SA has its work cut out to save mining - IRR

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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.

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