SA has its work cut out to save mining – IRR

Project
manager at the Institute of Race Relations Terence Corrigan has warned in a
report from the think tank that government would have to introduce considerable
policy changes if it hopes to pull the country’s mining industry out of its
lull into a “renaissance”.

It
has also called for the introduction of an independent minerals commission.

An excerpt from the report,
titled Steering Mining
into the Future: Can the mining industry prepare itself for a reinvigorated
tomorrow?, argues that the recovery of the mining industry is
possible, but will require “significant” reforms.

Since the beginning of the year –
on multiple platforms, including the Investing in African Mining Indaba and
parliamentary debates – Minister of Mineral Resources and Energy Gwede Mantashe
has said mining in SA is not yet a sunset industry.

The IRR report, however, argues
that South Africa has failed to follow best practice in several key areas.

It
further states that South Africa’s current policy and regulatory regime is the culmination
of a direction taken since the transition to democracy.

‘Nub of the problem’

Mining
expert Peter Leon, cited in the report, says the Mineral and Petroleum
Resources Development Act was an example of discretion afforded to the minister
on mining rights and operations, which brought about uncertainty.

“The
MPRDA essentially replaced the principles of private law, based on rights of
ownership, with principles of administrative law based on conditional state
licences.

“That,
in essence, is the nub of the problem which the industry has faced since
2004,” Leon argues.

Even as the commodity boom was
underway, South Africa’s failure to draw optimal advantage from it was to a
large extent a matter of policy and administrative failings – even if other
factors played a role too, according to Leon. 

Leon argues that limiting
executive discretion in the industry is an established best practice.

South
Africa needs to rewrite the MPRDA in objective terms, along the lines of
Botswana, which includes mandatory time limits for all licensing decisions, he
adds.

Independent minerals commission

“South Africa should remove
the high levels of administrative discretion that are currently so much a part
of our minerals regime. It should also introduce an electronic online mining
cadastre which many other African mining jurisdictions have done. We should
introduce the system that Ghana and Brazil now have, which is an independent
minerals commission to regulate the industry,” says Leon.

The IRR report says while
minerals account for over a quarter of South Africa’s merchandise exports,
mining remains strained, and indications for the future are not encouraging.

“Attending to the regulatory
hindrances besetting mining is necessary, but it is unlikely to be sufficient
for a revival of the industry’s fortunes. Much in the broader governance and
societal ambit has a bearing on the industry, contributing to the costs of
operations, and the desirability of undertaking operations in South Africa,”
says IRR project manager Terence Corrigan.

Corrigan says even though the
mining industry has been beset with tepid production and labour troubles, among
other things, the sector still plays a significant role in the South African
economy and remains worth investing in.

“If mining is no longer the
foundation and backbone of South Africa’s economy, it remains an enormously
important contributor to the country’s prospects.

“With a multi-trillion-rand
trove of minerals, there is the potential – in theory at least – for a mining
renaissance. Properly handled, this could mean a new lease on life for the
industry and its sustainability into the future,” Corrigan says.

The report acknowledges that
expropriation of land without compensation did not appear to register as a
major concern for the mining industry, but argues that uncertainty on policy,
broadly speaking, has made South Africa less attractive for investment.