How Cyril could return economic sanity to the mining sector – IRR’s Anthea Jeffery

CAPE TOWN — In providing a priority check-list of what Cyril Ramaphosa can do to revive the economy should he win this weekend, taking over from Zuma after next year’s polls, the IRR’s policy chief Anthea Jeffery does us a crucial service. Firstly, she says, get the mining minister’s interfering, debilitating fingers out of the mining sector and scrap this year’s Mining Charter. Rather, craft an empowerment scorecard which recognises and rewards the industry’s huge contribution to growth, investment, jobs, tax revenues, and export earnings. The benefit in reforming that sector’s stifling policy environment? A capital expenditure boost of 84% – and another 48 000 jobs. (Witness the current jobs haemorrhage). Then; and here’s where Ramaphosa’s mining sector union/executive experience would provide huge leverage; order your health minister to increase the statutory maximum pay-out to miners under the Occupational Diseases in Mines and Works Act (Odimwa) of 1973 – and accelerate the clean-up of bureaucratic chaos that sees 94 000 silicosis claims outstanding. Alongside this, curb the powers which a mining safety inspector can use to close down a mine for a single faulty reverse brake light. That alone can tip a marginal mine into closing down. Don’t compromise on safety, which is now improving hugely year on year – just encourage sanity to prevail. Everywhere! – Chris Bateman

By Anthea Jeffery*

Cyril Ramaphosa is more popular and has more ANC branch support than Nkozasana Dlamini-Zuma, while President Jacob Zuma has twice in the past week been roundly castigated by the Pretoria high court.

These factors might just mean (depending on the degree of chaos and fraud at the ANC’s national conference at Nasrec this weekend) that Mr Ramaphosa emerges as the ANC president and putative national president next week.

Cyril Ramaphosa addressing closing of the third Presidential Local Government Summit on 7 April 2017.

Which raises the question of what reforms he might embrace to quicken the current lacklustre growth rate – assuming, of course, that his own supporters can unite around a reform agenda and prevail over the resistance of the “NDZ” group.

Mining regulation is one place where he might start. Agriculture played the biggest part in raising the third quarter growth rate to 2% of GDP, but mining’s contribution was crucial too.

In addition, the Chamber of Mines has recently conducted a survey among its members to see what would encourage them to step up planned investment. This shows that capital spending already planned for the next four years could total R145bn. But most of this investment is of the “stay-in-business” kind and is not aimed at expansion.

However, mining companies also said that, if South Africa’s mining policy environment could be substantially improved, then capital spending over a three-year period could amount to another R122bn.

Dr. Anthea Jeffery is Head of Policy Research at the IRR and author of Patents and Prosperity: Invention + Investment = Growth + Jobs, published this week by the IRR and available on the IRR website.
Dr. Anthea Jeffery is Head of Policy Research at the IRR.

Writes Henk Langenhoven, chief economist at the Chamber of Mines: “This means capital expenditure on mining projects could be 84% higher than R145bn. The positive effect on employment creation, according to the survey results, would be nearly 48 000 people.”

If these gains are to be achieved, what items should be on Mr Ramaphosa’s policy reform “to-do” list?

The 2017 mining charter, under which the mining minister has “usurped the role of Parliament” (as the chamber rightly comments), must be scrapped. In its place, a new empowerment scorecard should be crafted which recognises and rewards the industry’s enormous contribution to growth, investment, jobs, tax revenues, and export earnings.

Proposed amendments to the Mineral and Petroleum Resources Development Act (MPRDA), now scheduled for adoption by Parliament in February 2018, must also be abandoned. The bill’s adoption has again been procedurally flawed, but still more worrying are the many additional discretionary powers that it gives to the mining minister – including the capacity to impose price and export controls on a host of minerals.

Current failures in mining’s vital safety and health regime must also be addressed. Mine fatalities have come down from an average of 624 a year between 1971 and 1990 to an average of 90 a year since 2012. Since 2012, however, mine inspectors have nevertheless imposed so many costly and unnecessary safety stoppages on mines that marginal operations risk being tipped from profit into loss. The stoppages have also sometimes been ordered for the most trifling and irrational reasons (a minor explosives infraction in one small part of an enormous mine, or a faulty reverse light on a vehicle).

Section 54 of the Mine Health and Safety Act of 1996 should be tightened up to prevent this – and to make mine inspectors personally liable for at least some of the costs of unwarranted stoppages.

The mining industry has also made important progress in reducing exposure to silica dust and is committed to a goal of no new silicosis cases by 2024. But the current statutory compensation system – the successor to legislation first adopted in 1911 – has long been sagging under the weight of apparent state indifference and increasing administrative incapacity, leaving thousands of ill mineworkers in the lurch.

File photo of a general view of Driefontein Gold Mine shaft, near Carletonville, South Africa.

Under the Occupational Diseases in Mines and Works Act (Odimwa) of 1973, the maximum one-time benefit for silicosis and other “compensatable” diseases is a meagre R105 000. The health minister has the capacity to increase this statutory maximum, but has failed to use this power since 2009 – even though the average monthly mining wage, at over R20 000, far exceeds the R3 000 monthly maximum which is all that Odimwa takes into account.

Administrative chaos has also afflicted the Odimwa system over many years. In 2012 Dr Barry Kistnasamy was appointed as the commissioner of the Odimwa fund to help turn it around. “At that stage”, as Dr Kistnasamy later told MPs, “its offices held rooms of boxes of disorganised paper records, its phones rang unanswered, and the fund had virtually collapsed.”

The mining industry has been trying, since 2008 in particular, to “make Odimwa work”. Important progress has again been made. But, according to a parliamentary briefing in October 2017, the commission still had a backlog of some 94 000 claims (down from 106 000 in November 2016), which have already been approved but have yet to be paid out. In addition, the claims of between 300 000 and 500 000 mineworkers still need to be assessed.

Read also: The growth Gigaba wants requires a shift from BEE – Anthea Jeffery

Reforms are urgently required. The maximum compensation claimable under Odimwa must be increased, while the bureaucratic inefficiency still plaguing the commission must be overcome. Long standing ANC policies of cadre deployment and racial preferencing have doubtless played a role in Odimwa’s decline and must be halted to help the truly disadvantaged.

The stakes are high. Mining has long been the bedrock of South Africa’s economy and still has a vital role to play in attracting investment – including that extra R122bn which could yet be forthcoming if Mr Ramaphosa has the opportunity and the will to embrace the necessary mining reforms.

Over the next few days, the focus will naturally be solely on Nasrec and what happens there. But Nasrec is also, of course, far less important than what happens on the policy front – whether for good or bad – in the years that lie ahead.

  • Dr Anthea Jeffery, Head of Policy Research, IRR.