SA mine bosses wimp out

[] — IS DEMOCRACY in Australia somehow different to democracy in South Africa – or are South African mining executives simply wusses?

Those questions have to be asked after comparing what happened in Australia when government imposed major changes with a critical impact on the mining sector, and South Africa where government is doing the same thing.

In Australia, when the government said it intended slapping a 40% super tax on local miners the mining industry went ballistic and fought back with no holds barred.

Mining companies ran advertising campaigns opposing the measures. Top executives like BHP Billiton CEO Marius Kloppers and Xstrata CEO Mick Davis let fly on the record in no uncertain terms over what the implications were.

Comments made by some companies were so pointed that the Australian Stock Exchange declined to publish them as part of its regulatory news service, and insisted the companies put them out as press releases instead.

Net result was that Australian Prime Minister Kevin Rudd resigned and was replaced by his deputy Julia Gillard, in an attempt to avoid what seemed likely defeat at the next round of elections.

Gillard has taken a far more conciliatory approach to the proposed new tax, which is now being renegotiated.

Now let’s review the situation in South Africa, following last week’s tripartite mining meeting in Pretoria which has been widely accepted as a “promising step forward’ by the mining industry.

A closer look reveals critical issues over black economic empowerment (BEE) and the tenure of new order mining rights remain unresolved.

Then there is what mining law expert Peter Leon has described as the general “issue of vagueness’ in the mining charter and the Minerals and Petroleum Resources Development Act (MPRDA).

Those issues were not mentioned by the mining company executives present, and emerged only in direct questioning to Minister of Mineral Resources Susan Shabangu by journalists.

The most compelling example of what is wrong with the present system is the dispute under way between Kumba Iron Ore and Imperial Crown Trading (ICT), over the mineral rights in Sishen Iron Ore Company (SIOC) awarded by the Department of Minerals and Resources (DMR) to ICT.

That affects not only Kumba’s future, but also threatens to undermine the entire MPRDA with the questions it throws up to investors over how mining and prospecting rights are awarded.

You would expect Kumba management to be fighting back Australian style with no holds barred. You would be wrong.

Kumba is taking legal action but it’s proving difficult for outsiders to get hold of the court papers and, for reasons best known to itself, Kumba won’t release them directly.

A Kumba release dated June 29 stated: “To protect the integrity of the legal process and the good faith nature of Kumba’s engagement with stakeholders, Kumba has preferred that the review application is made available to interested third parties through public sources only and not from Kumba itself.’

Integrity? Good faith? I am reminded of the scene in the movie Butch Cassidy and the Sundance Kid where one baddie asks: “Rules? In a knife fight?’.

This is a corporate fight to the death. Why would Kumba pull its punches – particularly as CEO Chris Griffith does not strike me as being a wuss?

Some industry observers are pointing a finger at controlling shareholder Anglo American as the reason.

Anglo, they reckon, is doing its best not to antagonise government because of its exposed position over Anglo Platinum (AngloPlat).

AngloPlat is arguably Anglo’s most important asset, but has still not achieved conversion for any of its old order mining rights. This is despite Anglo American CEO – and now AngloPlat chairman – Cynthia Carroll declaring more than two years ago that the situation was sorted.

But it seems to me the entire SA mining sector is petrified of offending the country’s politicians by criticising them in public, for fear of putting its businesses at risk.

The industry prefers to argue its case behind closed doors, as a result of which government overwhelmingly dominates the public debate.

I don’t think that’s healthy, although I can understand mining executives’ reticence to speak out given the risks posed by the “vagueness’ of the legislation.

But not fighting back allows Shabangu and other politicians to tongue-lash the industry at will.

Last week she accused the sector again of the serious issue of “fronting’ in BEE deals, without backing this up with concrete examples. She also climbed into the industry over its allegedly atrocious housing standards for workers, without any comeback.

I think the industry should speak out more on the record, even if it causes public tiffs with government – which it will, judging by some of Shabangu’s other comments.

She said: “There is a general agreement among stakeholders that in the main, perceptions of the country’s regulatory framework are adversely affected by the negative messages conveyed by some of the stakeholders in the industry and mining commentators with selective focus on potential areas of weakness in the framework.

“Ideally, we should manage the branding of our industry more actively and carefully.’

So there’s the official solution. Employ some more public relations staff to try and convince investors there’s no real problem.

It’s just as well we have international benchmarks such as Canada’s Fraser Institute survey, which spell out the true state of affairs.

It is to Shabangu’s credit that she has recognised this and committed herself to improving South Africa’s poor ranking by the Fraser Institute. But that’s going to take a lot more than good PR.