The government itself is a menace to the mining industry - Business Day, 8th July 2013.

Jul 08, 2013
"Reckless and populist ministers armed with confusing legislation and increasing arbitrary powers to enforce daft demands backed by draconian penalties are as big a threat to mining as everything else put together", says the Institute's CEO, John Kane-Berman.

Attempts by Deputy President Kgalema Motlanthe to broker a peace deal for the mining industry should not be allowed to obscure the fact that the government itself has done as much damage to the industry as anything else — including declining commodity prices, rising costs, warring unions, huge pay demands, or even Julius Malema.

The tragedy at Marikana last year would not have occurred had we had a proper police force instead of the ramshackle affair the African National Congress (ANC) has been playing around with these past 19 years — not least by deploying as deputy ministers people such as Susan Shabangu, who gleefully urge them to "shoot to kill".

Shabangu’s recklessness when she was deputy minister of safety and security has been carried over to her job as minister of mineral resources. Earlier this year, after Anglo American Platinum had reported needing to retrench 14,000 workers to help restore profitability, she threatened to withdraw its mining rights.

Not content with laying down the law on retrenchments when much of the mining industry is running at a loss, Shabangu is now assuming powers to do so on beneficiation and exports. Under 2008 legislation unexpectedly brought into operation last month, mining and petroleum companies are now required to promote the "development of downstream industries". In addition, Shabangu is empowered to "prescribe the levels required for beneficiation".

Another proposed law, the Mineral and Petroleum Resources Development Amendment Bill of 2013, authorises her to decide what percentages of minerals must be locally beneficiated, along with the "developmental pricing" to be applied. She will also have the power to "designate" the minerals she requires for beneficiation and thus prevent their being exported without her consent.

Her 2013 bill further gives her greater discretionary powers in the allocation of mining rights. First come, first served will no longer apply. Instead, she will be able to invite applications on terms she lays down. Under the 2008 legislation now in force, the minister can already "impose conditions to promote the right and interest" of mining communities. The 2013 bill empowers her in addition to "direct the holder of a mining right to address (community) challenges or needs". She is also acquiring much more discretionary authority over environmental matters.

The bill entitles the government to a "free carried interest", defined as "a share in net annual profits derived from the exercise of an exploration or production right — despite the state’s not contributing to the capital expenditure". This will presumably be over and above royalties, taxes, and some baksheesh for Chancellor House.

Not to be outdone by the Department of Mineral Resources in this never-ending game of goalpost-shifting, the Department of Trade and Industry is assuming powers to override sectoral empowerment charters, such as the revised mining charter of 2010. The override powers are in the Broad-Based Black Economic Empowerment Amendment Bill of 2012, which has been approved by the portfolio committee and National Assembly and awaits enactment. It provides for trade and industry’s generic codes to take precedence over all sectoral charters.

There will also be heavier penalties for a wider range of "offences". Some of these are so daft that it’s difficult to envisage how a prosecutor would draw up an indictment.

Under the 2013 bill, companies which fail to substantially expand opportunities for the historically disadvantaged to enter the mineral and petroleum industries; or which fail to promote economic growth, including the development of downstream beneficiation industries; or which fail to promote employment and advance the social and economic welfare of all South Africans, are liable to a maximum penalty of 10% of annual turnover and export revenue. Executives could be imprisoned for up to four years. Failure to comply with the government’s developmental agenda thus becomes an economic crime.

Reckless and populist ministers armed with confusing legislation and increasing arbitrary powers to enforce daft demands backed by draconian penalties are as big a threat to mining as everything else put together.

- John Kane-Berman


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