Shabangu conquers, but troubles brew at home

[] — THERE may be a shortage of manpower in the district minerals departments, but when it came to Toronto, South Africa’s minerals contingent was out in force.

A dozen or more souls represented the country’s mining industry at an Investec-supported investor roadshow, most flying business class.

Cynicism aside, this was an extremely positive trip. Mines Minister Susan Shabangu impressed with her frank acknowledgement of deficits in South Africa’s minerals legislation, and even promised to strike off an amendment that exempted the newly-found state-owned mining company, African Exploration and Mineral Finance Company (AEMFC), from certain administrative obligations.

She thus supported her claim that the company was not a veil for nationalisation, and that it would compete with the private sector on equal terms.

Hell, some department worthy even presaged Shabangu’s address at the Prospectors and Developers Association Conference (PDAC) by reading from a previous instalment of this column, Cue cards for Shabangu, proving they have good taste.

“The speech was well attended,’ said Peter Leon, a senior partner at Webber Wentzel who attended and spoke at PDAC (held annually in Canada). “People I spoke to were impressed with (Shabangu’s) frankness. She confronts issues head on,’ he added. Quite a compliment from the normally pugnacious Leon.

In a later investor meeting in New York, Shabangu and Senzeni Zokwani, president of the National Union of Mineworkers, drew parallels between the AEMFC and other state-owned entities such as Norway’s Statoil (not to mention Codelco in Chile) which happily and productively coexist with the private sector.

The AEMFC is really about securing coal for Eskom, not the takeover of platinum assets, they said. Another successful state-owned firm, PetroSA and Sasol, which trades on government-sponsored technology, have also traversed the private/public divide without stirring Orwellian dread.

Nationalisation was tackled more forcibly. Instead of the usual denial strategy, Shabangu has explained that without security of tenure, there can be no new jobs in the mining industry.

The new growth path has already identified downstream mining as a crucial job creator; the National Treasury has as well. Finance Minister Pravin Gordhan said in February the mining sector should aim to create 100,000 jobs by 2020. Based on Chamber of Mines senior economist Roger Baxter’s 1:10 multiplier effect, some 1 million lives turn on keeping mineral rights rock solid.

“Challenges were recognised and proactive solutions agreed,’ said Baxter in an SMS. His was a balanced presentation that weighed up pros and cons, but had some pro-SA bystanders wishing he’d done more of a hard sell. After all, this is the PDAC where even the remotest moose pasture can be converted into equity. Once an economist, always an economist, one supposes.

“The AEMFC is really about securing coal for Eskom, not the takeover of platinum assets.”

Leon said, however, that implementation of Shabangu’s promises remains, as always, the key.

He also believes government should consider the examples of Nigeria, Ghana and Brazil where application of the legislation should be delegated to an independent regulator.

“They should follow the example of others where licensing is taken away from the state,’ he said. “It’s possible they (government) should adopt the model. They did not reject the idea when I made the proposal in writing,’ he added.

Generally, then, a golden star for the civil servants whose North American trip, on the back of a scathing assessment of South Africa’s mineral policy by the Fraser Institute, was a decent riposte.

“We’re being judged now on decisions made years ago,’ said Sandile Nogxina, director general of the Department of Minerals Resources (DMR), who believes the furore regarding Lonmin’s inability to market base metals from its platinum-bearing properties was a historical loophole in the system, now being remedied. The Toronto trip was all about the future.

Nogxina, speaking from Pretoria, was not part of the Toronto jamboree owing to the fact that South Africa’s minerals future is, for all the flag-flying in distant lands, a vexed and meandering work in progress.

Nogxina was helping to defend the DMR against the agricultural union, AgriSA, which last year launched an expropriation claim against the DMR, reportedly seeking R99bn in compensation.

Nogxina counters that the case is only worth R750,000; nonetheless, it’s worth defending the principle, and to avoid setting a precedent, he said. He added that the silks fighting the case – Cassie Badenhorst for the DMR and Gerrit Grobler for AgriSA – would be addressing the judge on the merits of the case on Tuesday (March 15).

Thereafter the judge will decide on a date to provide judgment.

Ironically, Gerrit Grobler successfully defended the last major expropriation claim against the state – fought through the trade and industry department ((DTI) actually – where granite companies, Red Graniti and Marlin Granite, sought R2.7bn in compensation.

They argued old order mineral rights would be taken from them unless they met the conditions of the MPRDA, a development that cut a wide swath through bilateral trade agreements between South Africa and Luxembourg. The granite firms were ultimately owned by Finstone, headquartered in Luxembourg.

The matter went down to the International Centre for Settlement of Investment Disputes, part of the World Bank, in The Hague, where it simmered for several years until the sides agreed to a compromise. The granite firms had their new order mineral rights approved, ostensibly because they met the regulations, the state says, while the claim for compensation was shelved.

Yet The Hague had the final word, awarding R3.8m in costs to the DTI which one supposes is tacit endorsement of South Africa’s minerals legislation.

AgriSA won an expropriation case against the DMR once before on March 9 2009, an outcome then deputy director general Jacinto Rocha said was no big matter. The law provided for compensation to aggrieved parties, Rocha said; better that, than for legislation to be shown not to allow for any compensation, he added.

Which is true, but one hopes doesn’t happen in this latest case. It would be a cruel blow for Shabangu’s bruised but unbowed minerals administration.