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Beneficiation ‘is not beneficial for SA’

May 29 2011 13:35 Dewald van Rensburg

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Johannesburg - “South Africans need to be educated about beneficiation,” the new president of the Chamber of Mines, Xolani Mkhwanazi, told City Press this week in an exclusive interview.

“Most mining countries don’t refine their minerals. Most of them are also not the market for these products.

“Australia doesn’t refine. Canada doesn’t refine. Chile doesn’t refine. The market just isn’t there. You need to refine close to your market – Europe and Asia,” said Mkhwanazi, who is also the chairman of BHP Billiton [JSE:BIL] South Africa.

This directly contradicts the New Economic Growth Plan, in terms of which the beneficiation of primary mineral products has been named as a central goal for the mining industry.

In the plan, it is named in the same breath as possible export tax on primary metals.

According to Mkhwanazi, there is little support in government for export tariffs.

“This beneficiation thing is actually self contradictory. Because of the energy shortage you can’t do it, anyway.”

Last year, in the lead-up to the mining charter, the mining industry and government grew closer.

The new charter, which was made public in September last year, dealt with many of the sector’s concerns. But one of the unresolved issues is still the national refining strategy, which currently seems to be with Cabinet.

Director-general of the Department of Mineral Affairs, Sandile Nogxina, last month said in Parliament that consultation ­between the state’s economic departments over the strategy was at an advanced stage.

In the new charter there is no talk of compulsory refinement.

Mining groups are rather given the chance to make up 11% of the 26% target for black ownership with refining.

“We have come to an agreement with government that we need a refinement strategy. The strategy will not mean that mine groups have to refine, but that they should rather facilitate refinement,” said Mkhwanazi.

“The good thing is that it doesn’t say you have to refine or be punished any more.”

Among the chamber’s concerns over the new charter are provisions that attracted less attention.

The prescribed housing standards, according to Mkhwanazi, are a far greater problem.

His target is the complete disappearance of hostels to be replaced by family units or, at least, a room for each worker.
The deadline has been postponed to March 2015.

“It is clear that some mining companies are not going to reach the target,” said Mkhwanazi. It especially affects the gold and ­platinum sectors, which employ the lion’s share of mineworkers.

“Some of the gold mines have a life span of seven years. If you force the housing standards, the mine will simply shut down in 2015. Who loses then?”

Tension between the chamber and the South African Mining Development Association (Samda) boiled over last year during the revision of the mining charter.

Samda leaders supported the ANC Youth League’s plea for nationalisation but it was shot down by the SA Communist Party and the National Union of Mineworkers as a hidden request that the state settles empowerment debts.

“We can do most things together: safety, financing, exploration, infrastructure and so on,” said Mkhwanazi.

“The only thing we can’t agree on is this feeling that they’re entitled to something.”

Samda represents the junior mining sector, but is generally seen as the “black” chamber.

Samda’s leadership was deeply disappointed that a few controversial proposals did not make the new charter.

“There were many lessons to learn since the first charter, but why do mining groups always get the blame when things go pear-shaped? No one ever names the financial entities,” said Mkhwanazi.

“Then Brigette (Radebe, president of Samda) comes and says government or the big companies must give these guys a lifeboat.”

The new charter makes large concessions to empowerment groups, one of which is that their interests must have full voting power by March 2015 and that at least a small portion of income must flow through to them and the debt divided between the rest.

“Any businessman knows that when you borrow to buy a business, you never know when you will in reality own the business. Every business has debt. Anyway, these things are not influenced by shareholders, but by market forces.

“The new charter is a massive improvement over the first one, but like any agreement, no one is 100% happy,” said Mkhwanazi.

“Neither us, nor the unions, nor the government are totally happy, but that is the hallmark of a good agreement.”

- City Press



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