Mail & Guardian

Editorial: Digging a way out of our mining hole

18 Jan 2013 00:00 | Editorial

The best form of redress will come from a functioning industry able to ­create jobs, pay higher taxes and contribute to South Africa's reconstruction. ((Madelene Cronje, M&G)

The best form of redress will come from a functioning industry able to ­create jobs, pay higher taxes and contribute to South Africa's reconstruction. ((Madelene Cronje, M&G)

Let us be quite clear about this: there is nothing particularly ­surprising, or indeed objectionable, about a mining minister who represents a broadly left-wing government reacting angrily to a plan t­hat will cost 14 000 jobs and 400 000 ounces of platinum ­production.

Amplats' restructuring proposals, which will put four huge shafts on care and maintenance, in effect mothballing them, will have catastrophic ­consequences for workers and for the Rustenberg area, and they will cut into vital export volumes.

Amplats chief executive Chris Griffith's proposals may be rational, and necessary, but to expect a complete lack of political and regulatory push-back is absurd. But the detail of Mining Minister Susan Shabangu's response, and the even harder line taken by ANC policy czar Enoch Godongwana, reveals the profound confusion that is at the heart of the ruling party's relationship with the extractive sector.

There can be little debate that weak policy, and weaker implementation, caused South Africa largely to miss out on the resource boom of the decade leading up to the financial crisis. There is a real risk that, in the much more fragile period we now find ourselves in, the damage wrought by global conditions will be exacerbated by the way the government and ruling party respond to the pressure the mining industry is under.

That is why we heard a good deal this week from analysts arguing that Amplats' parent, Anglo American, should get out of this country entirely, and suggesting that Anglo trades at a steep "South Africa discount" comprised principally of political and labour market risk.

For all of the government's failings, it seems to us these calls are made ­without the benefit of much global context. In Brazil, for example, Anglo's own mismanagement is to blame for spiralling costs at the giant Minas-Rio iron ore project and, in Chile, a battle with the state-owned copper miner, Codelco, seriously soured the company's political relationships.

In Australia, mining companies are at war with the Labour government over efforts to increase the tax take from resources. In France, ArcelorMittal was recently threatened with nationalisation by the industry minister after it announced plans to close two blast furnaces at a cost of slightly more than 600 jobs and, in Russia, gangster capitalists with friends in the Kremlin hold multibillion-dollar investments to ransom. We could go on. The point is that South Africa's political risks, although real, are far from unique in either scale or intensity.

Ministerial discretion
However, they occur in the context of deep, complex mining, soaring electricity costs and weak commodity markets, so the rewards for taking risks here are lower than they are elsewhere, and that means the space for policy makers and politicians is constrained. And much of it has already been used up. That is something Shabangu and Godongwana, who told the Mail & Guardian this week that the state would seize mothballed mines, apparently struggle to appreciate.

Although Shabangu consistently spoke out against nationalisation, her party allowed the "debate" on the issue to drag on for nearly five years and, in ending it at Mangaung, threatened to impose massive new taxes and rules to force companies whose expertise lies in digging things out of the ground into "beneficiation".

Meanwhile, over the past decade, broad ministerial discretion over the implementation of empowerment rules has turned a policy aimed at ­redressing apartheid's iniquities into a corrupt carousel of enrichment opportunities for party cronies. Simple bureaucratic incompetence in the issuing of licences, coupled with profound failure in the development of electricity and transport infrastructure, compounded the problem. And the apparent complicity of Shabangu's department in the attempted heist of Anglo's cash dispenser, Sishen, and its silence regarding the looting and destruction of Aurora's Grootvlei mine near Springs have also weakened its credibility.

Against this backdrop, tough talk about betrayal and regulatory retaliation rings hollow.

Amplats could probably have handled the potential retrenchment of 14 000 of its workers better. It should have used the many forums available, it could have sought a cost-management partnership with unions and the government, and perhaps it should have gradually scaled down operations, ­starting well before 2013, to cushion the blow. Some blame should also go to the National Economic Development and Labour Council, a body created ­specifically to deal with such issues and disputes, which has failed ­spectacularly to serve it corporate purpose.

At the heart of the government's failure on mining is a belief that mines are literal treasure chests of hoarded wealth that can be raided to secure redress for the gross injustices of apartheid, to support the fiscus and to create jobs in beneficiation. That belief may flow from the fact that the struggle against grossly exploitative labour practices on the mines is indissociable from the struggle against apartheid. But that doesn't make it any more amenable to the operational and economic reality faced by mining companies.

The best form of redress will come from a functioning industry able to ­create jobs, pay higher taxes and contribute to South Africa's reconstruction. The government has the regulatory and infrastructure levers to create an ­enabling environment for economically, socially and environmentally sustainable mining. The industry has the cash and the skill. We expect more from both of them than the crude posturing we are being subjected to.

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