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The Mining Charter’s lesson

MONEYWEB / 08 OCTOBER 2018 - 00.33 / MAMOKGETHI MOLOPYANE

Policy shouldn’t be changed without careful prior assessment, especially in an industry so intrinsically linked to global market unpredictability.

Apart from the Marikana tragedy, no incident demonstrates the volatility of stakeholder relationships in the mining sector quite like mineral resources minister Gwede Mantashe’s address at a Xolobeni community meeting two weeks ago. I’ve said before that the workability of the Mining Charter will depend on its inclusiveness of mining hosting communities.

Gwede Mantashe may have been able to give ‘policy certainty’ to business, but what about local communities? Picture: Siphiwe Sibeko/Reuters

While it may seem that, in this charter, stakeholders have finally found common ground, the Xolobeni incident shows how far apart communities and the department are when it comes to what each deems to be valuable and indispensable.

More telling is that the closest the charter comes to defining community is in the context of the location where mining takes places. Given past experience of individuals or tribal leaders often claiming to represent the community, it would have been instructive for the policy to define who the community is. This would remove ambiguities for those affected, and more so for the mining companies; they need to know that they cannot selectively speak to a few individuals and then, as has been alleged, make decisions that will affect many on the words of those few.

It may be noted in passing that the shrewdness of Mantashe was wittily illustrated in gazetting this charter. He and his team have said to business, here’s the “policy certainty” you’ve been demanding. Not only does it include the ‘once empowered, always empowered’ idea, they’ve taken it a step further by withdrawing the Mineral and Petroleum Resources Development Act.

It is definitely too soon for a self-pat on the back. In reality, the legitimacy of the charter is entirely dependant on some parts of it being disputed and questioned by the industry and communities. For now, the Minerals Council of South Africa seems to have recognised it.

Observers who have not been looking closely at the legacy of mining in South Africa might sigh in vexation as to why government is still trying to enforce rules about “30% ownership, 5% non-transferrable carried interest to host communities and employees, or 20% black women representation on company boards” (Mining Charter as gazetted on September 27, 2018).

Some observers within and beyond South Africa’s borders may indignantly object to these changes, which include the requirement that companies contribute to community development programmes without using this as a substitute of their responsibilities in terms of the Social Labour Plans programmes.

However, it is perverse to argue that any attempt to rectify past and ever- present injustices is irresponsible and ill-advised when considering the state of mining industry globally and the innate weakness of South Africa’s gold and platinum sectors.

Some of the industry’s suffering is of its own doing; the oversupply of platinum group metals (PGMs) in the already oversaturated market has seen demand weaken. According to the Johnson Matthey PGM Market Report for May 2018, this year’s platinum oversupply is expected to reach 300 000 ounces. This is further aggravated by the tumbling platinum price, which is now standing at a 10-year low.

But these explanations are too limited and too expediently excuse mining from responsibility. More so when we know the truth to be the opposite. Perhaps it will be instructive to remind these observers why changes in the industry are necessary even when they make many uncomfortable.

Jade Davenport’s powerful words in Digging Deep: A History of Mining in South Africa (Jonathan Ball Publishers, 2013) addresses and rightly reminds this private prejudice and elite snobbishness that “nowhere else in the world has the mineral revolution proved so influential in weaving the political, economic and social fabric of society.”

It should by now make sense why any redress policy has to consider the fact that mining lies at the heart of South Africa’s economic and social crisis, be it from the concept of the migrant worker, discrimination and wage inequality in the labour market, or the capitalistic network that has enriched a few at the expense of the broader society.

Lack of government action and inconsistencies and lack of coherence in policies must equally bear the blame. When we focus only on the industry, we deliberately whitewash our responsibility of holding all accountable. We also circumvent our chances of examining the effectiveness of public policy effectively.

The blame for long-winded and unnecessary squabbling can equally be placed at the clay feet of political leaders who lack farsightedness. Since the first the mining charter, gazetted in 2002, there has been enough time to learn from scientifically well-founded, tested and implemented ex-ante policies used by other countries or regions that have become an integral and systematic part of the political decision-making process.

There are in fact lessons that can be learned from what others do. Although not perfect, the governments of Canada and Nevada have come close to regulating and achieving public policy goals while reducing the risk of being perceived by markets as ineffective or hindering investment.

On a recent trip to the state of Nevada, I had the opportunity to engage with a senior mining company executive. He gave an inspired account of how the government’s approach to regulation and interaction with the private sector – collaboratively working towards achieving public policy goals – has managed to bridge the distrust gap and enable better engagements with native communities.

The last six years of the journey to the Mining Charter III have exposed the weaknesses in public regulation that should bear the consequences for those who advised and were tasked with policymaking. What has surfaced out of years of conflict over mining policy and regulation is a valuable lesson. Policy should not be changed without assessing the feasibility of it and its impact on the markets. Even more so if those changes are in an industry that is intrinsically linked to the unpredictability of global markets.

The delays brought on by legal disputes has shown us that public policy, legislation and public regulation must always consider the effects on intended beneficiaries. There must be balance between understanding the consequences of policy changes in the face of industries that are global.

As such, regulatory strategies must include practical programmes that are small and can later be scaled on a national level. One example that is working involves a mine that is hosting small community businesses as part its enterprise development plan instead of one BEE company. If successful, this initiative can be tailored and replicated in another area to suit the needs of both that community and company.

An important memory from the years of dissatisfaction about policy and regulation in the mining industry is that economic realities are generally much stronger than policies. In future, it will be interesting to see if the revisiting or changing of public policies and legislation will fight against economic realities to gratify ideology.

In aiming to win policy battles, the Mining Charter has afforded government and its policymakers in all departments a valuable lesson. While the battle rages on and uncertainty continues, it will take a long time for the country to recover from the true size of the loss and the nature of the crisis created by policy uncertainty.

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LINK : https://www.moneyweb.co.za/moneyweb-opinion/the-mining-charters-lesson/

Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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