SA to get state-owned mining firm

Sandile Nogxina, director-general, DME

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SA to get state-owned mining firm
David McKay
Posted: Fri, 26 Sep 2008

[miningmx.com] -- THE South African government is to discuss the creation of a state-owned mining company in terms of proposals due to be tabled at the Mining Advisory Board, said Sandile Nogxina, director-general of mineral and energy affairs (DME).

“Some people are calling for the involvement of the state in the production of mining,” said Nogxina in an interview. “The question is how.”

Nogxina said there were opposing views on the proposals with certain “people frustrated by empowerment” seeking to have the mining industry nationalised, while others wanted a mining company that would take a position in so-called ‘greenfields projects’.

there may be more radical calls

“I don’t think this is a negative proposal,” said Nogxina. “The sooner we do something sensible about this, the better.

“If we don’t get this away there may be more radical calls that could disrupt the economy,” said Nogxina who also confirmed he hoped to have his contract renewed as director-general of the DME.

The Mining Advisory Board, created by the Minerals and Petroleum Resources Development Act (MPRDA), consists of representatives from government, labour and the Chamber of Mines of SA.

Nogxina confirmed one proposal, first mooted at Electra Mining, a convention, was to have such a state-owned company financed by proceeds of the Royalty Bill which is due to be promulgated.

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The bill seeks to levy revenues of mining companies and is scheduled to come into effect in 2009.

The Chamber of Mines of SA (CoM), the organisation that represents many of SA's listed mining firms, said it was difficult to comment on the proposals because the "devil was in the detail".

"Does the state have a majority stake in these mineral rights," said Frans Barker, acting CEO of the CoM. "The state is already getting royalties. So it looks like they'll be getting their cake and eating it."

Government believes it’s possible to replicate the governments of Botswana and Namibia which have joint ventures with De Beers in the production of diamonds.

It’s thought the proposal for a state-owned mining company is part of government’s attempt to restructure empowerment which has been deemed to have failed in certain respects.

Said Nogxina: “We keep giving the people mineral rights but they keep selling them,” he said referring to how empowerment firms have traded rather than built mineral holdings.

“We don’t have a timeline on these proposals,” said Nogxina. “We still have to decide on an implementation plan.”

A banker who declined to be named said that the Botswana government’s mining investment through Debswana is a special case and can’t be replicated for the needs of the South African government.

“The Botswana government pays full value for mining assets and chooses which ones it wants. It also leaves the running of the investments it makes to the private partner.

“There’s also the factor that Botswana has mines that are immensely profitable and a fiscus that’s highly dependent on the mining sector. I’m not sure you can say either of those things about South Africa,” he said.

"This state-owned mining company would have to comply with other companies or there wouldn't be a level playing field," said the CoM's Barker. "And the proceeds of the royalties should be for ploughing back into the development of communities. Whereas now, this will only increase the frustration of the communities which won't see the benefits from mining," he said.