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Minister Zwane's Latest Mining Charter Of Radical Ownership Transformation Does Not Solve Anything

All is not well in mining, and won't be, until both government and business get a new perspective of the sector's place and role in SA's economy.

02/08/2017 03:56 SAST | Updated 02/08/2017 03:56 SAST
Siphiwe Sibeko/ Reuters
South Africa's Mineral Resources Minister Mosebenzi Zwane.

The breakdown between stakeholders in the mining sector is a foreseeable disaster. It did not begin when Minister Zwane tabled his self-styled charter, requiring a rapid acceleration of black ownership in the sector. The divorce between the stakeholders runs deeper and their alienation goes further back than that. Don't forget, as recently as 2014 we had historic records set for industrial action in the platinum belt and elsewhere.

In addition, we saw Zwane, a sector outsider and Gupta-Zuma insider, being sprung on the sector "without consultation". All is not well in mining, and won't be, until both government and business get a new perspective of the sector's place and role in South Africa's economy now and in the future. Only if a new, viable, workable, co-created vision is forged, can labour be persuaded to throw their lot in with the holders of capital and of public office.

Divergent Interests

The minister, through his latest charter of radical ownership transformation, is solving the central problem in the sector, as he sees it -- too little local ownership. Of course, as the Gupta-leaks are revealing, in the minds of the minister and his friends, ownership by corrupt cronies or naturalised immigrants, out-ranks broad-based ownership by natural citizens. He sees his task as that of wrestling control of the sector from the hands of capital from abroad, a noble cause until it is revealed that capital from non-western plutocrats elsewhere, greasing the palms of his pals, will suffice.

The mining houses, watching global commodity prices with hawkish verve, as the basis for their strategic response, have profit margins, corporate sustainability and shareholder returns in mind. You see, for a 50-year-plus investment in a mining venture to appear attractive, what is required is long-term stability and an expectation of a secure and reasonable return on capital invested.

Mining bosses are used to putting up with political noise and a shifting power-base, often accompanying the frontier markets where they operate. But, what mining bosses cannot tolerate, is a situation where resource nationalists such as the Gupta-Zuma-Zwane club have become, refuse to play the game and prefer to play a winner-takes-all round of roulette with the sector. This leads to the unbundling of mining conglomerates, the closure of marginally profitable shafts and eventually, divestment.

Captured Sector

What industry outsiders need to grasp is that the current minister comes from the anti-economic political school, where one can "pick up the sector" similar to "picking up the currency" once one has decimated it. It is an idealistic form of Zim-style grabbing but done slowly, like euthanising a cow by severing an artery in the neck and allowing the animal to bleed out before feasting.

Unless you place capital on top of the soil in the form of machinery and trained people, the minerals are just shiny forms of dirt.

The fact that the sector would need capital to be resurrected, probably from the Chinese or Dubai, is neither here nor there. My view is that the business community has not fully cottoned onto this modus operandi, which is the reason for their flabbergast and frustration. Workers too have not fully grasped the elitist brutality of this approach. How will the small guy, who goes home hungry and empty-handed to his family after being retrenched by the mine, combat the abuse of power by the powers-that-be? No shop steward, or union federation, has access to the levers to change the status quo.

This is the price we pay for having made corporatist trade-offs between "big business", "big labour" and "big government" in the 1980s and 1990s while having left the true patterns of ownership and control largely unaltered. It is the price the workers are paying for allowing their formations to become co-opted as political instruments rather than formations of amandla ngawethu. A new elite is fighting for a place at the table, by pushing and shoving those who are already there.

A New Vision for Mining

If we asked the question, what is the role of the mining sector now and in the future of South Africa? The answer would simply be, mining in South Africa is currently in decline, the IDC measuring its contribution to GDP in 2016 as low as 7,6 percent. Rising input costs such as electricity, above-inflation increases in labour costs etc. have squeezed margins and increasingly made the case for mechanization. The consequence is that our oversupply of labour loses its value as a competitive advantage compared to other territories.

So what!? Even if you have "mineral resources under the soil", as the Freedom Charter puts it, unless you place capital on top of the soil in the form of machinery and trained people, the minerals are just shiny forms of dirt. So the battle for the mining sector should be a battle about how to address these issues and position mining in a broader national value-chain of productivity. South Africa has a competency in chemicals and plastics, we have one in machinery and motor manufacturing, these can be tailored to grow new revenue streams through the beneficiation our minerals, but not under current conditions.

So, while the stakeholders are all focused on the debate around the charter, like dogs fighting over a dry bone, the sector slips further and further from its place as a potential centrepiece of a new industrial capacity engine for job creation. Minister Zwane's charter is not wrong because of its aims, but because of the underlying strategic rationale on which it is premised and because of the combative, passive aggressive manner in which he has tried to impose himself on the sector. This too shall pass, as the roll-back of state capture in its various forms takes place.

The question on my mind is, does the sector have the strategic leadership, in a post-Zwane era, to lift the debate from narrow interests to the longer-term national interest? If we fail to do so we will return to this point, only then it will be more destructive. It will be the social license afforded miners by communities, and not their mining licenses, that will be at risk.