PREMIUM FREE TRIAL

Colin Collard: Reading between the lines of Mosebenzi Zwane’s Mining Charter

JOHANNESBURG — South Africa is one of the world’s best-endowed countries in terms of mineral wealth. Yet it ranks only 66th in the world for its attractiveness as a destination for mining investment. In 1986, the industry employed 832,000 people. By last year that figure had dropped to 485,000. Then, as now, the industry is a huge employer of largely unskilled labour. Of course, mines have closed because ore has run out. But investors blame government meddling – and the hostile labour environment – for the industry’s continuing downward spiral. On June 15 the Minister of Mineral Resources, Mosebenzi Zwane, released his new Mining Charter. Is it yet another instance of government interference? Will it be benefiting the poor and jobless or, once again, is it simply a tool to enrich the chosen few in the ANC’s elite, including their friends? Here we delve into the mining minister’s thinking. In italics, how he presented it to the nation – and in Roman type, what we really believe goes through his mind. – Colin Collard

By Colin Collard*

“The mining industry has been the bedrock of the South African economy for over 100 years. The sector has made many positive contributions to the development of our economy, and some of the infrastructure and industries thriving today are as a direct resulting of mining.

“We cannot deny, however, that there have been some undesirable effects, brought on by decades of colonialism and apartheid.

“Unemployment, inequality and poverty have been growing over the years, creating an untenable situation.

“Of course, people like to blame the ANC for the widespread unemployment. They say we lack ideas, are anti-business, don’t know what we are doing, etc. But we’ve been in power for, what is it, just under a quarter of a century—that isn’t long, is it?

File Photo: A mine shaft is seen near Carletonville, west of Johannesburg. REUTERS/Siphiwe Sibeko

“What is comforting is that today a poor rural shack dweller visiting the city can see many blacks who are rich, indeed some who are very rich. So, even though it is taking a little bit longer than we wish, we are getting there, aren’t we? Anyway, we’d like to spread this type of wealth around a little more. And that’s the purpose of this Mining Charter.

“The birth of South Africa’s democracy in 1994 brought about political freedom for all. Vast economic imbalances remain a challenge, particularly when the majority of South Africans have yet to see meaningful economic participation or ownership of these minerals.

“Naturally, I am not discounting the 40% of earnings the mining industry contributes to government in tax, a rate which many say is among the highest in the world. And I am not denigrating the mining industry’s contributions by way of licenses or its royalty payments to communities. Or that mining employs half a million people who in turn pay taxes to the government. I am also not unmindful of the dividends the mining companies pay to the state’s Industrial Development Corporation and to the government employees’ pension fund. Or even the R200 billion that has already been transferred to black individuals or organisations in empowerment deals. We, as government, see none of these contributions as a problem.

Read also: Maimane: Zwane’s Mining Charter has Zuptoid fingerprints all over it

“What really concerns us, however, is the white ownership and management, and the grip that White Monopoly Capital has on the mining industry. That’s what really bugs us. We wouldn’t mind if mines were owned by Chinese, Indians (particularly Indians) or even KhoiSan—but please, God, not whites.

“The need for more radical measures in order to meet the socio-economic needs of our people has never been greater than it is right now.

“Today more people in South Africa are without jobs than ever before. The number of people on benefits now exceeds the number employed. We’ve been downgraded by all the ratings agencies. Technically, we are in a recession. Our borrowings are now so huge that we actually pay more in interest on what we borrow than what we pay to grant beneficiaries. Business confidence is the lowest it’s been in nine years. The economy is the worst it’s been since the advent of democracy. Every second day, somewhere in the country, there is one or other protest about service delivery. Regrettably, too, hardly a week goes by without a government or state owned company hitting the headlines in some or other financial scandal. So you can see how we desperately need a good story to tell. Hence this Mining Charter.

“As a country with a substantial amount of untapped mineral resources, we have a unique opportunity to use these minerals as a catalyst not only to adopt aggressive economic growth efforts, but to catapult South Africa’s economy forward.

“Actually, I have no idea how, on our own, we would have the expertise to tap these mineral resources, or how we could finance exploration, sink shafts, set up crushing and milling plants, or even manage mining operations. So how do we ‘use minerals as a catalyst for aggressive economic growth’? I don’t really know. But it sounds good, doesn’t it? What I do know, however, is how to take from Peter and give to Sipho.

“We are not blind to the current global economic climate. It requires Government to be more resilient in addressing the ever-growing economic challenges posed by a variety of political and economic factors.

“This Mining Charter we present to you today is a key instrument for radical change, designed to address many of the inequalities in the mining and minerals sector prior to 2002.

“Did you get all of that? While this Charter is going to address many of the inequalities in the mining and minerals sector, it’s actually not going far enough. We saw how easily the mines buckled when we presented the 2004 charter. Did that appease us? Of course not. We want more. So expect more demands next year, and the year after that, too. We are going to escalate our demands by degrees, though. Doing it all at once could create havoc—just like in that old story of the frog jumping out of a pot of boiling water but getting cooked if water in the pot is heated up slowly enough.

Read also: Ruan Kemp: Controversial new mining charter – is it a Black Zwane event?

“In 2016 at my first Mining Indaba as the Minister of Mineral Resources, I promised that as a reasonable and responsible Regulator, we would take some time to engage with South Africans. Over the past year, we embarked on many such engagements, and heard views from a wide range of stakeholders.

“Notice how I talk of myself as a reasonable and responsible Regulator. Sounds nice, doesn’t it? But anyway, back to the subject. We didn’t engage with everyone. Mostly we did desk research—my desk—and where we did consult we certainly didn’t include stakeholders who we thought would raise objections. Like that lily-white Chamber of Mines, the bedrock of all White Monopoly Capital. Just because they represent 90% of the owners of the industry they think we should listen to them. What they don’t understand is that we make the rules, not them.

“A major concern raised by the investor community was that of policy certainty, and at a time when policy certainty is most needed, we present The 2017 Mining Charter, An Instrument of Change: Giving Practical Expression to Radical Economic Transformation.

South African president’s radical economic transformation. More magic available at www.zapiro.com

“Because we didn’t talk to the investor community they didn’t, of course, raise the issue of policy certainty now. It’s just that we already knew about it; it’s an old chestnut of theirs, one they’re always harping on. They’re forever telling us that investors, particularly the overseas ones, want to know where they stand, that there should be fixed rules about shareholdings and returns. Well, they want fixed rules? I’ll give them fixed rules!

“By the way, how did you like the title: An Instrument of Change: Giving Practical Expression to Radical Economic Transformation? And you thought only Thuli could come up with catchy report names!

“We have listened to the people of South Africa, (well, at least the views we wanted to hear) who have indicated that many of the structures for the inclusion of Black shareholders in the industry have been nothing more than debt-laden arrangements, with no real direct economic participation.

“As I’ve said, we didn’t spend too much time on it. Fact is, I’ve been too busy scooting here, there and everywhere, courtesy of you-know-who, who, as it happens, made lots of valuable suggestions for this report.

“We have listened to workers and communities whose economic interests in the mines have not been recognised. They have not seen real economic benefit from mining activities.

Read also: Zwane’s new mining charter reflects desperation of the Saxonwold Shebeeners

“The miners, by the way, just happen to be among the lucky few in South Africa to actually have jobs. Naturally, we didn’t speak to unemployed persons. We never do. You don’t dazzle a man who has nothing. To him you promise a job, not a shareholding.

“We engaged the financial institutions, who shared their challenges of balancing developmental needs and that of making profit.

“Capitalists always pretend to care about workers when actually all they are concerned about is profits.

“Given these and other considerations, I turn now to deal with some of the key areas of improvement that are informed by what you have said and have resulted in us implementing what you have asked for.

“Notice how I talk about “you”. It sounds like I really care about your opinion, when actually I don’t.

“On the element of ownership, not only have we increased the thresholds required for prospecting rights, mining rights and the transfer of rights, we have ensured that workers and communities receive their fair share of the economic development of their country’s mineral resources.

“As I said before, we’re not concerned about the huge contribution the mining industry makes to the nation by way of taxes, licenses, royalties, employment, etc. It’s the foreign or white control thing that bugs us. As before, qualities like experience, ability, merit, skill mean nothing to the ANC. Only numbers. If the numbers aren’t right, then nothing is fair—pure and simple.

“The 2017 Charter requires that a new prospecting right must have a minimum of 50% plus 1 Black Person shareholding, which must include voting rights.

“Notice none of this 50% plus 1 without voting rights. What we want is control. And, for now, be grateful it’s only 50% plus 1. Next time around we are going to increase the percentage to where it represents—yes, you guessed it—the exact demographics of the country. I mean anything less than, say, 90% wouldn’t be fair, would it?

“And don’t ask me how any of these newly empowered participants are going to pay for the increased percentages. You’ve heard about expropriation of land without compensation? Well, hold that thought. Now think of mines. Where do you find them? Under the land, of course. And you don’t steal land without stealing what’s underneath it, do you?

“A new mining right must have 30% Black Persons’ shareholding, with the 30% shareholding to be apportioned between employees, communities and entrepreneurs in a specific manner.

“The stability of the mining sector is largely dependent on workers, (I mean when it comes to ensuring stability, who, after all, does the rioting, burning, vandalising and looting, if not the workers?) who play a crucial role in its development. Stability cannot exist whilst the conditions of workers remains inadequate. In demonstrating Government’s commitment to ensuring that our workers realise decent benefits, we have incorporated measures aimed at addressing their concerns—the most notable being the allocation of 8% shareholding to workers, and the separation of workers’ shareholding from that of entrepreneurs.

“We have taken to heart the plight of our people from host communities and from labour-sending areas. An 8% shareholding is allocated to mine communities, to be held through a trust.

“The trustees? Don’t worry about that. They’ll be appointed by the President who, from time to time, will choose only the most suitable candidates.

“Right now, we’ve got plenty of applicants looking for positions where good governance is important. On the waiting list are people like Brian Molefe, Ben Ngubane, Lucky Montana, Hlaudi Motsoeneng—with a regular supply expected from our state owned entities.

“We must ensure that our communities, under the leadership of both Government and traditional leaders, derive meaningful benefit from their mineral wealth.

“And don’t give me that crap about how our communities can’t, on their own, raise money, prospect, sink shafts, set up processing plants, etc. That’s not what is important here. Our policy is: if we see something we like, we take it. The new ANC slogan is: If You Can’t Create, Take!

“Of course, we’re not going to kill any gold egg-laying geese. That would be stupid. You squeeze foreign or white owned companies until they squeak; you don’t kill them off. Or you force them to sell, like we did to that Swiss company Glencore. We came up with some marvellous strategies to compel them to sell their Optimum Coal Mine to the Guptas. (I’m annoyed that I did more work on this than Molefe, but he gets all the credit.)

“A 14% shareholding to Black entrepreneurs evidences that this Instrument of Change is serious about new Black entrepreneurs. It is designed to encourage new Black shareholders in mining and mineral ventures, and to ensure that they receive real economic value from their participation, rather than decades of debt repayments.

“Those of us in the ANC leadership who have mining investments are tired of having to borrow money to pay for our shares—even if they are sold to us at bargain prices. What we want to do away with is that outdated willing buyer willing seller idea. We’ve seen through those devious Western tendencies that distorted the thinking of our well-meaning writers of the constitution. If historically it belonged to us, then it’s now rightfully ours.

“I know, I know. 14% goes to black investors or moneyed blacks, that is, those who have cash or influence, and only 8% will be going to the hundreds of thousands of miners. Which means for every million rand’s worth of shares a moneyed black gets, a mining black will probably get around R1, but there was nothing I could do about that. The cabinet, and our adviser—you know who—decided that’s the way to go.

“Holders who have maintained a 30% black shareholding will not be required to restructure their shareholding. In this regard, the Charter seeks to reward those holders of mining rights who have contributed to transformation of the industry.

“You see, you’re either a contributor to transformation or you’re a bloody Western, imperialist, CIA agent.

“Notice, too, we’re praising those who have contributed to transformation, meaning that if you don’t carry out these new strictures to the letter, then next time you are going to be in for the high jump. Get it?

“What we would actually like to see is more Gold Fields-type schemes, where mining houses simply give away shares to ordinary blacks. No, not ordinary-ordinary blacks. I mean blacks like Baleka Mbete, Mamphela Ramphele, Ashwin Willemse, Jerome Brauns and such like.

Jacob Zuma, Baleke Mbete and Cyril Ramaphosa arrive at parliament to deliver the annual state-of-the-nation address in Cape Town, South Africa, on Thursday, Feb. 12, 2015. Photographer: Halden Krog/Bloomberg

“With regards to the transfer of rights, a Holder who sells their mining assets must give black-owned companies a preferential option to purchase.

“And don’t come crying to me saying the black-owned company’s price is lower than what you can get from a white-owned company. You have to sell to a black-owned company, no matter what price they offer you—even if it’s nothing. Or you lose your mining license. That’s how we threatened Gold Fields. Just be aware that I can snap my fingers (clicks fingers) and shut down a mine—just like that. That’s the power I have. So don’t ever mess with me.

“In order to ensure that the workers, mine communities and Black Entrepreneurs derive real economic benefit from their participation and ownership in the mining industry, the Charter requires the holder of a mining right to pay 1% of its annual turnover to the 30% Black Persons’ shareholding prior to, and over and above any distributions made by a Holder to its shareholders.

“That’s 1% of turnover, not profit. So if any year the mines pay dividends of, say, R5 billion on a turnover of, say, R500 billion, then 1% of R500 billion is R5 billion—and all of that goes to Black Persons first. If the mining houses want anything for foreign or white shareholders, then they must simply run their mines more efficiently. OK?

“This 1% payment is meant to ensure real economic value in the hands of Black Persons, but is always subject to the solvency and liquidity test as provided for in the Companies Act.

“I’m being kind here, of course. I don’t want companies to go under because, as I’ve said before, if they do we won’t know what to do with all the holes they leave in the ground—and we’ve already got more foreign zama-zamas than we need.

“In order to achieve economic transformation, we need to produce a new era of industrialisation, driven by young economic champions.

“Doesn’t that sound grand? I’ll say it again. ‘A new era of industrialisation, driven by young economic champions.’ What I’m talking about, of course, are black champions, not foreign or white champions.

Elon Musk is now rated one of the US’s greatest entrepreneurs.

“Job-creating and wealth-creating white champions like South African-born Elon Musk must go and do their championing elsewhere. We do quite nicely without them here, thank you.

“Procurement can play a profound role in providing genuine economic opportunities, particularly to new entrants and the youth. It is through procurement opportunities that we can eliminate historic imbalances that continue to plague South Africa’s growth.

“When I talk of new entrants and the youth I don’t just mean the sons and daughters of cabinet ministers or the President. It will also include blacks who are making their way up the political or patronage ladder.

“Also, when I talk of ‘blacks’ I don’t just mean ‘historically disadvantaged people’. I now include naturalised blacks, regardless of the fact that they might actually be foreigners who were never disadvantaged by apartheid, such as people from, say, India.

“I mean, when it suited the apartheid government, didn’t they make visiting Japanese businessmen ‘honorary’ whites?

“The Charter requires 70% procurement of mining goods and 80% procurement of services from BEE entities. It also requires that analysis of 100% of mineral samples be done by South African based companies.

“Now here come the juicy parts…

“On Employment Equity, the Charter aims to ensure that black representation at the various levels of employment is representative of the demographics of the country. The requirements are:-

  • At Board level, a minimum of 50% black representation, 25% of which must female black representation;
  • At Executive/Top Management level, a minimum of 50% black representation, 25% of which must be female black representation;
  • At Senior Management level, a minimum of 60% black representation, 30% of which must be female black representation;
  • At Middle Management level, a minimum of 75% black representation, 38% of which must be female black representation; and
  • At Junior Management level, a minimum of 88% black representation, 44% of which must be female black representation.

“Does all this sound like apartheid-style job reservation to you? Well, where the hell do you think we get our ideas from?

“The intention is to ensure transformation of the entire industry.

“In Zimbabwe they call it ‘indigenisation’. But that’s such a horrible word. Doesn’t it sound like some type of forced takeover—almost as if you were stealing? ‘Transformation’ is a much better word. It has a positive ring to it, as in the sentence: ‘Overnight the bud transformed into a beautiful flower’. Or ‘The pale pupae in the cocoon transformed into a colourful butterfly’. See what I mean?

“As you might have gathered by now, what we want to do is simply restrict white ownership and management. If any whites out there feel threatened by these new regulations, then we will have gone some way in achieving our objective, which is to drive a wedge between the black and white communities of this country. Divide, polarise, stir up hatred, play the racist card—these are the strategies we’re employing to ensure we retain control of government in the next elections.

“The MPRDA boldly declares that the mineral wealth beneath the soil belongs to all South Africans (that is, mainly non-colonial South Africans).

“Our role as the custodian of these minerals on behalf of the people is to see to it that this declaration becomes a reality (with the full approval of President Zuma and the cabinet, of course).

“Today I implore you to join us as together we implement this revolutionary tool, aimed at ensuring that we meaningfully transform this key sector of our economy for investment, growth and sustainability. (Just as we’ve done so admirably with state owned organisations.)

African National Congress (ANC) president, Jacob Zuma (2nd R) waves to his supporters. REUTERS/Siphiwe Sibeko

“As a last point, it would be remiss of me if I didn’t point out that this announcement might give the jitters to some mining industry investors, particularly the foreign ones. Shares might take a knock, in fact. Some overseas investors might even pull out.

“But do I care? Do I care if some people say what we’re doing here is a type of Mugabe land grab? Or that we’re carrying out populist-style strategies in the manner of Hugo Chavez?

“Well, I have news for the world. We have girded our loins for an expected short period of hardship, a brief one, of course, not another quarter of a century, and which we will comfortably see out while we wait for nirvana. And, unlike what happened in Zimbabwe or Venezuela, we, the African National Congress—with our unparalleled record of success in everything we administer—will show how easy it is to get right, believe me.

“I thank you.”

  • Colin Collard is a businessman and past editor of Good Taste magazine.

Footnote:

Despite 150 years of mining, South Africa’s still has the world’s largest non-oil mineral reserves. Some years ago Citigroup put the value at $2.5 trillion—way ahead of the next three countries on the list, Russia, Australia, and Canada.

Although mining accounts for nearly half a million direct jobs, double that number of people are employed indirectly in other sectors as a result of mining.

You would think that with our ever-growing unemployment crisis, and because the mining industry could boost employment—specifically of unskilled workers—so significantly, that the ANC government would be doing everything in its power to expand South Africa’s mining industry as fast as possible.

Instead, as John Kane-Berman of the Institute of Race Relations points out, potential investors are being chased away by “a hostile policy environment, regulatory uncertainty, and a militant labour regime”.

The Fraser Institute ranks South Africa as only 66th out of 109 countries for its attractiveness as a destination for mining investment.

Very tellingly, Kane-Berman says: “Between 2001 and 2008 the South African mining industry shrank by 1% a year, whereas the top 20 mining exporting countries averaged growth of 5% a year. The South African mining industry is smaller now than in 1994.

“If the South African mining industry had not shrunk by 1% a year, but grown by 5% a year, as was the case with other major mining countries, South Africa as a whole would be very much richer than it now is. There would have been more jobs not only in mining but in almost every other economic sector. There would be less poverty in communities in which mining takes place. There would also be less poverty in rural sending areas, including neighbouring states. The government would have collected more in taxes. The country would have earned more in foreign exchange. More foreign investment would have flowed in. Pension funds invested in the mining industry would have been richer.”

But what do we have instead? A government interested only in cutting up a shrinking cake … while everywhere around us lies a boundless world of untapped opportunity.

One example. South Africa has one of the largest reserves of coal in the world. Last year, the country produced nearly 200 million tonnes, of which 119 million tonnes went to Eskom’s 16 coal-fired power stations, and 75 million tonnes were exported. In January 2017 The Times of London reported that more than—hold your breath—2 400 coal-fired power stations were under construction or being planned around the globe.

What steps has the ANC government taken to encourage the exploitation of this massive export opportunity in the shortest possible time?

Make Better Decisions. Start your Biznews Premium FREE TRIAL today.