Speaking on the sidelines of the Investing in African Mining Indaba this week, President Cyril Ramaphosa acknowledged that government missteps had hurt the development of the local mining industry. At an event hosted by ENSafrica, he said this was now being addressed.
“Many of you in the mining industry know that for the past few years we have been dealing with policy uncertainty, policy inconsistency and policy deviation,” Ramaphosa said. “We went on wrong routes, not even detours. We took completely different routes. That is precisely what we have been dealing with and are dealing with it with a great deal of determination.”
In opening the Indaba, his minister of mineral resources Gwede Mantashe made similar remarks. Investors coming to South Africa, he said, “now know what they need to do”.
Not everyone would agree that there is now perfect clarity, but there is certainly widespread agreement that things have improved. For years under the previous minister, Mosebenzi Zwane, the only people making good returns in the industry were lawyers trying to make sense of the regulatory environment.
One of the primary problems was the Mining Charter, which is one of the first things that Mantashe tackled when he was appointed. This sets out the obligations of mining rights holders to transform their operations and supply chains. The third version of the charter was originally published by Zwane, but suspended when it was challenged in court.
Mantashe however quickly set about reviewing that document and releasing a revised version. Significantly, he consulted with the industry, labour and mining communities to come up with something that would find broad acceptance.
“It looks a bit longer than expected, but I regarded that as positive in the sense that it showed commitment to listen to all the stakeholders,” Warren Beech, partner and head of mining at Hogan Lovells, told Moneyweb at the Indaba. “Certainly it seems far better than Mining Charter II, but there are still a lot of details that are going to have to work themselves out.”
Many of these have to do with interpretations of the charter and how exactly it will be implemented. They are however not on the scale of the concerns that were raised about the previous version under Zwane.
“What Minister Mantashe has brought is some policy certainty,” Jonathan Veeran, a partner in the corporate practice at Webber Wentzel, explained to Moneyweb. “I do think the charter is a compromise between government, labour and business. Each of the parties has some sort of takeaway, but has also compromised to a certain extent.”
While it has only been a few months since it was announced, the new charter does appear to have had an impact on sentiment in the local mining industry.
“It has definitely made a difference,” Greg Webber, co-head of mining and resources at Nedbank CIB, told Moneyweb. “Things are definitely more positive and collaborative between government, business and labour.”
It has been particularly significant for funders to gain some clarity.
“We now have something we can plug into financial models and determine whether they work or don’t work,” Webber said. “Previously we didn’t know what to put into the model, so it’s a large leap forward. It’s probably the best balance we could get between the many stakeholder desires pulling in different directions.”
Significantly, the relationship between the Department of Mineral Resources (DMR) and the industry has also been restored.
“Mantashe has opened the doors of the DMR,” Veeran said. “Zwane had no relationship with the industry in any way or form, so you are going from the doldrums to something more sustainable. I also think that Mantashe understands the industry a whole lot better, and he has gravitas in the ANC itself.”
How long will it last?
One of the concerns that does persist for the industry, however, is just how long this new charter will be in force. It is already the third iteration in less than 15 years.
Mantashe has said that the charter will be in place for the next five years, but this is not a binding commitment. There can be no certainty that he will even continue to be the minister for this period, and if a new minister is appointed there’s nothing to prevent them from coming up with a new version.
“There’s no guarantee,” Beech said. “It’s as good as the minister’s word that no other charters will come out. So investors have to accept that it will change. It’s a dynamic process that depends on where society and the mineral community is at any time. Investors have to recognise it is a two- to three-year charter and probably not much more than that.”