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Finding a shared vision

Restoring the relationship between government and the mining industry.

One of the recurrent themes at this year’s Investing in African Mining Indaba has been the state of the relationship between the South African government and the local industry. Or perhaps, more accurately, the lack of it.

When asked about the relationship between the Department of Mineral Resources (DMR) and the Chamber of Mines, the chamber’s CEO Roger Baxter replies simply: “there isn’t one”.

While government and the mining industry have treated each other with suspicion for years, their attitudes have never been as adversarial as they have become over the last year. Baxter has gone so far as to say that the chamber is no longer engaging with the Minister of Mineral Resources, Mosebenzi Zwane, because it has lost confidence in his leadership.

A damaged relationship

“The unilateral publishing of the DMR’s Reviewed Mining Charter and various other instances where the Minister of Mineral Resources acted recklessly and to the detriment of the industry have caused an enormous amount of damage to the relationship between the regulator and the industry,” says Baxter.

“That is why the chamber was forced to come to the conclusion that it cannot engage with any confidence with him on the industry’s future.”

This stance is in contrast to the way the chamber has acted in the past, where it has not spoken out strongly against government and rather tried to engage in a less combative manner. This approach, however, became untenable.

“I think there has been a significant change in stance by the chamber,” says Herbert Smith Freehills partner and Africa co-chair Peter Leon. “It has gone from being quite passive to being very active.”

“It came from a change of leaderships and very critically the appointment of Roger Baxter as CEO,” he points out. “He is very knowledgeable about the industry, and is highly respected by the industry and by some in government.

“I think the chamber’s undergone something of a renaissance.”

This has been most clearly seen in the its response to the 2017 Mining Charter. It criticised it immediately and launched a court application to have it set aside, which will be heard later this month.

“Under the circumstances, I think they had no option to do what they did because of the consequences of the charter coming into effect,” says Leon. “What it did in the past was appear to be acquiescent in what the government was doing. It believed in an approach of quiet diplomacy. That did not work and I think they are right to have adopted a different stance.”

A new partnership

While this more confrontational approach may have become inevitable, it is far from ideal. As Allan Gray equity analyst Rory Kutisker-Jacobson points out, “in a perfect environment” there would be political support from the top for the mining industry and an appreciation of shared interests.

“The government should make it clear that, yes, there are certain demands that we are going to place on the industry with regards to communities, social upliftment and ownership, but assuming that they meet them we will come together and support this industry,” says Kutisker-Jacobson. “It should still be one of the greatest employment drivers in South Africa.”

Investec Asset Management’s Hanré Rossouw agrees:

“Sadly the hostile environment has not been conducive to anything,” Rossouw says. “What we need as a country is a partnership between government and industry for starters, but investors also need to be part of a wider discussion with organised labour, communities and other stakeholders. We need to create a sustainable industry that will attract investment. It might be smaller, but it has to be profitable again.”

As Wandisile Mandlana, a partner at Bowmans points out, this is dependent on reestablishing trust between all the role players in the industry. That begins with an acknowledgement that all parties do want to act in the best long-term interests of the sector.

“There is a misunderstanding when it comes to transformation,” Mandlana says. “The investment community is not resistant to it. The chamber has said that its desired outcome is one that is negotiated between all the stakeholders, such that at the end we have a shared vision for the long-term prosperity of the mining industry.”



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