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JOHANNESBURG — South Africa’s government seriously needs to start opening its eyes to what its neighbours are doing, because, frankly, a lot of them have policies that make more sense than our own. Case in point is Botswana, which ranks at position 21 in the world on the latest Mining Policy rankings produced by Vancouver’s Fraser Institute. South Africa ranks 81, closer to Zimbabwe. Time for Gwede to start improving this situation. – Gareth van Zyl
By David Christianson*
For over 100 years, the dissemination of knowledge about mining has been overwhelmingly from South Africa into the rest of the continent. It is time to reverse this flow, starting with the regulatory environment.
For the last two years, the IRR has argued that South Africa needs to adopt a mining law which builds on the good-practice lessons of Botswana. Over the past year, the source of good-practice lessons has expanded to include Namibia and, counter-intuitive though it may seem, also Zimbabwe.
Botswana is the perpetual continental leader of the Mining Policy rankings produced by Vancouver’s Fraser Institute. In 2016, the year the IRR first suggested following Botswana’s lead, our neighbour was ranked 12th in the world on Mining Policy factors (out of 104), headed only by developed-world jurisdictions such as Saskatchewan, Manitoba, Nevada and Western Australia. The only developing-world jurisdiction ahead of Botswana was Chile, which is an intermediate case. South Africa came in at 84, Namibia at 38 and Zimbabwe, with its indigenisation policy, at a miserable 102.
The Fraser Institute stressed the consistency and transparency of Botswana’s mining laws as well as the consistency and efficiency of its administrative processes. Executive discretion is minimal and the ethnicity of applicants is not a consideration.
The Fraser Institute’s rankings give a 60 percent weighting to the ‘mineral potential’ – or God-given natural wealth of a jurisdiction’s mineral endowment – and 40 percent to perceptions of government policy in the exploration, development and mining space. There is not too much that can be done about mineral potential although exploration and public data management play a bigger role than is often appreciated (both areas where South Africa performs appallingly).
However, policy is entirely a product of what governments choose to do and not do. It is sometimes argued that the Fraser Institute’s Policy rankings are limited by the fact that they measure the ‘perceptions’ of mining industry executives and are thus not ‘objective’. But that’s exactly the point. The index tells us what those who make mining investment decisions are thinking.
In 2017, Botswana dropped to 21st ranking in the Policy rankings out of 91 jurisdictions. South Africa was 81st, just avoiding the bottom decile, the country’s worst-ever performance. At that point, Botswana’s actions demonstrated just how different it is from South Africa and how justified its much higher ranking is.
In June this year, the Government of Botswana announced plans to bring a new minerals policy before parliament. The policy, which has been in preparation for three years, is ‘intended to improve the investment climate in the minerals sector’, said the minister. Other legislative amendments include measures to speed up environmental approvals, clarify the status of protected areas and improve economic infrastructure, all areas of concern identified by the Fraser Institute.
These initiatives dovetail with other areas of government policy designed to make it easier to conduct business in Botswana. There include the 2017 Regulatory Impact Assessment Strategy and the Doing Business Reforms Roadmap, both of which are in implementation and, more importantly, are seen by investors as credible commitments to improving the investment climate.
What a relief it would be for South African miners to hear our minister commit to improving investment regulations in the sector. Minister Mantashe’s recently announced intention to scrap the amended version of the Minerals and Petroleum Resources Development Act is a promising step in that it eliminates some of the uncertainty associated with too much (arbitrary) executive power. Miners will no longer fear being forced to sell minerals to local beneficiaries at discounted prices.
But mining investors will still be subjected to the racial bean-counting outlined in the Charter, now scheduled for finalisation before November. This is an aspect of policy which both Namibia and Zimbabwe, following Botswana’s lead, have recently scrapped.
In 2016, the government of Namibia, at the time following South African policy, proposed a law requiring compulsory local black ownership of assets in mining. But, with the country facing negative growth in 2017, it was very sensibly abandoned. President Geingob rejected the idea on the grounds that it would disincentivise investment and that the benefits would accrue to those with access to capital rather than the truly disadvantaged.
Zimbabwe abandoned Robert Mugabe’s 2008 indigenisation policy immediately after the dictator’s removal in December last year and, despite issues around the recent election, is enjoying a mining revival. From just three active minerals exploration permits in December last year, activity had increased to 30 active permits by the end of March. The country is once again attracting investor interest. It can be expected to climb the rankings substantially in the next Fraser Institute Index, due in early 2019.
South Africa’s neighbours have thrown aside resource nationalism. It has to be asked why the South African government is not able to accept the good-practice lessons of these experiences and do the same?
- David Christianson is a policy fellow at the IRR – a think tank that promotes political and economic freedom. If you agree with what you have just read then click here or SMS your name to 32823.
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