Friday, January 21

The Minerals Council remains committed to transformation despite court ruling

FIFI PETERS: The South African government has backed away from a fight with the mining industry over the contentious ‘once empowered, always empowered’ clause. Previously, the government wanted mining companies to maintain a 26% stake in black empowerment in perpetuity. This means that if the old empowerment partners sold their shares, the mining companies would have had to reissue new shares to reach the 26% threshold.

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We have Tebello Chabana, a senior public affairs executive and a transformation at the South African Minerals Council, joining Market Update to tell us what this means for the industry. Tebello, thank you very much for your time. Does the mining sector see this as a government raising its white flag on this issue, and will this move help boost investments in the sector that were previously frozen due to political uncertainty?

TEBELLO CHABANA: The Government’s desire not to appeal this ruling, that is, to leave it as law, is positive in the sense that it certainly provides certainty on a highly controversial issue in the mining context. You will recall that this is the third iteration of the mining chart. I think the first one that came around was around 2004. We have had mining companies that have made deals that we know are in excess of R 150 billion, based on those mining statutes, based on the way they were formulated, and obviously in talks. with the Department of Mineral Resources and Energy, DMRE. So when this misunderstanding appeared related to what happens when shareholders sell, when that misunderstanding appeared, it was critical that we clarify it.

First of all, you want black investors to get some value. I mean, that’s why they are in business, to realize some value. But it was important that we get this clarity. At the time, Minister Mahlodi ……. 2:13 agreed that we actually get this declaratory order. Subsequently, the department changed its mind on this, but we decided to remain clear, as you call it, ‘once empowered, always empowered’ because, as you can imagine, if investors don’t understand the rules that apply, they won’t invest. That has been one of the challenges for mining, as investors, current and future, were not sure if we do this BEE transaction in good faith, it should have X consequences.

If the DMRE wants to implement a set of rules in the future that are clear, concise, and provide clarity to future investors, so be it. But it is always important that investors know where they stand. If I do A, B, C, D, will that mean E, or not?

FIFI PETERS: I understand that you or the Council of Minerals had a discussion with Minister Mantashe shortly after it was announced that the government would no longer challenge this case in High Court. What did you guys discuss?

TEBELLO CHABANA: First of all, you need to understand that the minister on a public platform said, this was in Joburg Indaba, which is unlikely to challenge the sentence. He made this announcement on the public platform. But now you can understand that, before that, we had certainly sought to involve him and the DMRE to try to assure them that the industry will continue to transform. We remain committed to transformation. Certainly that is the strong message we send to the minister and his team. You need to look at it in context.

We have known since 2004 that the mining statute is a policy. So the legal status of the letter for us has not changed. The sentence was limited to clarifying it. So we’ve known since 2004, we’ve transacted based on the first and second iterations, and now the third iteration. Now two courts have confirmed it. So it has become quite clear to us and it has not prevented us from transforming in any way. It was important that we provide that assurance to the regulator and others that we are still going to continue transforming ourselves, although we now know that the court has spoken to make it clear that this is a policy instrument. It is a policy instrument that we welcome, by the way, that we support, despite the challenges we have had with some of the above. [versions].

FIFI PETERS: The problem is that the transformation has not gone far enough or wide enough in the communities, so if you are saying that the sector is committed to transformation, what does that mean? How are you going to do things differently outside of this policy instrument that you are now complying with, as a result of having compromised all these agreements? How are you going to do things differently so that we have a transformation that is seeping through the entire mining value chain?

TEBELLO CHABANA: I guess maybe what I disagree with with you, Fifi, is that I think the transformation has been seeping through the entire mining value chain, and I’ll tell you why I think it has been happening. The fact that the industry has not been able, by itself, to totally transform the magnitude of poverty and inequality, the unemployment that we have in the country, is not an accusation against the mining industry alone. We cannot do it alone as an industry. Now, what has the industry done if you look at the transactions that the industry has made? Let’s talk about a controversial issue, one that produces black industrialists or black capitalism.

On the one hand, I think it is an important effort. But you must have …… 6:14. And I say that if you look at the 20 richest black South Africans, 90% got their wealth from mining. If you look at the communities, the schemes in favor of shared ownership that we have implemented, take a look at the one at Kumba where each employee earned more than a million rand, go to the magazine …… log 6:36 – I think too are online: the mining industry is the largest contributor to socio-economic development. You are in, you are out. No other sector of the economy contributes more to its communities than mining companies.

We do it through our socio-labor plans, that is why we are doing it. And maybe one last thing, if you look at the guaranteed average monthly salary for entry-level unionized mine workers in gold, platinum and coal, and some of them don’t have a tuition, in 2020 they were earning between R19,000 and R25. 000 per month. That’s a guaranteed monthly salary for an entry-level worker.

The industry has even transformed its wages: real wages, social wages. Has that been enough to radically change the fate of the communities where there is mining, where there is no mining, such as the labor dispatch areas? I don’t think so, but can the industry do it alone? No.

The mines tend to be in really remote places where the municipalities are poor and whatever. The type of money that the government should spend on the provision of social services, the provision of services and the implementation of mechanisms. [such as] infrastructure so that other companies can grow, can go to them, grow and generate employment. If the government were doing that properly, the communities would not have to rely almost exclusively on this economic activity here in mining and one or two retail outlets in particular areas.

So that we can work with the government as a mining industry, we can be that catalyst for development. But we certainly cannot work alone. If we look at the money that these municipalities return to the treasury, what we can spend as an industry is a drop in the bucket compared to what the government should do in those communities.

FIFI PETERS: Point made. Just one last question. It appears that the government is looking for other ways to drive the transformation. Any idea what they could be?

TEBELLO CHABANA: We say that this mining charter has been an effective instrument to drive transformation. That is our premise, that is our starting point. Now him Mineral and Oil Resources Development Law (MPRDA), which is the framework legislation, has allowed the government to make the content of the mining charter binding on mining companies. It is important that people understand it. Mining companies, as we speak, have mining rights, they have social and labor plans that are part of the license to operate. If they do not implement their social and labor plans, the DMRE can act. They can sanction them, they can revoke their mining rights.

So, as it stands, mining companies are heavily regulated to drive transformation. Many people don’t understand that context because they don’t see it in any other sector of the economy, not in retail, not in construction, not in the financial sector, to the extent that they have it in mining. So people tend to think that there is no legislative framework, especially to drive transformation in mining. It is there and it has been very effective.

The DMRE has had, as a result of the MPRDA, the power to do other things, to set other instruments in motion. He has had these powers; the court confirmed that he has had these powers. I know the rest of society is realizing this problem, but those powers have been around for some time.

FIFI PETERS: It’s okay. Tebello, we leave it there for now. Thank you very much for joining the program. Tebello Chabana is the Senior Public Affairs and Transformation Executive for the South African Minerals Council.

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