[miningmx.com] — THE South African mining industry looks to be on a collision course with the Department of Mineral Resources (DMR) that could see mining company executives at last openly criticising the failings of the new mining legislation.
This is because of the seriousness of the negative fallout from the Kumba/ArcelorMittal/Imperial Crown Trading (ICT) and Lonmin/Keysha Investments debacles.
There is concern among mining company executives – and, increasingly, broader business interests in the country – that the negative reaction to these developments is hammering South Africa’s investment image.
“All the reputational good that the country gained from staging the highly successful 2010 FIFA World Cup is at risk of being negated by what is going on over mining and prospecting rights,’ said a senior mining executive, speaking on condition of anonymity.
“Kumba and Lonmin are by no means the only examples of situations where there are conflicting claims to mining rights caused by what is taking place in the regional offices of the DMR. So far the others have been kept under wraps.’
Mining executives have been extremely reluctant to criticise the DMR openly, because of concerns that their businesses would be penalised.
Instead, they have tried to settle things in private behind closed doors to avoid public confrontation.
Those concerns are very real, according to another business executive who told Miningmx: “The moment you criticise the DMR in public, you will be punished Administrative delays become longer and decisions go against you.
“But it’s now come to a situation where you are damned if you do and damned if you don’t.
“It’s become very clear that if you are not prepared to defend yourself publicly, you will lose the game because you will be sliced and diced by government.
“Trying to settle things behind closed doors is not working. The government’s assumption is that you are going to roll over and, frequently, that’s what happens.
“You get pressured to compromise through deals that will “make the problem go away’ and that will “save face’ and “avoid embarrassment’ for government and the politically well-connected personalities involved.’
According to multiple industry sources, the root cause of the problem lies in the wide-ranging discretionary powers granted to the DMR and the minister of mineral resources by the Minerals and Petroleum Resources Development Act (MPRDA).
That’s described by mining law expert Peter Leon , a partner in legal firm Webber Wentzel, as the unresolved “issue of vagueness’ in the legislation.
A mining investment executive said: “The legislation is flawed – we knew that from the start. We wanted a system that was transparent and laid down exact processes and outcomes.
“Instead, we got one where the civil servants have wide powers of discretion and the government was overambitious in its belief that it could administer the system effectively. It’s become very clear this system is subject to interference.
“It’s not just in South Africa that this happens. Anywhere in the world you get a system like this you will find people looking for ways to bend the rules and take short cuts.’
On the other side of the table, it seems government’s attitude is hardening as well.
The release from the DMR on August 10, responding to the outcry over Lonmin, laid the blame squarely at Lonmin’s feet.
The statement said: “The DMR rejects with contempt the reported insinuations of wrongdoing or corruption in relation to the awarding of mining or prospecting rights, and also wants to state clearly that all applications are dealt with equally and fairly.
“The DMR urges all stakeholders to clarify any misunderstandings or misconceptions before going public with wild statements which confuse investors and ultimately damage South Africa’s image as a reputable mining jurisdiction.’
Reaction from Lonmin has been mild. The company issued a statement in which it thanked the DMR for its “cooperation in expediting the approval of these Section 102 applications’.
CEO Ian Farmer subsequently told Miningmx that there remained a “fundamental difference of interpretation’ between Lonmin and the DMR over the conversion of the group’s old order rights, and that the DMR statement was “not entirely accurate’.
Other mining sector executives – sadly still refusing to be quoted on the record – have described the DMR statement as “rubbish’ and what happened to Lonmin as “horrific’.
It’s because of reporting like this that the media is also taking flak from government and government-linked personalities.
In a lengthy letter to Miningmx, Jacinto Rocha – former DMR deputy director general and now a mining law consultant – said: “Those in the media who write and report on mining and minerals related matters need to do some serious introspection with regard to the standard of reporting, and their evident overzealousness in accepting half-baked stories from “sources’ and presenting those to the public as fact without properly verifying these “facts’ and “sources’.’
The ramifications of all this are serious for South Africa Inc. Mining executives earlier this year had high hopes for the success of Migdett (the mining, growth, development and employment task team).
That’s the tripartite body set up in 2008 by government, the mining industry and organised labour to revitalise the mining industry through measures including greater transformation and a reform of the Mining Charter to address bottlenecks and problem areas.
The bottom-line strategy is to ensure that South Africa Inc does not miss out on the next commodity boom the way it did on the last one.
Migdett has been highly praised by Leon, but his optimism has been tempered in recent months through the events at Kumba and Lonmin.
His current assessment is that “the South African government is speaking with a forked tongue’.
A number of SA mining executives share that view but, unlike Leon, they won’t put it on the record – yet.
