SOUTH Africa’s Chamber of Mines (CoM) joined business and civil organisations, as well as parliamentarians, in condemning allegations the Gupta brothers – Atul, Rajesh and Ajay – had been involved in the appointment of government ministers.
It also added its own twist to recent events, described as “state capture”, saying that it noted links between the Gupta family and the recently appointed South African mines minister, Mosebenzi Zwane, and his officials.
The CoM was most concerned, however, by reports that mining companies were being inappropriately placed “under undue pressure” for not having complied with the country’s black economic empowerment regulations, or for alleged health and safety abuses.
Said the CoM: “Most concerning to the chamber are reports that mining companies are being placed under undue pressure via inappropriate section 93 notices for alleged failure to meet the ownership requirements of the charter when the subject matter is presently before the court for a ruling, or section 54 mine safety stoppage notices, given the damage these can do to the industry and investor confidence”.
“Should the country and industry be concerned about these issues? The chamber believes so,” the CoM said in a statement.
An industry source told Miningmx that reports of intimidation of mining companies had increased in the last six months following the surprise appointment of Zwane as mines minister in September.
Zwane, the former MEC for agriculture in the Free State province, has had previous business links with the Gupta family. He travelled with them to Glencore’s offices in Switzerland to consummate the R2.15bn sale of the group’s controlling stake in Optimum Coal Holdings to Tegeta Exploration & Resources, a company that is controlled by the Gupta family’s Oakbay Investments Group.
Zwane’s appointment as mines minister came as a shock as there was growing appreciation of work completed by former mines minister, Ngoako Ramatlhodi, and the fact that Zwane was a virtual unknown with no high ranking pedigree in the ANC.
In fact, he was appointed a member of parliament just over two weeks before being made mines minister. “It would be interesting to have seen the reaction had Minister Zwane been appointed after the removal of finance minister Nlhanhla Nene from office,” said an industry source.
He was referring to the madcap four days in December in which Nene was replaced by another unknown, Desmond van Rooyen, who was subsequently replaced by Pravin Gordhan following an outcry from business and a heavy slide in the value of the rand against the dollar signifying the dismay with which international markets viewed events.
This week, however, the extent of ‘state capture’ was given new perspective after deputy Finance Minister Mcebisi Jonas said the Gupta brothers had offered him the role of finance minister, a development described today by Business Leadership as “a grave threat to our country’s constitutional democracy”.
The Gupta brothers – Atul, Rajesh and Ajay, have close business links to President Jacob Zuma. Atul is chairman of Oakbay Resources. Only the president is allowed to appoint deputy ministers and ministers.
The CoM said it noted the “… allegations of links of the Minister of the Department of Mineral Resources to the Gupta family, and allegations that some of his special advisors are linked to the boards of the Gupta family companies”. It said recent events was “… making the mining sector ask questions about this matter”.
The chamber said the South African mining sector was “in crisis” and that stability and certainty as well as fair treatment of licensing applications was necessary.
“Allegations of corruption and undue political influence in licensing decisions are not in the interests of the industry or the country,” it said.
THE LAST STRAW
This is the first time the chamber has been so blatantly outspoken on an issue that is broadly familiar to all industry executives: that the process of awards of prospecting and mining licenses is far from clean.
However, executives have been reticent to speak out about abuses for fear of retribution, sometimes through an unscheduled visit of health and safety officers from the Department of Mineral Resources (DMR) who reportedly place restrictions on mining activities after uncovering safety violations, some of them minor.
One of the few executives to have spoken on the matter is Bernard Swanepoel, the former CEO of Harmony Gold and Village Main Reef. He told the Sunday Times in February, 2015 that it was naive to hope that business leaders could openly criticise the South African government as it may cost their companies.
In June, the Junior Indaba conference that Swanepoel helps organise, held a public vote in which 31% of some 200 delegates said they could not do “honest business” with the DMR. David Msiza, the chief inspector of mines, and current interim director-general of the DMR, said the outcome of the survey was “regrettable”.
Speaking on condition of anonymity, a senior South African mining executive, told Miningmx this week that exasperation with the DMR was one of the reasons why the CoM had decided to challenge the interpretation of the Mining Charter in the High Court.
“The industry gets bullied. There’s not a single example where there’s been a consultation with the DMR in which we have met in the middle. There’s also the inefficiency in dealing with the DMR. They don’t have the paperwork or they don’t understand the commercialities,” he said.
There was also the issue of treating shareholders correctly. “We [as executives] are personally liable. We have made representations to shareholders about certain things and we would be sued to high heaven if we broke those,” he said, referring to promises that shareholders would not be diluted more than the 26% as required in the 2004 mining charter.
“We get more credibility in the industry than standing up for shareholders. They are fed up with the lack of shareholder support so I don’t think we are adding to any risks by embarking on a court process,” he said.
The CoM is hoping the High Court will vindicate its view that companies that have completed empowerment transactions will not be required to re-empower themselves – a view that is held by the DMR. Some empowerment deals have failed whilst others no longer exist because the black-owned partner has sold its investment.
