2017 Looks to Be Worse for South Africa

As bad as the past year was for South Africa’s embattled mines, industry executives have the glum foreboding that 2017 is likely to be even worse. New black empowerment regulations may be the final strike that drive many out of business altogether.

For some time now, the mines have been waiting for the latest iteration of the Mining Charter, a set of rules designed to prod the industry into increasing black participation. The idea is to redress apartheid-era ownership that was entirely white. At that time, blacks were prohibited by law from any participation in mining other than menial low level labor. They could not even qualify as artisans or technicians.

This changed with the advent of democracy in 1994, but the newly installed African National Congress administration felt it was not enough to simply do away with discriminating legislation. Also needed were corrective laws that would actively push mining houses to speedily redress past racial imbalances.

The Mining Charter was intended to do just that. It lays out what companies must do to move toward black empowerment, if they want to retain their mineral rights. Unlike the U.S. where what is below the ground is the property of the landowner, South Africa vests mineral rights with the state.

Companies have generally gone along with empowerment rules, recognizing the need to become more inclusive. It includes, for instance, the requirement that all mining companies are 26% black owned. Targets are also set for black management positions, suppliers and contractors. Tweaks to the charter happen every four or five years and are seen as part of doing business in one of the most mineral rich countries on the planet.

In late November, the country’s Department of Mineral Resources (DMR) sent to parliament its latest draft of the charter. The difference this time is that unlike with previous adjustments to the charter, the DMR now has gone ahead on its own in redrawing it, blanking the mining industry out of the process.

When industry executives finally got to see it, they were alarmed at its contents. Roger Baxter, CEO of the Chamber of Mines, said if it goes ahead as planned, the consequences for the industry will be grave.

“The chamber is deeply concerned that the draft-reviewed Mining Charter contains ill-considered and/or unachievable targets,” Baxter said. “Its implementation in its current form will have dire consequences for the mining industry and the entire South African economy at a time when both are facing significant challenges.”

As featured in Womp 2016 Vol 12 - www.womp-int.com