26 September 2013
Mining investors are moving closer towards a strategic dialogue with the government about the future of the mining industry in South Africa following investor engagements headed by Deputy President Kgalema Motlanthe, Finance Minister Pravin Gordhan and Mineral Resources Minister Susan Shabangu in London last week.
Despite tensions over proposed legislation aimed at encouraging mining companies to sell part of their raw material to manufacturers for value-added “beneficiation”, there was a willingness to listen to government’s case about the way past inequalities still fuelled instability in the industry.
The delegation leaders made it clear that the draft legislation was not written in stone and that the government was prepared to listen to proposals for amendments to sections which would give the Mineral Resources Minister discretionary power to force companies to sell raw materials at a price determined by the state.
Since the Marikana tragedy in August last year, when 34 miners were killed after Lonmin’s platinum mine negotiated separate pay increases for rock-drill operators, who are literally at the cliff-face of the mining industry, there has been little or no new foreign investment in South Africa’s mining sector and its performance has dropped well below levels in other mining countries.
The ruling African National Congress (ANC) decided against nationalisation of the mines at its five-yearly conference last year and has since also shelved a proposed additional tax on profits for fear of alienating investors and “killing the goose that lays the golden egg”.
Mining profits for development
The focus in the industry is now on the new legislation which seeks to ensure that more of South Africa’s mining wealth remains inside the country for purposes of development, creating jobs, fighting poverty and ensuring that those communities which contribute to mining wealth see some of the benefits.
This overall objective remains a non-negotiable for the government. What remains unresolved is how it is going to be achieved.
Both the Deputy President and the Mineral Resources Minister spent time explaining to the mine bosses and institutional investors that given South Africa’s past and the gross distortions created by the 1913 Land Act, the migrant labour system and the bantu education system, it was not an option to return to business as usual.
Minister Gordhan said that there needed to be a new relationship throughout the continent and the developing world between mining companies and the countries and communities in which they operated which acknowledged and rectified these past injustices.
“Rent from mining commodities must make a contribution to a fiscal base for education, training and development,” said Gordhan. “There needs to be a bias towards investment rather than consumption,” he said.
Minister Shabangu said that the 1913 Land Act had allocated only 87% of the land to the white minority and only 13% to the black majority, but it had driven black people off the lands so that they could be put to work on the mines.
Beyond migrant labour
Deputy President Motlanthe said the migrant labour system had institutionalised inhumane practices which separated men from their families and forced them to live in abject conditions in the vicinity of the mines.
Mr Motlanthe indicated that scrapping the scrapping of the migrant labour system was a subject of active and ongoing discussion between the government and the mining companies.
Instead of a system where miners leave their rural homes to live and work in far-flung mining areas far from their families for months on end, proposals were under consideration whereby miners would be able to have shorter, say eight-week, work cycle and take two weeks off to be with their families.
This would enable them to maintain closer bonds with their families and prevent the creation of two parallel households, which was both financially unsustainable and socially destructive.
The emerging dialogue between the industry and the government is headed in the direction of creating a more collaborative relationship between government, labour and business which would be able to address strategic issues and ensure the medium- to long-term stabilisation of South Africa’s mining industry.
Mining ‘needs its own NDP’
The prospect of dialogue has been significantly strengthened by the negotiation of the framework of agreement between government, labour and business which was facilitated by Deputy President Motlanthe a couple of months ago.
“The government is determined to do everything possible to strengthen the mining industry in these difficulty economic times,” Motlanthe said.
In recent months the focus in the mining sector has been on damage control, post-Marikana strike resolution and fraught wage negotiations.
Advocates of reform in the mining industry insist that a social compact between labour, government and business is vital. It could be modelled on the National Development Plan (NDP), which would help resolve strategic issues while day-to-day issues were resolved through such channels as the Chamber of Mines and the union structures that make up the collective bargaining process.
“What is needed is a mini-national development plan for the mining industry which addresses for mining all the issues that were covered by the NDP,” said one mining CEO, who is urging the dialogue to go deeper and discuss issues of housing, education and health care of the workers.
“There is no brain surgery involved,” he said. “A fulfilled and empowered work force makes for a stronger industry and a stronger country.”
John Battersby is UK country manager for Brand South Africa