Mantashe, the Mining Charter, and the power of balance: Part 1

Gwede Mantashe, mines and energy minister, South Africa

One commentator described South African mines minister, Gwede Mantashe, as “a brawler” on news of his appointment in February. While that may be, what’s required in these delicate months of Mining Charter negotiation, however, is finesse, balance and a mindset finely tuned to the South African zeitgeist. This is why Mantashe – a man of contradictions – is perfectly positioned to deliver a new Mining Charter, writes DAVID McKAY.

Sandile Nogxina tells the story of his recall from Mexico where he’d been serving as ambassador since 2012. So urgent was the instruction to return to the Department of Mineral Resources (DMR) that it was left to his wife to do the packing. “She’s still there,” remarked Nogxina at a mining conference in June, still astonished at the swiftness of it all.

If any minor anecdote is able to express South Africa president, Cyril Ramaphosa’s, concern about the tenuous position of the country’s mining sector, it might be that he should turn to Nogxina, director-general of the DMR for just over 13 years, and who most represented the spirit of co-operation in which the Mining Charter was first drafted in 2003.

But the thread had been broken, and probably long before Mosebenzi Zwane stepped through the departmental door in 2016 until his sacking in February this year. What was required, one senses, were old hands with an understanding of history and the interplay between the country’s society and its mining industry.

Of course, the major appointment had already been made – three months earlier in February – when Ramaphosa unveiled Gwede Mantashe as mines minister. The response from media drifted between shock and no small surprise: that a dyed-in-the-wool Marxist and trenchant unionist should take up the argument of fixing the mining industry tells us all we need to know how desperate and morally bereft the Zwane years had been.

You can see why Ramaphosa turned to Mantashe though. It makes for obvious logic: knowledgeable, a safe pair of hands – perhaps – and passionate:  “If you think that I’m here because it’s a deployment, then no. It’s an industry I love because it made me,” he said to delegates at a recent Mining Charter summit, east of Johannesburg. Quite.

Mantashe, a former chairman of the South African Communist Party, and national chairman of the African National Congress at the time of his latest appointment, was a trade unionist with the National Union of Mineworkers (NUM) for 24 years, having co-founded the organisation with Ramaphosa. He was then Witbank branch chairman. A former miner, he worked through the organisation’s ranks becoming secretary-general of the union in 1999 until 2006.

One can’t imagine a more different incumbent in the DMR to Zwane, a bureaucrat from the Free State. “Although minister Gwede Mantashe is not the easiest person to work with due to his extremely assertive nature, he is the perfect person to rescue the dysfunctional DMR,” said Gideon du Plessis, general secretary of Solidarity, a union.

Reports from inside the DMR describe Mantashe as a contradiction. He’s fond of starting meetings with a song; sometimes a workers’ song, says Ayanda Shezi, spokeswoman for the department. But she says his “easy-going” nature is punctuated with fits of impatience. “He sometimes gets frustrated by the bureaucracy – why it takes so long to get things done,” she says. “He doesn’t understand when officials are afraid to talk to him.”

Although minister Gwede Mantashe is not the easiest person to work with due to his extremely assertive nature, he is the perfect person to rescue the dysfunctional DMR.

One can understand the reticence of Mantashe’s colleagues at the DMR.  Hanging on to a job in the DMR was a question of anonymity and, unfortunately, compliance. During the days of Zwane, the department had a murky, impregnable air. Those identified as potentially obstructive were redeployed; skills and experience were purged.

From an industry perspective, phone calls went unanswered. Mining industry CEOs recall the frustration of trying to secure the various permits and certificates they needed to mine or explore. There was dark business going on in the department’s Trevenna offices in service to a script written elsewhere: the marble and gold of a Gupta family Dubai mansion, perhaps?

Certainly, the task of Mantashe must be to primarily install a regulatory regime that is at once predictable and fair. But an equal and unappreciated task will be restoring the DMR itself. Corrupt, largely incompetent, with a minerals administrative cadre that is hardly functioning, it could even be argued this will be the greater challenge.

Mantashe has been questioned for embarking on a province-wide roadshow, principally regarding his redraft of Zwane’s Mining Charter. On closer inspection, it would seem that departmental dereliction is both a mining matter, and a broader national problem. The ANC is losing votes because the impression is that it’s not working for the electorate anymore.

“I’m in my fourth month here,” said Mantashe in July. “Month number four: I’ve talked and visited all nine provinces, talked to people and it’s not sufficient. Engaging people is never sufficient [on its own]”.

The grounds of the Johannesburg Country Club gleamed in the winter sunshine. Inside, however, Roger Baxter took up his position at a hastily convened press conference in a state of unreal gloom.

Some R52bn was leaking from the shares of mining companies in the wake of Zwane’s Mining Charter redraft which had been long threatened and had now materialised. The Minerals Council was condescended to discuss Zwane’s near unilateral Charter decisions at a later meeting – an invitation rejected by Baxter. The Council had not been notified before its gazetting, much less seriously involved in its negotiation. The flight of capital that was taking place was enough to rival the shock of 2002 when investors took once glance at government’s then peri-nationalisation plans, and fled.

There was a lot to hold and horrify in Zwane’s charter. The first thing that struck one was its derring-do in the sense of its boldness; the brass neck.

One clause in the document was ordering mining companies to pay dividends to black shareholders (including recently naturalised Indians) before it repaid debt. Another asked miners failing the DMR’s 26% equity ownership target under its view of ‘once-empowered, always-empowered’ to sell another 30% of their shares. There were also plans for a new tax collection agency to which increased levels of development and skills levies would be paid. The list went on, subverting numerous Companies Act provisions, the Constitution, and international trading pacts along the way.

The sector was so infected by a trust deficit [that] when you said good morning, you had to go outside and check if the sun was there, or if it was midnight.

Baxter, CEO of the Minerals Council – then still the Chamber of Mines – could hardly contain his astonishment. As journalists sought to piece together the knavery, Baxter and his team set about fighting the battle in the courts. Zwane’s Mining Charter was a coup. The Minerals Council later gave it a different term: “egregious”, it called it.

With this recent history in mind, it’s worth acknowledging just how much has been achieved by Ramaphosa and Mantashe in the brief months since February. While Mantashe’s new draft Charter is hardly the finished item, it’s at least the fruit of multi-party discussion. What’s perhaps sometimes missed is the sense of process. Speaking at the Mining Charter summit, Mantashe said the act of negotiation had been as important as the actual items under discussion.

That’s quite right. One has to bear in mind the tightrope all stakeholders are being asked to traverse. Mantashe railed against those who accused him of supporting white monopoly capital. “I haven’t been to London in six years,” he said. But while “whites won’t be driven into the sea”, blacks will take control. Remarkably, he called for black capitalists but in the same breath speaks of the class struggle. In the end, his task is social compact and restoration of trust between partners.

“The sector was so infected by a trust deficit [that] when you said good morning, you had to go outside and check if the sun was there, or if it was midnight,” he said. He added: “I think over this period, I have seen [people] beginning to understand each other, and the warmth that is growing among people”.

Said Mxolisi Mgojo on the sidelines of the Mining Charter summit: “You must remember, this has never been done before. But you can see how complex the issues are.”

Delegates at the summit captured every bit of the complexity of the country’s mining sector. Community concerns moved far beyond the urgent need to fix mining sector regulations to equally urgent matters of living standards, redistribution and, in some cases, radical calls for the kind of nationalisation the 2004 Mining Charter was intended to mediate.

Mantashe promised to tackle matters outside the Mining Charter debate through the DMR – issues related to the exhumation of burial sites, and the effects of blasting on homes for instance. But the document was not a ‘bamba sonke’ [skim the cream], he said. For now, however, the aim was to the immediate problem at hand: how to fix the Mining Charter.

For Part 2 click here.

10 COMMENTS

  1. David,
    Both the South African President and Minister Mantashe are dinosaurs from a bygone era.
    Their colleagues and opponents have faded from history. Their presence, enforcing their view of how the world works, is tantamount to Bill Clinton still being President of the US. They are from the same era.
    If you meet up with Minister Mantashe, even his red socks have gone pink he is so aged.
    He and our esteemed President presided over the NUM when the gold industry was at the height of its powers (employing 850 000 men and producing 1 200 tonnes of gold), they had moral right on their side and there was billions at stake which could be extorted. They had zero to lose, they could only gain. How the situation has changed.
    Both are died in the wool Communists whose vision for South Africa is to turn the country into another Venezuela, Cuba with a dash of Chinese Communism.
    Into this failing economy (which their actions have helped de-industrialise, never to rise again), they purport to again provide us with their Utopian vision of a hybrid mixture of capitalism, workers collective Communism, and unbridled Socialism as contained in their long failed series of “Mining Charters”. All this whilst expecting capital to finance it. Again, bizarre.
    The “golden goose” provided with their every whim at the height of their powers. They continue to demand it perform, not realising that most of the “big guys” they could bully 30 years ago have moved out of the country/ failed as business and died and thus cannot be held hostage or bullied anymore. Paylimits dictate economics which indicate that South Africa’s now imaginary “vast mineral wealth” is commercially not viable and sterilised by the costs and expectations heaped on it.
    The message should clear- the big capital required to build large, powerful industries has moved on, replaced by opportunistic capital from the East whose only objective is to reap what is easily extractable and gained with minimum input. There is very little support for their Utopian vision.
    So the only impact they make is with debates on sites such as this one. Nobody cares about SA mining anymore David.
    South African mining is dead. Live with that fact.

      • Hi David,
        It is indeed a bleak vision. Shared by many. Take a look at the unnecessary destruction wrought on the goldfields and the burgeoning and uncontrolled artisanal mining to which the DMR potentates are turning a blind eye.
        As an aside, take the amount of “views” this story has had on your tracker above. 21 as at time of posting of this comment.
        Your article is superbly written. It deserves some attention “Views” on this site usually number in the 100’s.
        Isn’t that telling you something? People are just not interested in Mantashe, the ANC, and its nonsense anymore.
        Stay well.

      • David, your relief at Minister Mantashe’s appointment relative to the previous incumbent, and you personal liking for the man, has affected your judgment. Time to reflect that you may not be objective – hope, and faith in human nature is not enough. Nothing Minister Mantashe has said or done is close to what is required to even vaguely moderate the decline of the SA mining industry. He is ideologically incapable of making the hard decisions required to save the industry – Mining Charter III is, in all its iterations, the death knell for the industry, layered as it is on Charters 1 and II before it. This is inescapable – things are too far gone for “restoring trust” and cleaning up the DMR’s regional offices to be a viable strategy. The Emperor is wearing no clothes, and your liking for him is stopping you from calling that out.

      • Hi Jack – I’d be the last person to claim ownership of “the truth”, so I take your comments on board. I’ll give them a good ‘think’.

        As for Mantashe, he’s had a go at me publicly (in press conferences) for asking questions that have the sympathies of the Minerals Council at heart. That’s a good place to be for a reporter: being criticised from both sides of the agenda.

        Similarly, a successful Mining Charter needs to be something nobody feels completely happy with. This is the view of Mxolisi Mgojo, head of the Council, who sees (rightly I think) that a good negotiation can’t yield up a Mining Charter reflecting the purely capitalist outcome perhaps some of us would like.

        South Africa has its history which has to be tackled and I believe the mining sector still has an important role to play in this. So a balance needs to be achieved – hence my “power of balance” headline on the article. So let’s see.

        Thanks for taking the time to comment. Much appreciated.

        Regards

        David

      • Hi David, the counterpoint to Minister Mantashe and the ANC’s policies is NOT the Mineral Council’s position – being accused of being sympathetic to the MC only takes you a very small part of the way.

        The MC is hopelessly compromised on every front; its office bearers are often rent seekers, and its investments are trapped in SA. The current MC is like a submissive puppy that spends most of it’s time on it’s back wetting itself.

        The counterpoint to the government position is avtuslly the position of investors who have not yet committed capital to SA mining. You need to cover the full spectrum if you have any hope of find a “truth”.

    • Acceptance of reality is the only place where a turnaround may be possible. The above statement IS reality and is not acknowledged and rather brushed aside by those who prefer to see the positive in the situation. This is an easy-out, which allows everyone not to have to deal with the issue.
      Although it may be possible to “see the positive” in the situation while falling from a cliff, it is far wiser defend from being pushed over the edge in the first place.
      Correcting the situation will take enormous courage in order to stand up for what is right, rather than the weak, follow-along approach currently being embraced.

    • Dear All,

      I vehemently disagree with the JSE Cynic’s incoherent rant about “socialism in RSA etc”.

      I proffer the following as my stance on the matter:
      1. JSE Cynic does not mention even a single static to support his claims. What the safety record then ( Using his flawed analysis that when RSA was producing 1200tons of Au and employing 850K ppl)?
      2. What were the demographics of management ? Did he expect this to stay constant (i.e continued subjugation of Blacks)?
      3. JSE Cynic postulate that “RSA economy if failing” . Well, should RSA economy still have been still have “45% of its exports being Gold” then the failure would have been there for everybody to see. Fact : RSA Economy is 3-4x bigger than in 1994 when it solely depended on Gold mining as its main export. We would have been truly left behind had we been fixated with supporting Gold Mining to the exclusion of everything else!
      4. Maybe the “golden goose” stopped being golden for RSA …and thus it is time to go for its meat rather than hope for its eggs!
      5. Mining Charters are part and parcel of the MPRDA. So they are here to stay! As for paylimits, he is extremely naive. I refer him to the History of Newmont & Freeport in the USA. These companies were not investing in infrastructure & technology to lower their unit costs. They were high-grading their ore deposits, and Freeport duly went out of business. The Freeport we know today is a 3rd incarnation of itself. Newmont being 2nd incarnation. they have learned the hardway, and that is why they are so ahead in their investment philosophies than any mining company.
      6. As the despised boss of Randmines ( Lionel Phillips) once said: ” Every ore deposit is a bounty which , at the right time, it will be profitably mined”. Just because you know its there now, it does NOT necessarily mean you have to mine it now! This was the case in the 1880 ‘s and it is still the case now! if you doubt my bona fide, ask the PGM miners ( 2000 -2010) or Gold miner of 1910- 1925)! Mines are a treasure , they need to provide lasting legacies ( i.e Yanacocha etc) for the surrounding communities.
      7. I welcome any capital , not just british or American capital. So the East capital is most welcomed. As for its objectives, I can assure the JSE Cynic that it is NO different , or worse off, than the European one he so revere!
      8. The Randmines managers of the 1980’s made a similar statement that ” South African mining is dead”. Well , the only thing that is dead is Randmines NOT RSA mining industry.

      The tirade& whining by racists who are anti-transformation will get louder and their pessimism grow BUT for some of us, we will look to the future with renewed hope , because after all mining is a hopeful business ( we plan for the future with its attendant uncertainty)!

      Truly yours,
      GS

  2. I agree with JSE Cynic. The “team” at DMR is not interested in rescuing the industry. For them its still about transformation at any cost. Now do not get me wrong. I support transformation. But if you want to rescue the industry. Concentrate on the basic things first.
    – Proper policy that attracts investment.
    – Support from DMR and quick effective turn processing of all applications by officials.
    – A working SAMRAD (David, you should really do a story on this and on the waste of tax payer’s money. First they developed the NMPS, then SAMRAD and I hear they are developing a new system again that will again cost millions). Everytime its the same officials being entrusted to manage it. They should merely collaborate with SARS on this one. Use SARS’s e-filing developers.
    – It is crucial for exploration companies to have up to date information on status of properties and status of rights. Furthermore, Council for Geoscience must provide exploration information to prospective applicants. At this stage its just not happening.
    – Once you dealt with the basics and you do it good, then do you deal with transformation, which incidentally is a legal requirement. DMR merely need to access compliance.
    – At the moment, due to SA being an non-investable mining destination, no meaningful transformation can happen as projects are not being advanced to development stage. The existing mines are old, mined out and not profitable. Any empowerment deal on those are doomed from the start in any event.

    Thus, I mumbled a lot, but in effect I am saying that DMR should get their house in order. Exploration must be the priority and DMR must support such initiatives through word class regulation thereof.
    DMR must therefore be restructured to provide a proper service. If needed, they must get rid all most senior managers and replace them with officials who want to work and make a difference.

  3. Hi David,
    Thank you for creating this platform to share my views.
    Minister Mantashe, try as he might, will never be able to reform the DMR or re-awaken interest in the South African mining industry. It is too far gone, and entrenched. To dismiss bureaucrats in a socialist revolution is dangerous and leads to civil strife. It is now what it is.
    The following facts are against him, unpalatable as they may be, and are at the heart of the industry’s demise.
    1. Minerals in the ground in South Africa were attached to Title Deeds and were deemed property for several centuries;
    2. In 2004, the Socialist ANC expropriated this property, with compensation. Access to them became a “right” attached to a political agenda.
    Minerals in the ground could no longer be freely traded or developed, permission now had to be sought from bureaucrats emplaced in positions of extreme power and who had a strong political agenda and no understanding of the economics required;
    3. The political agenda of the ANC, to punish what they saw as an exploitative industry (the taxes and royalties from which had built the modern infrastructure of the country) has ensured that the mining industry has no social contract in South Africa, and will not have one for many generations to come;
    4. The bizarre insistence that “minerals had to be beneficiated in the country” also did not take into account the infrastructural development and economic conditions (for which Government is exclusively responsible) for this to occur, and the skills and cheap electricity to do it. The ANC itself undermined this very policy, choosing to buy Chinese steel for the construction of its major power station, whilst Highveld Steel not even 60km away never received a single order and went into business rescue.
    5. The vast extensions of the Wits gold deposits (Anton Esterhuisen is indeed correct), no longer property under the ANC, were left unexplored, undeveloped and abandoned. Capital does not like risk or being expropriated, without compensation.
    The shafts were abandoned, winders cut up and sold for scrap, and surface plants demolished and sold. The capital now required to re-develop same now make these mines forever uneconomic and unattainable. The money paid into giant rehabilitation funds and workers funds has disappeared (and strangley, nobody ever asks where to?). The gold industry is dead.
    6. Exploration (essentially a high risk investment into first finding and then researching a mineral deposit), the lifeblood of the industry, was killed stone dead. The length of time taken to issue a right became a barrier to entry, as are the copious regulations.
    When a company celebrates issuing a SENS announcement saying “the Company application over the Farm xxxx has been accepted by the DMR”, instead of celebrating the announcement of drilling results, sampling results, pre-liminary economic assessments and feasibility studies, then we must know that we as an industry have regressed to such an extent that our role as minerals developers has been usurped by the announcement of small victories over a bureaucratic system.
    Right now, the entire market capitalisation of mining companies on the JSE is less than that of a single mobile phone service provider.
    South Africa is no longer a mining country. It is dead. It is yesterday’s story, and so is Minister Mantashe.
    And the constant whine by DMR potentates that the “debate must be had” will be rejected.
    The debate has been had since 1840- all one has to do is to read Pierre-Joseph Prodhoun’s essay “Property is theft! Property is theft!” to realise that the debate has now finally reached South Africa, with the added spice of race based politics. Talk about being too late. The debate has been had and Prodhoun’s philosophy found wanting.
    So what is the industry now? The most profitable industry is the continued public debate and Conferences surrounding same (Bernard is ahead of the game here)- organisations such as the Minerals Council have become pale shadows of what they used to be and will fade away as their management retire. The ANC has met its objective, it has punished the industry and closed it down.
    South African mining professionals have a future. In Africa. Not here.

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