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Complexities of Mining Charter could compromise May wrap-up

There is, however, a positive will to get it done and save jobs, says Peter Major.

NASTASSIA ARENDSE:  Mines minister Gwede Mantashe says that’s he’s aiming to finalise the third version of the industry charter by May and it may ask the requirements for black ownership levels and other targets. I had a conversation with Peter Major who is an analyst at Cadiz Corporate Solutions about the comments by the minister and also about the state of the platinum industry in South Africa.

PETER MAJOR:  It’s very good news. It’s so different from what we’ve heard before. I think most people are a bit sceptical that it can be wrapped up by May. There are just so many issues to deal with and there are so many parties negotiating. It’s not like it’s just Gwede Mantashe and the Chamber of Mines. There are a dozen other parties involved. That’s without even considering the various communities and they didn’t talk about going to different communities and canvassing their opinions.

It shows there’s a positive will that it’ll be done soon and there’s a positive will on behalf of the DMR to make what accommodations are necessary to save jobs and to save the industry. We haven’t seen that literally in decades. And so everybody is very optimistic it’s really good news. We think Gwede has put in quite a tight deadline but, hey, it’s his deadline and wants to give it a try. …

And the fact that they are not contesting … from the judiciary. He said in front of everybody yesterday, “We accept the judiciary’s decision. It is our recommendation that this be been settled by the court”. We’ve had only a declaratory order – it can be an unbiased decision that both sides can live by. So he  says it’s not like we were challenging it. We agreed with the Chamber of Mines a year ago, two years ago, to do it this way. So very conciliatory. It’s just that there are a lot more issues and problems that still have to be dealt with but I haven’t seen any of us this optimistic in more than ten years.

NASTASSIA ARENDSE:  I suppose one of those issues and problems that needs to be dealt with is the issue of distrust in the industry. He mentioned that in the first 44 days since his appointment he’s found that there was a lot of suspicion among players in the industry.

PETER MAJOR:  He’s very right there. That cannot be eliminated by May. That won’t be eliminated for years. This mistrust has built up over many, many decades and apartheid had a lot to do with, but also the rise of the ANC and also the rise of the NUM. That’s to say, how did they get so much political acceptance? How did they get so much tolerance by demonising the mine companies? It’s the worldwide trend. This is how politicians work. They have to have an enemy and they have to keep you off balance, they have to keep you stirred, and the easiest, quickest way for anybody in any political organisation to get support is you demonise. So they’ve demonised the mining companies for thirty years. They’ve never admitted the mining companies did anything right for any…country. Now they wake up and everybody believes their stories, even though you and I know it’s not quite true. The mining companies were existing in a system that…entirely right. They would have been happy paying…mines that’s the best payed for decades before apartheid fell.

Anyways, the fact is they’ve been demonised and so there is mistrust. They mistrust the political parties, they’ve mistrusted the DMR for the last 25 years. The communities mistrust mining companies because they’ve been fed all this rubbish for decade after decade. So you have to go for lots of little… First clean up the legislation, make it fair, make it legal and make the onus all parties. Don’t just put all the onus and responsibilities and obligations on one party, which is what’s happened till now. Put responsibilities on all parties, and they all have to abide by the Constitution. Trust will build up that way, but it will still be gradual. It will still be over a decade.

NASTASSIA ARENDSE:  I think is saw a comment from one of the mining executives, saying that maybe we should try to get a long-term charter where, instead of changing the requirement every five years or when a new minister is appointed, we keep it for 10 years. In that case you’ll be able to cement in some trust and have stability for 10 years before we need to have a look at it again. Do you think that could be an option that could work?

PETER MAJOR:  Once upon a time we thought all you need is a good Constitution and the rest will take care of itself. There are a lot of people who still believe that. But the Constitution gives everybody rights. Why do you single out one industry, why do you demonise one industry and load them will the ills of society, load them with all the things that government should have been doing, and hasn’t been doing?

So there is a lot to be said that the charter is just plain unconstitutional. We have a wonderful Constitution that is supposed to cover all those. Why do we need to have a separate charter for a separate industry? The only reasons you really want a charter in this country is because it’s going to grow jobs. If that charter is going to continue to shrink the mining industry, than what good is it doing? That what’s happened until now. We’ve got 400 000 fewer mining jobs than we did 20 years ago – 400 000 good, working, paying jobs. The guys have gone and they took 800 000 subsidiary jobs with them.

So the charters that we’ve had until now have only destroyed jobs. So I think if anybody still thinks we need a charter, they’d better make sure that charter is designed to create jobs, not cost more jobs.

NASTASSIA ARENDSE:  Today there was a platinum industry conference or breakfast as it were, and the comments out of the minister, Gwede Mantashe, talking about the platinum sector, were that he doesn’t know whether there actually is a crisis and he doesn’t believe there is a crisis. When you look at the platinum industry, is it in a worse position that the gold sector? What’s your assessment of it?

PETER MAJOR:  I would say it’s very close to the gold sector. It’s a little bit better in that some of the platinum mines are making money and have a future – only about a third – whereas in the gold sector almost none of them are making money and none of them have a future. So it is in crisis. Anybody who has invested in platinum the last 18 years has either made or lost money. Nobody has made money if they bought in the last 18 years and they are still holding today. There are no earnings. We haven’t had earnings in years. You can’t find industries this bad anywhere else in the world. Productivity has fallen in the last 10, 15 years. You can’t find an industry on the planet where productivity goes down. Only in this country, only in our mining industries do you see such horrible devastating figures.

One would wish Gwede could stay there longer and look at the graphs. He don’t have to look at tables, charts and numbers. Just look at the graph of what has happened to these industries in the last 20, 30 and 10 and 5 years. If you look at a graph you can’t deny that’s the reality. Massive value destruction, massive losses, the government is making no taxes off industries but used to make tens of billions every year in taxes. So everybody’s been hurt. Shareholders, …and government. Everybody has been hurt and you can’t deny that. It’s epic Armageddon.

NASTASSIA ARENDSE:  As a result I would imagine that South Africa has lost its labour-cost advantage in the global mining industry.

PETER MAJOR:  Without a doubt. We haven’t had a labour cost advantage ever. We did have labour-cost, plus electricity, plus legislation, plus ore-body advantages. When you put them all together we had advantages for almost 100 years. We had fabulous ore bodies, lowest-cost electricity in the world, and we had legislation, even though the Afrikaans and the English didn’t get along, even though had a whole big war, they did get along well enough to make legislation that would allow mining companies to grow and hire people.

We had the right combination to have a very good industry here for 100 years, creating huge wealth for the country and creating huge wealth for over a million people. But that’s gone now. We have no competitive advantage now. Our ore bodies are not competitive enough to make up for the disadvantages of sky-high electricity, sky-high labour costs with the worst productivity on the planet, and with legislation that is mind-boggling and very complex, 2000 pieces of legislation in just the last 15 years. That’s insane. Most people can’t follow ten commandments – how are we going to follow 2000 pieces of legislation, and every one is designed to make mining harder and less productive and less financially lucrative.

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