Roger Baxter: Why SA mining execs boycotted Zwane’s Jhb Indaba banquet

LONDON — The 28 council members at South Africa’s Chamber of Mines made a very public statement against mining minister Mosebenzi Zwane – all of them boycotted the Joburg Indaba banquet where he was guest of honour. In this forthright interview, Chamber CEO Roger Baxter explains why the miners refused to attend, reasoning this would be a sign of respect to a flawed Zuma ally deeply implicated in the corruption scandal wracking the country. Despite their obvious vulnerability to officialdom (immovable assets; mining licences etc) the miners have led the business sector’s fight against state capture. And having upped the ante, they seem determined to increase the pressure. – Alec Hogg

It’s a warm welcome to Roger Baxter, the CEO of the Chamber of Mines and you guys have thrown a cat amongst some pigeons there at the Jo’burg Indaba, Roger, issuing a statement today to explain why you never went to a dinner or the banquet, which is traditionally attended by everybody, which happened last night. What’s going on?

We took a conscious decision as the Chamber of leadership, it wasn’t a decision that was taken lightly and it wasn’t an impromptu decision. It was a decision to say, ‘going to engage with the minister in this particular environment, at a dinner session, is simply not what we’re going to do.’ So, what we did is it’s not based on any animosity personally towards the minister but rather given our current regulatory and legal cases that are in place it was a decision that we would rather not engage with the minister because obviously, when you go to a dinner that’s going to be exactly what comes out of it.

Explaining the decision is very easy because not only has this minister unilaterally published a charter, who’s full implementation would damage and destroy the mining sector, in our view, to benefit a select few at the expense of many. He also sought to introduce a damaging moratorium on new right issuances, which we also had suspended through a court process. His charter effectively, establishes an agency, the Mining Transformation Development Agency that has a revenue stream of sum R3bn that will be appropriated from the industry itself, with no governance or no governance proposals in place, which obviously begs a number of questions from our side.

Now, this comes on top of already a questionable history on the minister’s side where he came in as minister. Seemingly with the primary task of strong-arming a legitimate right holder of a major mining asset, conspiring with a then Eskom leadership to force the sale of a mine to a well-known family that has systematically robbed SA of public funds.

You’re being very polite in all of this, Roger. Let’s just call it for what it was.

Yes.

Zwane, is the minister, he’s been named in Gupta Leaks. He’s been named by the Public Protector. He helped Eskom to strong-arm Glencore and you guys decided you’re not going to respect him. Clearly, that’s what happened or not?

No. Effectively, our political view is that he has not explained any of these allegations against him and it’s extremely difficult for us, based on this pattern of behaviour, for us to engage with any confidence with this minister, in terms of the industry’s future. Our decision is about our loss of confidence in the minister, etc. The fact of the matter is that you’ve also got the Academics Report, you’ve got the SA Council of Churches Report, you’ve got the Public Protector’s Report, you’ve got the Gupta Leaks, you’ve got the A Magubane research that’s been done and none of those allegations have been answered. We’ve been fully supportive of the need for an urgent establishment of a judicial commission of enquiry to State Capture, which we think should be appointed by the Chief Justice, as soon as practically possible. One of the areas that needs to be investigated is mining. Alec, remember that this issue around State Capture or even the State Capture of private interests is an issue that goes back to 2009, when we had the Kumba Iron Ore, ICT (Imperial Crown Trading) debacle.

Lots of ministers in the Zuma Government have got fingers in mining pies, isn’t it a little late now though to wake up to this reality? There’s been an enrichment in this industry for a long time. Now, Zwane, has kind of taken it over the top and it’s perhaps just pushed a little too far?

I think the right way to define it, Alec, is that when we negotiated with the ANC and the Human Resource Policy back, starting in 1992 right through to about 2004, and then the second iteration of the charter. We always had a party on the other side of the table who was willing to engage in the national interests. We don’t have that at the moment. We have obviously, a number of these State Capture allegations that are in place so, we have a minister that we don’t trust and we have no confidence in him. So, is it a bit late? No, I don’t think so. I think there always comes a turning, defining moment and it’s not just happening in the mining sphere it’s happening at a more broader sphere, where the leadership of organised business and the leadership of many different big companies in SA area standing up and being counted and saying, ‘no.’

Look, at Bonang Mohale at BLSA and the significant work they’re doing saying, ‘listen, we’re not going to support anything that’s unethical from an unethical leadership point of view or by a governance perspective.’ And, from the Chamber of Mines perspective, we’re doing exactly the same. By the way, we have our own membership compact that we’ve only just put in place. Remember, I’ve only been the CEO for the last 3 years and we’ve reorganised ourselves, we’ve become a lot more driven and effective, on behalf of our membership so, this is leadership standing up and being counted. The real heroes of SA are the people that are standing up and being counted against State Capture. Even if it’s happening now, which may be later than people had hoped, it’s happening at a much bigger scale and we can only encourage that.

Roger, what about the position on KPMG, McKinsey, SAP – there’s 3 companies that are clearly complicit in the whole State Capture scandal. They’ve taken money, it’s open and shut. Well, 2 of them have already apologised profusely. The third one, McKinsey, is trying to brazen it out. How does the mining industry, given your very strong leadership position on Zwane, how’s the mining industry viewing those 3?

We’ve also, and it’s not only just looking at those particular corporates, it’s even looking internally, having our own inspection to make sure that all our members are meeting our own membership compact as a starter. In terms of those other companies clearly, each of the individual companies are looking at who their service providers are, and they’ve been engaging with the different service providers expressing their significant concerns about their issues. So, it’s happening in a public space, it’s happening in a private space and I think people are standing up and being counted. I’ve got to say that I’ve been in organised business for a while. Not always in the absolute senior positions. It’s only when you get to those positions that you can really make the difference that counts and I’ve been really impressed with our leaders and office bearers, doing what they need to, to criticise and to take action where necessary, if the particular parties that deliver on services are not meeting or not doing what they should be doing. I think we’ve become a lot more vocal on these issues over the last 6 months, in fact actually, possibly longer.

That is the mining industry and you certainly have gone to battle on these issues but much of corporate SA who share a lot of your directors on your mining boards seems to still be giving KPMG, (for instance), the benefit of the doubt, and so on. Is it not a time to get a more cohesive approach and perhaps given the testicular fortitude that you have shown in mining to bring the others along with you?

Well, I think what we’ve done is we’ve also been, through our engagements with BMSA and the pledge to SA that BMSA has signed, we’ve been looking at developing our own pledge, similar to theirs. Compelling all our membership to do exactly the same thing, which is to say, ‘guys and girls, you’ve got to go back and put huge pressure publicly, and otherwise on these companies, who have been involved in unethical leadership and bad governance practices to get outcomes.’ If business doesn’t stand up now then we will continue on this existing march of folly. From our particular side, we’ve been driving the angle and we’ve had quite a lot of good and a lot of support from our council members. Remember, Chamber has got 28 council members and just watch this space. I think we’ve got some interesting things lined up  that will come out over the next month or two.

But where to from here and particularly perhaps starting off with the country as a whole and then we can talk specifically about mining?

I think the critical issue at a country level is we need astute, ethical leadership at the top that’s driving an agenda of positive, transformative change in the economy, but really focussed on getting the economy to deliver, and playing a unifying role and not a divided role. That starts at the top of the country. Now, when you reflect into the processes clearly the ANC Elective Conference in December is an important conference. In terms of organised business, we’ve been involved in a number of different discussions with organised labour, with COSATU and others, to try and get a sense of the key issues and giving ideas as to how we can get the economy back on track. Once you’ve got that leadership in place and you’ve got outcomes in terms of government that are driving an agenda of positive, transformative change, which is encouraging much greater investment in the economy and much greater business confidence. I think SA can really make good progress.

So, when you get into the specifics of the mining sector clearly, we’ve made a decision that it’s just not practical to engage with this current minister because we don’t trust him and we don’t think that he is going to deliver an outcome, which is in the national interest. So, what steps are taken beyond that? At this particular stage, we only have confidence in the courts and we’re following the court processes. We have been negating with a lot of different stakeholders. For example, we have met with the ANC top 6, or at least most of the top 6, and expressed our concerns, etc. We’re continuing to make sure that the legal system does its job and delivers outcomes which are again, in the national interests. But as businesses, we’ll make sure that on an ethical leadership and good governance stage we’ll drive our agenda at the same  time because I think lots has been exposed. We need this commission of enquiry and we need the prosecuting authority to do their job and get on with the process of making sure that people understand that you’re not going to get away with State Capture.

So, you didn’t go to the dinner last night because Zwane was there. Presumably, he was going to make a speech and you weren’t going to clap for him.

Yes, effectively, we were not going to go to a dinner where the menu didn’t quite agree with us, and it wasn’t quite amenable to what we were expecting to be on the menu. But secondly, he’s been on a number of different platforms and on the platform, that he was on in Perth he basically said, that this mining charter is law and that the mining companies must implement it and that the investment community is absolutely over the moon about the charter, which is creating a totally false view of what’s actually happening in mining.

He didn’t mention once the fact that the charter has been suspended. It’s under court and there’s litigation in place that the entire industry is absolutely up in arms around the issue. And that himself and his administration having covered themselves in glory, in terms of helping leaders through the crisis that they’re currently facing. So, it was incumbent on us, in that foreign forum, to stand up and say, ‘sorry that’s not correct.’ This is a country where we’ve fallen down the rankings, in terms of the Fraser Institute Survey. We are now ranked 13th in Africa for our investment attractiveness so, we made these statements, including the fact that we’ve lost confidence in this minister, to negotiate an outcome which is in the national interest and I think that’s been a strong statement that has come through from the industry. It’s not just Roger Baxter speaking. Yes, I’m the CEO of the Chamber but this is the Chamber speaking through Roger Baxter, as the CEO.

What’s the reaction been like from the organisers of the Jo’burg Indaba?

So, Bernard was a little bit mischievous yesterday saying, ‘people must go and sit in the room and try and engage, and solve their differences.’ Unfortunately, Alec, we’ve certainly done a lot of work over the last 2 years to try and do that, to try and engage with the department. But what we found, particular in engagement of the ownership element, is that our views are negotiated in bad faith so, he came in at the last moment with a set of ideas that were totally off the radar screen, off the chart. Which basically, stopped any potential agreement that could have been reached at that particular time so, from that moment on, we knew they were negotiating in bad faith and the outcome of that is what you see.

Bernard obviously thinks that we can go and sit. He says, ‘lock Roger and the minister away in a room, and try and get outcome which is interesting.’ My particular perspective on it is that’s not going to solve any particular issue and we’ve made that comment to the ANC. We’ve lost faith and trust in the minister himself, and we’re not going to engage unless there’s some sort of third party facilitation.

What happens if at the ANC’s Elective Conference in December, the Zuma Administration is perpetuated through just another person, who waves the banner and that the same minister of mining is reappointed or continues to play in this role?

We will continue with our court cases. The court cases continue. The interdict hearing for the review of the mining charter is taking place on the 13th and 14th December, roughly at the same time as the Elective Conference. Our legal processes continue and when those legal processes have delivered particular results hopefully, it would have created the right sort of environment to allow for a more meaningful proper negotiation of a charter that we can all live with. Not a charter that is unilaterally developed and imposed, in which only the mining sector is going to have to implement, which it can’t because the targets are not practical.

But I think what was important this morning is that Zwele Mkhize, the treasurer general of the ANC, made it quite clear. He said, ‘they’ve taken on board the industry’s concerns.’ They do think that the charter needs to be renegotiated and that there has to be engagements. They’re prepared to play a facilitating role now, again, that’s an interesting offer. We still continue with the legal processes but we’re not going to engage with the minister, at this stage.

But you would with Zwele Mkhize?

We would if the ANC wanted to play that role but that doesn’t mean that the court cases are going to be suspended because if that’s the condition for the engagement, we’ve had enough experience about suspending court cases. Remember the Declaratory Order Application of the continuing consequences issue, we had started that process with Minister Ramatlhodi back in 2015. We put it on hold, pending a discussion process and clearly, on the way that discussion went and the way that, in our view, the minister and his team negotiated is not something which we want to go back and do because it’s just going to generate an outcome, which is not very good.

What’s happening on the ground, Roger? What’s happening with the companies you have to keep pouring money, (this is mining), into exploring for new reserves, maintaining the shafts, etc, is all of that continuing?

Greenfields exploration of SA is basically, at a standstill. New greenfields projects in SA, there’s effectively an investment freeze. Mining companies are not even covering their sustaining CAPEX in the current environment so, what’s happening is we’ve seen net investment in the last 2 years turning negative and that will feed through into mining production over the next couple of years. So, it comes back to this issue that at a particular point in time there has to be a focus on creating an environment where we have a stable, predictable, and competitive policies and we have a government and industry partnership driving an agenda of positive, transformative change. That’s something which is not going to happen in the current environment.

The problem for you is that you’ve got assets that you cannot pick up and move anywhere so,  you have to find a solution. Do you think there is one available?

Yes, I do. I think ultimately, as much as South Africans like to do what is called abyss gazing. I think the older we get the more we realise that abyss gazing is rather a traumatic past time and it’s better to be focussed on avoiding those sorts of issues and getting back into engaging and driving outcomes that are workable. I think there are pragmatic solutions that can be put in place but it’s going to have to start with ethical leadership and good governance and that starts in our department (in the ministry), and engaging in a way that is driving/focussed on a national interest as opposed to trying to potentially, benefit a select few.

Just to close off with. I spoke last week with Mick Davis, the founder of Xstrata and X2, and a very well-known person to you. He said that he told the mining minister last year and he would repeat it in public. That he will not advise anybody, anywhere to put money into the SA mining sector today. In fact, he didn’t just say mining but the whole country. He says, ‘there are major issues that need to be worked out, from corruption to productivity, to uncertainty around legislation and to a decline in the capital stock in the country.’ Would you agree with his view or are you still going out, when you’re in the international environment, encouraging or trying to encourage people to invest in the country?

Alec, I think our conversation with the investment community for example, the RMB Morgan Stanley big 5 Investment Conference in CT last week, we met. Myself and the Chamber’s president met with 37 different investors, institutional investors in the industry – the conversation is slightly different. It’s not about whether people are going to put new capital in the industry. It’s whether people are going to take their capital out of the existing industry so, I think there’s been huge support from the investment community in relation to our court challenges on all these things related to the mining charter, the moratorium and all that sort of stuff. There’s huge support coming through saying, ‘the industry absolutely has to draw a line in the sand and focus on ethical leadership and good governance,’ which is what we’re doing. I think there’s been a lot of progress on that. But when it comes back to your original question around, ‘do we want investment into the country?’ I’m not going to go out and say to an investor, ‘don’t come and invest in SA.’ But I’m going to say that there are some significant challenges that we need to get resolved in the short and medium term, which are resolvable if you’ve got the right ethical leadership, and good governance in place. And if partnership can be realised between the different stakeholders to get an outcome, which is workable for all of us. I think that is possible but again, it comes back to ethical leadership and good governance.

Chamber of Mines press statement

Chamber of Mines CEO, Roger Baxter, today confirmed that Chamber of Mines executives and office bearers decided not to attend last night’s Joburg Indaba banquet at which Mineral Resources Minister Mosebenzi Zwane was the guest speaker.

It was not an impetuous decision. It was not a decision based on personal animosity towards the Minister. It was a carefully considered decision based on the current regulatory and judicial situation.

It was also something we resolved to do without fanfare or comment. We regret that the conference organiser chose to publicise our decision, which was conveyed to him purely as a matter of courtesy to assist his organisational considerations.

However, we are now in a position where we have to explain what lies behind the decision. The following are the points that led us to the decision we made:

• Not only has Minister Zwane unilaterally published a charter whose full implementation would destroy the industry; he also recklessly sought to introduce a moratorium on approving new rights or amending rights. He did so on the basis of his refusal to engage on the issues.
• His gazetted charter establishes an agency that would administer billions of rands a year appropriated from the industry with no indications of plans for good governance.
• This comes on top of a very questionable history:
  • He came in as Minister seemingly with the primary task of strong-arming a legitimate rights holder of a major mining asset, conspiring with then Eskom leadership to apparently force the sale of a mine to a well-known family that has systematically robbed SA of public funds. The story has been comprehensively documented by the Public Protector. The Minister has done nothing to explain his role in this.
  • Prior to that, in his previous position as Free State Agriculture MEC, his alleged role in channeling hundreds of millions in state funds to the same family for the establishment of a dairy at taxpayers’ expense has also been comprehensively documented with, again, no attempt at an explanation by him.

    

• This pattern of behaviour makes it impossible for the industry to engage with any confidence with him on the industry’s future.
• We know that a new charter has to be developed.  We stand ready to do so with government leaders of integrity and with all other stakeholders. We have been seeking to do this for the past two years without success.
• Right now, we are focused on legal remedies because it is the only currently available course of action in which we can have confidence.
• For us to have attended last night’s event would have forced us to engage with the Minister on specific regulatory issues in circumstances that are simply not conducive to any constructive engagement at this stage, other than through the courts. The last time the Chamber shared a platform with the Minister – in Perth, Australia – the outcome was not at all constructive.
• The conference organiser decided to involve Minister Zwane in this event, as is his right. However, we would have expected Mr Swanepoel to understand why, in the circumstances, Chamber leaders chose to avoid exacerbating a situation where, again, the outcome would inevitably have been unconstructive.