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Draft 2018 Mining Charter: Better, but still profoundly flawed

And a continuing choke on investment.

‘Transformation Trumps Sustainability’, the latest report from the Institute of Race Relations (IRR), provides a detailed assessment of the 2018 Draft Mining Charter. The IRR warns that, though the draft is better than its predecessor, it still falls far short of the regulatory framework required for a thriving mining sector capable of boosting economic growth and job creation. 

The 2018 Draft Mining Charter was gazetted on June 15 for comment within 30 days.

The IRR report acknowledges that the amendments introduced under new mining minister Gwede Mantashe make for a better draft than his predecessor’s 2017 charter. However, the new document still has many damaging features.

The 2018 draft is better than its predecessor in some material ways. It scraps the 51% ownership requirement for new prospecting rights, gives more recognition to the ‘continuing consequences’ principle, and slightly reduces earlier procurement and employment equity quotas. In addition, it scraps the 100% compliance requirement for skills development and mine community upliftment, instead confining this onerous demand to the ownership element alone.

However, the draft charter still greatly increases the regulatory burden on mining companies in South Africa. Its adoption of a 30% ownership target contradicts all the assurances earlier provided by the Department of Mineral Resources (DMR) that the 26% target was immutable and would not later be changed.

Now that the DMR has gone back on this pledge, the risk of the ownership target being raised once again – perhaps to 51% next time – looms all the larger.

While some 50% of gold mining companies and 60% of platinum ones are already battling to survive at current mineral prices, the draft charter nevertheless obliges these struggling companies to do additional BEE deals and fulfil a host of costly procurement and other obligations.

These would only push up their operating costs and increase the likelihood of shafts being shuttered and mineworkers retrenched.

The risk is that companies thinking of investing in new mines will have yet more reason to stay away.

South Africa’s enormous mineral wealth is a major draw card, the report says, but this is offset by the country’s unattractive policies.

By contrast, if the regulatory environment were to be reformed, so as to give the country the benefits of certain, stable, and predictable mining policies, then new investment would double, 150 000 more direct and indirect jobs would be generated, and the mining industry would once again start playing a larger part in boosting the country’s now dismal rate of economic growth.

The report recommends a shift to EED to achieve such outcomes.

Under an EED Mining Charter, companies would earn EED points for their contributions in four categories: economic, labour, environmental, and community. Given the overarching importance of growth, their economic contributions would count the most.”

By contrast, if the country continues with the flawed BEE model, South Africans will reap a bitter harvest as the economy falters still further and joblessness worsens, thereby curtailing any realistic prospect of upward mobility and inclusive prosperity.

By contrast, a shift to EED in mining (and elsewhere) would free the economy from the leg-iron of ever more damaging BEE requirements. It would also empower the majority of South Africans in a way that BEE interventions – and the 2018 draft charter, in particular – will never be able to achieve.

Read the full report here.

Dr Anthea Jeffery is author of the report, head of Policy Research at the IRR.

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“Parliament’s great triumphs since 1995 are the 2 000-plus pieces of legislation and 3 000 policy changes it crafted. Not to mention the 450 000 jobs lost forever. Business, and mines, are drowning in red tape.

“SA has half the world’s minerals and almost no-one to mine them. We have 6 152 abandoned mines and counting”…Mining’s miserable future, MW.

We’re stuck with a bunch of socialist dinosaurs trying to stay alive in a world where they should have been extinct long ago. ANC+policies a bigger thread to life in SA, than the asteroid that wipe out the dinosaurs.

Evolution = to know more today, than I did yesterday, except ANC Evolution = yesterday I knew nothing, how should I know anything today.

“However, the draft charter still greatly increases the regulatory burden on mining companies in South Africa. Its adoption of a 30% ownership target contradicts all the assurances earlier provided by the Department of Mineral Resources (DMR) that the 26% target was immutable and would not later be changed.

Now that the DMR has gone back on this pledge, the risk of the ownership target being raised once again – perhaps to 51% next time – looms all the larger.”

In other words, you can’t trust these shifty communists. Who knew?

Socialism is the strongest force of destruction invented by man. The damage done by the economic system of socialism is much worse than a nuclear explosion. We have the best scientists in the world in charge of nuclear experiments and nuclear facilities, but we have the scum of society, with the lowest mental capacity in charge of the socialist experiment.

The capitalist system, with property-rights at its foundation, builds capital and enables wealth-creation. Socialism is the antithesis of capitalism and turns assets into liabilities. Competent workers living on the farm was an asset for the farmer before ANC intervention. ESTA- and security-of-tenure laws turned worker’s houses on the farm into a liability for the farmer. Having families living on the farm now diminishes the value of that farm. The houses on the farm remain unoccupied as a result. The ANC turned assets into liabilities.

Ownership of, and shareholder in a mining company was previously regarded as an asset. The Mining Charter turns the ownership of a mine into a liability. The capital value of the shareholding is destroyed as profitability comes under pressure from BEE, EE, local beneficiation, labour laws and populist political demands. The owner is forced to share his assets and profits with so many people, but the tax liability remains. The mineral wealth will stay under ground as a result.

The socialist experiment is now extended to healthcare. No doubt, both the membership of, and shareholding in medical schemes will also now become a liability. Current world-class medical services will become unavailable as a result.

How long will the socialist experiment last? Until all wealth has been destroyed and all assets have been turned into liabilities.

ANC is just pure corruption riding on the coat-tails of popularism and from which NOTHING but misery results.

There is no future for SA with the ANC – NOTHING.

The only future for SA lies with a party that has the courage to rise up above the ANC.

The ANC is profoundly flawed (with corruption, cadre deployment, party before country etc) but not getting better at all.

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