SA miners will miss commodity upswing

Johannesburg - South Africa’s squabbling politicians and a badly redrafted mining law – especially with regard to rehabilitation regulation – which has sparked a flurry of litigation, will consign the mining industry to another mediocre year, ensuring it misses the benefits of an upswing in commodity prices that started last year.

Paul Miller, investment banker for Nedbank mining finance, told reporters this week he could not see the political leadership required to help turn the industry around, ahead of this year’s ANC elective conference in December.

It would be up to the industry to assist regulators to improve a mining environment battered this year by what he termed a break-out in “lawfare”, as companies challenge some of the mining regulations.

The biggest negative effect on the industry would come from the amended Mineral and Petroleum Resources Development Act and the reviewed Mining Charter.

Both were expected to be enacted shortly, despite strong opposition from the mining industry.

Adding to the uncertainty were a number of legal challenges to the department of mineral resources’ interpretation of section 54 work safety stoppages, Miller said.

Often, when mining investors spoke out against the uncertainty in the regulatory environment, politicians misunderstood this to mean the latest amendments to existing legislation or the overlap of mining and environmental laws, which were being harmonised.

This was a red herring, Miller said, emphasising that he was not arguing against the government’s transformation agenda.

“The fundamental uncertainty is the fact that uncertainty, discretion and the lack of timelines is actually built into our regulations.

“It is built into the law,” Miller said, citing as examples the power of Mining Minister Mosebenzi Zwane to determine if a social labour plan was acceptable and to grant a section 11 order and its conditions.

“The uncertainty is because the actual base law is written with uncertainty inherent in it.

“That discretion is delegated to officials ... and those officials are activists.

“They are applying a political mind-set [with regard to] what they are doing and have vague guidelines to apply.

“Quite frankly, you can get very different interpretations of what is required, depending on which official you ask.”

Miller cited the cases of Optimum Coal and Keaton Energy as examples.

While the Gupta-owned Optimum Coal got its Section 11 application – which allows a change of control permit – approved “within weeks”, Keaton Energy was still waiting for a decision from the department for an application lodged last May.

“These things are not certain. They are applied with discretion and there are no timelines on when decisions can be granted,” said Miller.

Two court cases also threatened to shape the industry this year, he added.

Law firm Malan Scholes’ application to have the entire Mining Charter scrapped, on the basis that it did not go through the legislative process, is expected before the courts in February and could throw the whole industry into disarray.

There was also Sibanye Gold’s application to have three inspectors from the mineral resources department, along with Zwane, held personally liable for R26.8 million in losses suffered by the company’s platinum unit at its Kroondal operation in North West.

If successful, other mining houses may follow suit.

READ: Zwane up in arms over R26m claim

Added to that were the various court cases about the Public Protector’s State of Capture report, in which Zwane would be involved, Miller said.

“I think 2017 is going to be a particularly serious year for the mining industry in South Africa, and there is a very real chance we are going to do further damage to our mining industry simply because South Africa Inc has not got its head round what it wants from its mining industry.

“The next 12 to 18 months are stacking up to be some of the most volatile and uncertain times ever experienced by our country’s mining sector,” he warned.

While the big mining houses would be able to weather these headwinds, smaller companies, international investors and new entrants would be deterred, he said.