Mining plan sent to the dump

2015-02-08 17:00

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It is the last major proposal for state intervention in mining to come out of South Africa’s heated nationalisation debate – but the notion of “strategic minerals” seems headed for the garbage heap.

The proposal was already significantly diluted in a last-minute compromise with the Chamber of Mines early last year.

If even this watered-down version falls away, almost nothing will remain of the ground-breaking proposals contained in the ANC’s State Intervention in Mining document, which was largely adopted in the Mangaung declaration in 2012.

President Jacob Zuma last month referred amendments tothe Mineral and Petroleum Resources Development Act back to Parliament, a move that was widely anticipated.

What wasn’t predicted were his reasons for doing so.

Ngoako Ramatlhodi, who replaced Susan Shabangu as minister of mineral resources last year, publicly called for the bill to be referred back. He wanted to split out the sections on oil and gas into a separate law.

President Zuma’s reasons for sending the bill back, however, include qualms about the proposed “strategic mineral” system.

In its current form, the bill could see South Africa hauled before international forums for breaking trade agreements, the presidency said after Zuma had sent it back.

It is an obvious objection that has been studiously ignored by the department of mineral resources since it was first raised by various parties in 2013.

The referral looks like a presidential rebuke of Shabangu and her policy team – or an indication of how “business-friendly” Ramatlhodi’s new broom will be.

The president also said there had not been sufficient consultation on the bill. The department of mineral resources’ deputy director-general for policy, Mosa Mabuza, dismissed the same complaint from the DA in Parliament last year.

But the drift away from resource nationalism has been evident for a long time.

“The whole State Intervention in Mining thing got ignored by the department of mineral resources,” a source close to ANC and state policy debates told City Press.

The State Intervention in Mining document was meant to end the nationalisation debate started by Julius Malema when he still led the ANC Youth League.

It is increasingly looking like a diversionary tactic rather than a real attempt to extract more value from the mining industry.

The original strategic minerals plan was to declare a commodity “strategic”. Then the department of mineral resources would impose “developmental prices” on an unspecified share of every producer’s output, which had to be offered to local beneficiators before it could be exported.

The compromise with the Chamber of Mines saw “developmental” prices become “mine gate prices”, which are defined in the bill as the price a mine would charge before transport costs. The source said this compromise immediately made the mechanism meaningless.

The original formulation was considered draconian even by otherwise staunch supporters of state intervention – it made estimating the value of a mining asset virtually impossible because developmental prices could be anything and apply to any percentage of production.

“It was probably unconstitutional and, more importantly, bad for investment,” said the source.

And if mines only agree to “mine gate prices”, they are in effect saying they will not charge import parity. This is illegal under competition law anyway.

Other major State Intervention in Mining proposals never even made it as far as draft legislation (see Whatever happened to...). These included an entirely different set of conditions on mining rights revolving around local content, employment, value addition, research spending and other things.

City Press understands that the department of trade and industry was less dismissive of the State Intervention in Mining proposals, and even drafted its own suggestions for the bill – which were largely ignored.

While the beneficiation of minerals features heavily in the department of trade and industry’s industrialisation plans, the department of mineral resources controls the most powerful mechanism for making it happen.

The two departments evidently do not see eye to eye when it comes tothe conditions mining companies must submit to in exchange for mining rights.

The department of trade and industry’s deputy director-general for policy, Garth Strachan, told City Press he could not comment on the Mineral and Petroleum Resources Development Act being referred back to Parliament.

Strachan said that even without strategic minerals, the department of trade and industry had other tools to promote beneficiation – principally, he explained, incentives.

He added, though, that the department would like “stronger localisation” to be written into the Mining Charter, which is the list of conditions on mining companies that hold mining rights.

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