Suing over Section 54: Is this a solution? – Moneyweb, 1 February 2017

It's doubtful.

By Terence Corrigan

Last year’s labour court judgement on the use of Section 54 stoppages seems to have put something important into motion. Last week, it was reported that Sibanye Platinum was instituting legal action against the Minister of Mineral Resources, Mosebenzi Zwane and a number of his officials. It seeks some R26.8 million in damages from the respondents in their personal capacities to compensate for losses caused by the ‘draconian’ application of Section 54 at its Kroondal mine. Compensation aside, this is a case that could serve as a reminder that stiff costs can come with the vindictive or over-zealous use of state power.

Doubtless, there are many who will give this a supportive thumbs-up. But whether it will solve the problem is doubtful.

Some background: Section 54 of the Mine Health and Safety Act empowers the department’s health and safety inspectors to suspend operations on mines if they believe that dangers to the health or life of employees exist.

In November 2016, Judge Andre van Niekerk ruled that health and safety inspectors from the Department of Mineral Resources had seriously overreached themselves by ordering a complete shutdown of AngloGold Ashanti’s Kopanang mine near Orkney. The actual risk identified was limited to a small part of the mine, and affected no more than 2% of its workforce.

This was not the first time that Section 54 had successfully been challenged in court. In 2012, Judge Brian Southwood made a similar ruling in respect of adjoining clay mining and brickmaking operations – Bert’s Bricks and Expo Clay, located near Potchefstroom – both of which had been shut down over damage to a forklift’s tyres.

In both instances, the inspectors’ actions were held to be disproportionate to the risks involved. They have also had real business consequences. In the case of Kopanang, the opportunity costs amounted to some R9.5 million a day, or R48 million over the duration of the closure. In the case of Sibanye’s Kroondal mine, the company argues that repeated stoppages in 2015 and 2016 inflicted costs in the order of R180 million, turning it into a marginal operation. The Chamber of Mines calculates the costs incurred across the industry by these stoppages at a whopping R13.6 billion between 2012 and 2015.

For Ron Weissenberg, a non-executive director of several mining and mineral companies, and associate lecturer at Rhodes University, this is all too familiar. He notes that the rational function of the inspectorate is to promote the safety of mineworkers, while helping to keep mines viable. Yet this has not been his experience. He points to an inspectorate that lacks an understanding of the mining industry (many have little background in mining, and many come from an administrative background in mining), with an ethic dominated by box-ticking.

He remarks: ‘Operations in which I have been involved, have been served with Section 54s for things like a first aid box not being up to scratch and a faulty reverse light on a vehicle, or for the paperwork not being flawless. These things don’t pose a danger and are easily dealt with by existing regulations such as Section 55 (which calls for remedial action within a logical timeframe or closure of a demarcated area deemed unsafe).’

Legal action against the department and against its errant officials could certainly register a powerful objection to this. Given the existing court rulings on Section 54, it might well prove successful. Indeed, Judge Van Niekerk specifically wrote in his judgement: ‘Had the applicant sought an order for costs on the basis that the respondents bear the costs of these proceedings in their personal capacities, I would have given serious consideration to such an order’.

This would in turn probably be effective in forcing a moderation in the inspectors’ behaviour. They would be given serious pause, should they not be able to take refuge behind the resources of the department.

This would be a substantive victory, but in some respects a superficial one.

The past few years have not been kind to mining in South Africa, as the richer veins (the ‘dripping roasts’, as industry slang once described them) have dried up, as global demand has flattened and as cost and regulatory pressures have squeezed operations and employment numbers. Indeed, PricewaterhouseCoopers’ (PWC) survey of the country’s mining industry, SA Mine, found that South Africa’ mining industry had suffered a loss of some R46bn in the 2016 financial year.

The future of the industry is profoundly uncertain, despite South Africa’s enormous mineral endowments. Much of this is the consequence of an inhospitable operating environment, not least arising from deliberate policy decisions, such as the effective nationalisation of mineral rights and changing empowerment requirements. Beneath much of these lies an ambivalent or even deeply ambivalent attitude on the part of the state to the country’s mining industry.

Weissenberg presciently argues that this has made mining an ‘industry of retribution’. It is seen as the archetypal villain of South Africa’s past, and is continuing now to put profits before people and spiriting its gains abroad.

Seen from this perspective, the eager resort to Section 54 is a symptom of a much larger problem. It reflects, at least in part, this jaundiced view of the industry, and a sense that the department and its inspectors are tasked – morally, as much as legally – with imposing much-needed discipline.

Regrettably, this emphasises the failure to establish a cooperative relationship between government and business. Globally, relationships between business and government have proven themselves valuable assets for economic growth and socio-economic development. What is at issue here is neither collusion nor some idealistic ‘solidarity’, but is a recognition that each has a role, and that mutual understanding and assistance brings shared benefits. Such relationships have their inevitable tensions but, fundamentally, business and government see that their fates are linked. Concerns on both sides can expect a proper hearing.

Such a relationship is arguably doubly important when dealing with extractive industries, given the political sensitivities around them.

Legal action is a counterpunch strategy. It stands to alter the manner in which the industry is treated. This will be a positive, but limited, achievement. It will do little to alter the dearth of professionalism and the antagonistic mindset that has driven the reckless use of Section 54. Fundamentally, though, affecting this change depends on a change in mindset within the state – and until this comes about, perhaps the courts are the only avenue available.

Terence Corrigan is an independent governance, research and communications consultant with an interest in business and corporate governance. He is a Policy Fellow at the South African Institute of Race Relations (IRR).

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