[miningmx] — MUCH has been written about the Marikana shootings, which played
out in graphic detail in the electronic media, but surprisingly little commentary has
been given about how any of this was possible in a constitutional democracy based
on the rule of law 18 years after the end of apartheid.
Although the President has appointed a wide-ranging judicial commission of inquiry
under the chairmanship of a well-respected former judge as well as an inter-
ministerial task team to deal with its immediate aftermath, I think it is legitimate to
pose a few fundamental questions.
– Why were the Ministers of Labour and Mineral Resources absent from Marikana
until the day after the shootings?
– Why was the SAPS’s tactical response team and not the public order policing unit
deployed at Marikana?
– How was it reasonable, justifiable and proportionate to shoot dead 34 mine
workers?
– How could the Minister of Mineral Resources claim two days after the incident that
she “was not aware of where [the Association of Mineworkers and Construction
Workers operates in the mining industry” after this union was at the forefront of
Impala Platinum’s six-week strike in February, which led to the death of three
people and cost some R2.5bn?
– How could the new national police commissioner, Riah Phiyega, four days after the
shootings say to the police that “safety of the public is not negotiable. Don’t be sorry
about what happened”?
– How could the former Cabinet spokesperson, Jimmy Manyi, refuse to discuss the
incident with the media at the post-Cabinet media briefing on August 22 on the basis
that the “government [was] in mourning”?
– What circumstances led to the opening, late last week, by the Independent Police
Investigative Directorate of 194 cases of assault and attempted murder against the
police following the arrest and detention of some 260 mine workers?
The world is clearly watching and waiting to see how South Africa will handle
arguably one of its most important tests since the transition to democracy in 1994.
CONFIDENCE
The unfolding of the events at Marikana has clearly affected international investor
confidence in the South African mining industry. A week after the Marikana
shootings, Fitch Ratings described the events as reflecting “broader structural
problems that have long weighed on South Africa’s credit rating”, and cited rising
costs, policy uncertainty and nationalisation rhetoric as reasons to regard South
Africa as “a less favourable investment destination compared with its peers”.
Although the incident at the Marikana mine was ostensibly driven by union rivalry
and wage dissatisfaction, as much as the conduct of the police, the root causes seem
to run much deeper, to the daily living and working conditions of mine workers and
mine communities.
When one looks at how best to optimise South Africa’s prodigious mineral wealth, an
important focus must be on those most directly affected by mining – those South
Africans whose physical and social space is affected by the arrival and departure of
mining companies.
The issue goes much further than simply one of living conditions. It seeks wider
recognition to the voice of the community concerned by fostering mutual
understanding of expectations and defining mutual obligations.
Our current approach to mine communities is not delivering these benefits. It
presupposes a one-size-fits-all model for such communities, despite their diverse
needs and circumstances, and reserves no seat at the regulatory table for the
affected mine communities.
Another integral component of this new social contract for mining must be real and
meaningful transformation, which to my mind requires sober reflection on black
economic empowerment. The promotion of BEE in the mining sector has, ironically,
become a catalyst for the populist support for nationalisation.
This is because both the original and revised Mining Charter promote a form of
“narrow” BEE, resulting in the enrichment of the well-connected few. While the
revised Mining Charter requires BEE transactions to aim to achieve “meaningful
economic participation”, it also confusingly requires that these beneficiaries are
vested with “effective ownership”, including voting rights and management control.
This seems to preclude broad-based share schemes with communities and workers as
their beneficiaries.
REGULATORY CERTAINTY
It is alo by now well known that in resource-rich developing countries with ambitious
transformation and development goals investors require regulatory certainty and
administrative efficiency. This in turn requires laws and policies that are clear,
definite and consistently applied. This is particularly true of the mining sector.
While the Mineral and Petroleum Resources Development Act (MPRDA) was intended
to mark a formal shift away from subjective, broad discretions towards generally
objective criteria combined with bound ministerial discretion, in reality it applies this
principle inconsistently and employs its BEE and socio-economic objectives to retain
a high level of administrative discretion.
This is particularly evident with regard to the granting of prospecting and mining
rights, where ostensibly mandatory requirements contain much room for variance.
The situation, however, is not irremediable, and it is hoped that these are among
the issues that the DMR will consider in its proposed revision of the MPRDA, which
according to the Minister of Mineral Resources is now imminent.
MANGAUNG
As the country turns its attention to the ANC’s mid-December elective conference in
Mangaung, in the hope that it may offer some predictable policy direction for the
mining industry, it is helpful to remember the political peaks and troughs that have
brought us to this point. State intervention in the mining sector has arguably been
central to the country’s economic transformation debate since December 2007, when
the ANC elected its new leadership in Polokwane and resolved that the state should
“intervene strategically” in the mining sector “to drive the growth, development and
transformation of the structure of our economy”.
Greater state intervention in the mining industry has thus been a reality for the last
five years. The source of uncertainty has always been “how” and “how much”.
This has been a topic of contention, not only between the industry and the ANC, but
within the ANC itself. The debate intensified in 2009, when the ANC Youth League,
led by its then President Julius Malema, called for the nationalisation of the South
African mining industry without compensation. The ANC National Executive
Committee responded in November 2010 by commissioning a research report into
state intervention in the minerals sector (SIMS).
While the SIMS report rejects the wholesale nationalisation of mining companies as
unaffordable and unconstitutional, it retains the option of nationalising specific
companies, “particularly for strategic monopoly priced mineral feedstocks”. It also
recommends a formidable array of interventionist regulatory “reforms”. Although the
adoption of the strategic nationalisation policy has been publicly confirmed by
several party officials, it is not clear which minerals might be deemed “strategic”.
However, at the end of the NEC’s bi-annual Lekgotla last month, ANC Secretary-
General Gwede Mantashe announced that a list of strategic minerals would be
finalised by the next NEC meeting in September. According to Mr Mantashe, a
starting point for this is the SIMS report, which identifies coal, iron ore and platinum
group metals, among others, as strategic minerals. If the SIMS report is supported,
these minerals could become subject to export tariffs, infrastructure tariffs and other
measures to ensure their secure supply to state-owned entities, as well as cheaper
supply to domestic industry.
The NEC has apparently also agreed that South Africa’s mineral regulatory approval
system should be simplified; that a portion of strategic minerals should be “set
aside” for local beneficiation; and that mineral feedstock input costs should be
reduced “with the state playing a critical role in this regard”.
It is not clear from the report itself whether these imposts would have the desired
effect of promoting local beneficiation, much less whether such increased
beneficiation would be viable, given South Africa’s energy constraints and the higher
capital demands that this would impose on mining companies.
This speaks to a more fundamental flaw in the SIMS report – a lack of any
comprehensive economic impact assessment, which, if conducted, would reveal that
the approach adopted in the report is somewhat self-defeating. While the report
proclaims its principal objective as being to “maximise the developmental impact” of
South Africa’s prodigious mineral endowment, it ignores the reality that our minerals
cannot have any developmental impact at all if they are left in the ground, which
will be the inevitable result if they cannot be productively and profitably extracted.
The mining industry remains the bedrock of our economy and its success is in the
government’s interest, as much as the broader public interest. If the government
fails to address the problems affecting the platinum industry – and, indeed, if it
decides to exacerbate them by adopting ill-considered regulatory interventions – we
are likely to see more Marikana conflicts, not fewer.
Peter Leon is the Head of Africa Mining & Energy Projects at law firm Webber
Wentzel. This is a shortened version of a speech he delivered at the South African
Institute of International Affairs on August 30.
