaving investors as uncertain as ever,” says Leon.

“The South African mining industry is in the middle of an existential crisis. We have seen a precipitous decline in the price of commodities.”

“Over the past five years the price of iron ore is down 77%; gold down 39%; platinum 52%; and the Government’s tax take from mining has declined by nearly 40%. Certainly the 74% decline in foreign direct investment into the country last year can in part be attributed to this sectoral decline.”

Leon continues adding that the difficult domestic conditions have exacerbated the situation. The inflationary cost of energy (20% up per year for the past five years) and labour settlements of 40% above the inflation rate means that “the industry faces a potent cocktail of ever increasing costs and declining revenues. While these costs have partly been offset by the sharp decline in the rand dollar exchange rate, this has not been sufficient.”

The recurrent issue is that investors will be wary about investing in an environment of low commodity prices and continued regulatory uncertainty. The ball is obviously now in the government’s court Leon indicates, talking about the way forward.

“The minister was correct when he said the mining industry is experiencing winter. Right now, spring feels some way off.”

Winning with AMCU

Johan Olivier, partner in the Employment & Employee Benefits Practice at Webber Wentzel says “The minister is to be commended on addressing the need for stability in industrial relations in the mining industry.”

It is crucial that South Africa avoids another protracted strike as in the platinum industry and curtails violence.  The minister also stressed that all stakeholders need to commit to the framework agreement of MIDGETT and the 10 point plan to minimise retrenchments in the mining industry Olivier highlighted.

“However, the difficulty with this approach is that AMCU has majority stake in the platinum and gold industry, but has not signed these agreements. The minister needs to take urgent steps to win the trust of AMCU and make them a meaningful participant and stakeholder towards achieving lasting agreements and stability in the mining industry,” Olivier concludes.

Top Stories:

Samancor Chrome issues Section 189 and starts union consultation process

AMCU condemns Barberton mine collapse, three workers remain unaccounted for

South32 to restructure South African, Australian operations