Rio Tinto’s declaration of force majeure at its Richards Bay Minerals (RBM) sand mining operation last week following the murder of RBM’s operations GM Nico Swart in May and increasing threats of violence is a wake-up call for South African mining.
The Minerals Council of SA and the Democratic Alliance (DA) have called for urgent action to restore investor confidence. DA shadow mines minister James Lorimer has also demanded that a specialised police unit to crack down on mine invasions and zama-zama activity be set up urgently.
Rio Tinto, the world’s second largest mining company, suspended operations at RBM last week and declared force majeure on customer contracts over mine security concerns.
R6.6bn project put on hold
Its $463 million (R6.6 billion) Zulti South expansion project to the south of Richards Bay has been put on hold while negotiations continue with government and law enforcement to address ongoing violence around RBM’s mining operations in the northern KwaZulu-Natal industrial port town.
The circumstances behind the latest shooting (of Swart) remain vague, though this is not the first incidence of violence in recent years against RBM or its employees.
Rio Tinto twice shuttered operations at RBM in 2019 over violent protests.
Mineral Resources and Energy Minister Gwede Mantashe visited the mine after the shooting to reassure Rio Tinto that everything possible was being done to resolve issues of violence around mining.
“The circumstances around the shooting are unknown at this stage and the incident is being investigated by the South African Police Service (SAPS). The company is cooperating fully with the SAPS to support its investigation into this very serious matter,” RBM reiterated in a statement.
The Minerals Council called on government to act swiftly to urgently restore law and order in the area.
“This requires urgent action by the national Justice, Crime Prevention and Security Cluster,” it said in a statement.
Mining industry at risk
The DA’s Lorimer says the ‘investability’ of SA’s mining industry is slipping away, and it’s time to set up a specialised police unit to stop lawlessness and mine invasions.
“Across the country mines are under siege from invaders or criminals trying to extract wealth. The declaration by RBM of force majeure on its customer contracts shows how bad the problem has become. RBM declared it was not able to meet its contracts because it has had to shut down due to ongoing attacks on the mine’s personnel and equipment.
“The mine has been under siege for years from local tribal leaders and militant groups who are demanding jobs, contracts and money,” says Lorimer.
The suspension of mining at RBM is a huge blow to KwaZulu-Natal. The mine is the largest taxpayer in the province, according to trade union United Association of South Africa (UASA), which called on the provincial government and police to restore order to the area.
This call has been echoed by the Minerals Council.
“Continued acts of lawlessness including blockages of roads, burning of equipment and intimidation of staff at mining operations are not only unacceptable and damaging to the country’s reputation as an investment destination, but also impact the lives and livelihoods of mining employees, their families and surrounding communities,” it says.
‘Severe socio-economic consequences’
“The closure of mining operations due to security concerns negatively impacts on production, employment and investment, and will ultimately have severe adverse economic and social consequences.”
Meanwhile, Lorimer points to the Nuco chrome mine in North West as one of several other mines subject to invasion.
Orion’s efforts to restart a copper and zinc project in the Northern Cape has also been met with protests from locals demanding deeper involvement with the community.
“What’s significant about RBM is that it is the last remaining investment in South Africa of Rio Tinto, [one of] the world’s biggest mining companies,” says Lorimer.
“SA’s mining industry is desperate for foreign investment to maintain operations and open up new opportunities. The closure of an operation owned by Rio Tinto is going to chase away potential investors, worsening the decline of the industry.
“Potential investors, particularly in junior mining operations, will worry that if a company as big and experienced as Rio Tinto cannot make it in SA, that smaller operations will stand no chance,” says Lorimer.
“As mining revenues are a vital source of government funds, the government needs to be very attentive.
“Unfortunately, it has not been. Police have been very slow to act. Ordinary police are often bamboozled by legal counterclaims and regulatory loophole-jumping used by mining mafias. It is clearer than ever that South Africa needs a unit of police specialists, familiar with mining law and empowered to take on even heavily armed mining mafias.”
The creation of a specialised police unit was suggested in a Department of Mineral Resources and Energy (DMRE) discussion document on artisanal mining released in April. But recent events have added urgency to the industry’s call for action.
UASA says a local traditional leadership squabble is part of the dispute that gave rise to previous incidents of violence, which included the burning of mine equipment.
Peter Leon, global co-chair for Africa at Herbert Smith Freehills, says Rio Tinto’s decision to declare force majeure at RBM after Swart’s shooting should be a wake-up call for the DMRE.
“Rio Tinto is one of the world’s biggest mining companies and its decision to suspend operations at RBM is clearly concerning as much as it is not conducive to investor confidence in the country.
“I think there is a lot of sense in the proposal made by James Lorimer for the establishment of a specialised police unit to deal with illegal mining. This is something which the DMRE should be discussing urgently with the SAPS.”
“This issue is certainly not confined to KZN,” says Leon, “but is endemic to abandoned gold mines and tailings facilities in the Witwatersrand and Free state in particular.
“The minister now needs to follow his words at Richards Bay in May with concrete action before it is too late.”