Stepping forward and stepping back – the Chamber of Mines on amendments, CCMA, and Strydom
Things between South Africa's mining companies and the government arms it interacts with have been very touchy for the last few years. Nationalisation, violent labour strikes, electricity supply problems – wherever mining and the state touch has been a flashpoint. Happily, it seems that the mining companies are reasonably satisfied with the changes coming in the Mineral and Petroleum Resources Development Act Bill, although, of course, their counterparts in the oil and gas business are a little less so.
Despite progress in the regulatory arena, however, things have gotten tenser and tenser at the CCMA as the platinum strike drags on with no sign of agreement. The latest spark came when negotiator Elize Strydom spoke out against the process and her CCMA counterparts. The Chamber of Mines is standing by Strydom, but the atmosphere of animosity and rancour remains both palpable and worrying. – FD
ALEC HOGG: The South African Chamber of Mines has welcomed the approval of the Mineral and Petroleum Resources Development Act Bill. Roger Baxter, Chief Operating Officer of the Chamber of Mines joins us in the studio. Well, you guys – for a change – are smiling. Usually, it's the miners who are beaten over the head. It looks as though the shale gas industry is going to be sorted out by these amendments, but you don't have a problem…
ROGER BAXTER: We weren't involved in the discussions on the shale gas side or on the offshore gas side. We were involved only in the mining-related issues. It's been a very extensive 13-month process with both government and parliament. Of all the issues that we were particularly concerned about in the first draft that came out in December 2012, we think we've made the right progress collectively – sometimes not perfect to what we wanted – but the compromise is the right thing for the country and the industry. We think the changes are the right ones and that we're making progress.
ALEC HOGG: You have certainty now, in mining.
ROGER BAXTER: It isn't yet. Just remember that we still have… The Amendment Bill itself will require regulatory regulations to be developed, so that's still a process that has to happen. At a broader industry level, we think that we're getting better policy certainty. Just remember, the nationalisation debate was a big negative for us – that is now out of the way. The ANC rejected wholesale nationalisation. On the tax review issues, we have a tax committee that we're working in, so at a policy level we believe we're on the right trajectory. In relation to the regulatory environment itself, we also think we're making the right progress. In this particular Bill, we had nine issues that we were concerned about. We think that we've resolved a number of those issues. It's not that we got everything we wanted; government also got quite a lot of what it wanted, but they were the right compromises for the right reasons.
ALEC HOGG: I wonder, though. If you look at the other side of this MPRDA Amendment where government is saying 'we want a 20 percent free carry and we want an option to buy the balance of your company' before you start investing… I wonder if it isn't perhaps a little bit like what happened with people in Germany, when the Jews were targeted initially during the time of Hitler. Everybody suffered in the long term. Doesn't this just slightly concern you, that maybe they're going on the one side? That's nationalisation by stealth.
ROGER BAXTER: Alec, we had raised some issues in our initial submission, which was made in January 2013 around the issue of the old OP2 licenses and free carried interest. A number of countries in the world do have free carried interest, particularly in the oil and gas industry so I think we should look at it from the oil and gas industry, being quite different to the actual mining industry, itself. Obviously, it's a concern to see what's emerged from their side. We obviously weren't involved in the discussions on that specific issue, but from our side we are making the right moves.
ALEC HOGG: Free carry is not a problem. Everybody lives with that. It's the 80 percent option, in other words, the option to buy out the rest of your business. If that's not nationalisation – and it can start in oil and gas – who's to say it won't come to mining?
ROGER BAXTER: I'm not convinced that its government's intention to take 80 percent shares in these types of environments. Hopefully, the parties in that particular grouping will work out some sort of acceptable compromise. What ultimately needs to happen here is we need the investment and exploration to take place and we need the investment to take place in the development of those deposits, so let's see how that process unfolds.
GUGULETHU MFUPHI: Roger, why do you believe government wouldn't be keen to take over mining?
ROGER BAXTER: Nationalisation is not a policy option that the ANC has accepted, so specifically in the mining side government recognises and is working with the sector to get mining back on track. Mining has been through a very difficult last couple of years, going back to 2012 – Marikana etcetera. I think Marikana still casts quite a shadow over the industry, but we've worked very hard….. you'll notice that if you look at strike activity/illegal strike activity over the last year and this year, it has been much more diminished. The levels of violence and intimidation have come right down, and so we are making progress. Yes, we have the platinum sector out on strike and we hope that that can be resolved at the earliest opportunity, based on a reasonably economically rational outcome. It's a challenging space, but we are making progress as a sector and addressing these types of issues. On issues like infrastructure, we have some big challenges as a country, and not just for the mining sector. Infrastructure is a binding constraint. The labour environment has been challenging for us, but we're not sitting on our hands. There's a lot of work that's going into resolving this and once we get some of these bits behind us, we think we'll be pointing in the right direction.
ALEC HOGG: Roger, I'm not trying to ambush you here, but the big story of the moment is the Elize Strydom, your Chief Negotiator, who said something to a reporter – off the record – which has now been repeated, and you guys are backtracking from that. Even today, there was an announcement on this issue. Surely, if she believes it and she said it – on or off the record – she should stick with it.
ROGER BAXTER: Her comments that were made were obviously her personal comments. She's a very respected member of our team and we're certainly not going to distance ourselves from her. She's going to remain within our team. It's one of those things where comments like that unfortunately, shouldn't have gone into the media at that particular time.
ALEC HOGG: I think maybe it shouldn't have been made in the first place, if that's the way she feels about it.
ROGER BAXTER: Sure, these things do happen and I think there's a lot of learning for all of us in the process. It's one of those difficult ones.
ALEC HOGG: But you're sticking with her…you're not going to abandon her.
ROGER BAXTER: No, she's a very capable person. She has a huge amount of value that she adds to the sector.
ALEC HOGG: Has she apologised for those comments, or does she still believe that she was within her rights?
ROGER BAXTER: The Chamber has obviously apologised to the extent of the impact it had on the CCMA itself. I think there's clearly room for introspection on all the different sides.
GUGULETHU MFUPHI: The platinum sector strikes: how far are we from finding a solution there – hopefully?
ROGER BAXTER: Gugu, we've obviously made a bit of progress, but I'm not sure how close we are specifically, to an agreement. The mining companies have made an offer of between seven-and-a-half and nine percent, which is a very respectable offer in the current circumstances with nearly half of the platinum sector loss making at current prices. Our hope is that ultimately, an agreement will be reached in the settlement zone. The industry is in a tough space at the moment. It's not to say that the stakeholders haven't been working hard, but the companies are saying 'this is what we can do and we can't do any further, otherwise it has a huge impact on the business itself'.
ALEC HOGG: Congratulations to you for bringing it all to the public's notice, by having the running total of what the platinum sector strike is costing us at the moment – nearly four billion.
ROGER BAXTER: Well, it's four billion in wages, more than eight billion in lost revenue to the sector, and lost revenue for the country from an export point of view and obviously, from an economic activity point of view. They're very interesting numbers. We've tried to provide as much data into the equation. We're also looking at wage rates and other things to just make sure people understand that we're not paying a low level of wages. In fact, if you look at mining in terms of guaranteed packages for entry-level miners – in some cases – we're paying double what other sectors are paying for similar semi-skilled workers. It's a very challenging one. We want to have a productive, engaged, and happy workforce but at the same time, we also have to run viable companies and make sure that productivity and other factors are coming forward. A lot of work is being done on that and we hope that these things come to a solution soon.