Nationalisation of SA mines already underway

[] — NATIONALISATION of the SA mining industry was already under way, despite statements by President Jacob Zuma and Minister of Mineral Resources Susan Shabangu that it was not ANC policy.

That’s the view of legal expert Hulme Scholes, who said the mining industry was being “set up for failure’ because there was no way it would be able to meet the black economic empowerment (BEE) targets set out by the revised Mining Charter and the Codes of Good Practice (the codes) to be achieved by a 2014 deadline.

In particular, he singled out the requirement that the BEE shareholder stake in any mining operation be unencumbered by that date to be counted towards the target of 26% “net value’ in a mining operation, as required by the codes.

“Those failures will provide the political justification for radical intervention by the state in the mining industry to achieve its transformation objectives,’ Scholes told Miningmx.

Scholes – who has been dealing with SA mining law issues since 1993 – currently works as a mining law consultant for CJM Corporate Advisers.

He was previously a director of Aquarius Platinum and, prior to that, specialised in mining law issues as a director of Werksmans Attorneys.

In recent weeks, Scholes has been giving a presentation titled The Road to Nationalisation of the SA mining industry to numerous mining companies and banks.

Scholes said his mission was to alert SA business to the very real danger of nationalisation, given the complacency and apathy that prevailed with government in the process leading to promulgation of the Minerals and Petroleum Resources Development Act (MPRDA), the Mining Charter and the codes.

Scholes attacked the mining industry for being “complacent’ on nationalisation and “unaware of how much work government has already done on a nationalisation initiative’.

Scholes said: “The mining industry needs to catch a wake-up call fast. Nationalisation is happening now.

“The industry needs to make a greater effort to get government to understand just how disastrous nationalisation would be for the mining sector and the entire country.’

Scholes added: “I don’t think government understands the economic catastrophe that will unfold in South Africa, should it implement nationalisation of the mines.

“It’s clear to me government has no real comprehension of the complexity of the mining business and the very real difficulties inherent in running mines in this country.

“I also believe that government views the Chamber of Mines – which is the spokesperson for the established mining companies – as a discredited organisation which it does not take seriously.’

“This is because government sees the chamber as a relic of the country’s apartheid mining past. The end result is that the chamber is not functioning as an effective interface between the mining industry and government.

“To me, a good example of this was the promulgation of the codes, where the chamber’s comments were simply ignored.’

That assessment flies in the face of the much-vaunted Mining Industry Growth, Development and Employment Task Team (Migdett), which was set up in 2008 as a tripartite initiative by government, organised labour and the mining industry.

Various senior mining industry executives have expressed high hopes for Migdett’s success, hailing it as a breakthrough.

Scholes said the chamber needed to be “more forthright’ in its dealings with the government. He criticised the organisation for not becoming sufficiently involved in fighting the nationalisation process under way.

He cited the parliamentary portfolio hearings held on May 28 on the creation of a state-owned mining company as an example.

Scholes said: “The only contributors were the ANC Youth League (ANCYL), the South African Mining Development Association (Samda), the National Union of Mineworkers (Num) and the Legal Resources Centre representing communities.

“It seriously concerns me that the chamber did not bother to put in an appearance to try and counter the rubbish that these other participants spouted on nationalisation.’

Scholes warned: “The great danger is that government might view such apathy by the mining industry as tacit acceptance of their nationalisation initiatives.

“I watched this all happen before, when the Mineral Development Bill was first circulated in December 1999. From that point on there was general apathy in engagement by the mining business sector despite the warnings being sounded, and the state basically ignored all the comments that were made from business.

“The same thing happened with the codes. Again, there was no constructive engagement with industry and we ended up with a nonsensical and unworkable document.

“History can be repeated if the department of mineral resources again ignores input from a mining industry which is not robust enough in its response.’

Scholes said nationalisation would take place in two stages, with the first already under way through the creation of the African Exploration Mining Finance Corporation (AEMF).

This is a wholly-owned subsidiary of the Central Energy Fund, which has been exempted from a string of legal requirements normal mining companies have to comply with.

These included exemptions from complying with requirements for prospecting rights, bulk sampling permission, mining rights and permits including the need to comply with various environmental management requirements.

Scholes said the original stated intention of AEMF was to apply for coal rights to secure supply for Eskom, but highlighted subsequent media statements that AEMF would also apply for other rights, including platinum and uranium.

Scholes said the second stage would involve the creation of a state mining company, which would probably take over AEMF and be used as the vehicle to drive a nationalisation programme.

Whether the state would pay compensation for the mining assets it expropriated was not clear.

Scholes said: “The ANCYL says no compensation should be paid. The Num is very quiet on this point.’

His conclusions are that “the statement by government that nationalisation is not policy is hollow. Draft legislation for the creation of a state mining company is inevitable, and this is how nationalisation will take place.’