Minerals Council South Africa chief economist Henk Langenhoven says their letter to Transnet chair Popo Molefe in December demanding that Transnet CEO Portia Derby and Transnet Freight Rail CEO Siza Mzimela be fired for incompetence and mismanagement was "a cry for action" on the deteriorating performance of Transnet.
"It was a desperate attempt to stem the billions of rands of export losses being experienced by the mining sector", he says. "It's absolutely vital that efficiencies and capacity go up as soon as possible."
After "talking to them about these issues for three years" it was clear this wasn't happening. Their pleas to be allowed to help in a meaningful way were being ignored or met with scepticism.
“There isn't much time or management resources available within the state. The argument that there isn't capacity in the private sector to run our rail system is absolute nonsense.
“We're saying: 'Give us the scope and the regulatory ability to get involved, and things will change.'”
Although Derby is still the CEO and will be addressing the mining indaba starting in Cape Town tomorrow, the letter has brought results.
There's been an agreement by the boards of Transnet and MCSA to work “intensely and closely together” to try to solve some of the issues that cost the industry R50bn in lost exports last year alone.
Joint technical committees have been set up and there's “real action to support each other and get short-term improvements happening”, he says, citing last week's announcement that Transnet wants to concession the whole Durban-Johannesburg container line, “overwhelmingly the most important line in the country in terms of GDP and trade”.
“There's clearly a change of heart,” he says.
Whether this new attitude will extend to the bulk iron ore, manganese, coal and chrome export lines, “we don't know”. They're commercially lucrative for Transnet, accounting for a large chunk of the 80% of rail income it gets from the mines, and Transnet has shown no sign of letting them go.
But “intense discussions about how this could happen are now taking place”, he says.
Getting finished product to the ports for export is only the end game in terms of the disasters devastating the industry.
These begin with the cadastral system used by the department of mineral resources & energy (DMRE) to manage applications for exploration and new licences, which he says is “virtually inoperable”.
“Mining is not just digging stuff out of the ground. It starts with exploration, and that is an absolute nightmare.”
The system being used by the department is largely a manual one.
“You apply on a computer screen but that's the end of it. Everything is then printed and then it goes from one desk to the next. And the minister and his department have been reporting on how many thousands of them are outstanding.”
The result is that new mining exploration in South Africa is “virtually at a standstill”, he says.
“A lot of the funding for that is sourced from international exploration companies, and we've declined to virtually nothing of the world share of exploration money. So we're not replenishing the pipeline.”
For mining licences it's the same system, leading to thousands of outstanding and cross-cutting licences.
“You'll get a licence for a certain piece of land, and then someone else will get a similar piece of land but a slightly different mineral. Which is completely untenable.”
Overlapping licences are “rife” in the Northern Cape, which is a new growth area for mining, mainly iron ore, manganese and chrome.
Those wanting to start mining find themselves in a legal quagmire instead.
“The net result is that very little happens.”
This raises questions about the future of mining in the country.
“The fact of mining is that every day you mine you're one day closer to the end of your mine's life. So if we don't do the further exploration it will just come to an end when current licence areas are mined out.”
They've been working hard to fix the cadastral debacle and are hoping the DMRE will announce at the indaba that it's going to buy an off-the-shelf system rather than continue its ponderous efforts to replace its antiquated system with a similarly antiquated one.
It would take six months to get a new off-the-shelf system running, he says.
“One of the best has been developed in South Africa, so we know it works very well. It will immediately streamline the whole mining scene in the country.”
Namibia and Botswana, among “the leading mining jurisdictions in terms of their efficiency”, are using it.
“What we have is as archaic as Noah's ark.”
Apart from its other failings, the DMRE system allows for “a lot of interference along the way”, says Langenhoven. Too much “ministerial discretion” in the granting of prospecting rights has long been flagged as a concern.
The DMRE's dysfunctional system is one of two explanations for why investment in mining exploration in South Africa has fallen from 5% of global expenditure in 2003 to less than 1% today.
The other explanation is uncertainty about whether BEE requirements will be applicable or not.
“Exploration is a very, very risky business, and nowhere in the world can you do that by borrowing money. You have to get venture capitalists in. And all the uncertainties about BEE have virtually killed the venture capitalist source of funding.”
BEE has been removed from the mining charter but is “very haphazardly applied or not applied in the regions, and that needs to be sorted out as well”, he says.
“You need to know what the probabilities and risks are and what obstacles there will be, and if they change as you go into the application process then people are very reluctant to do that.”
In addition to the regulatory uncertainty around exploration and mining licences there's also “a whole plethora of regulations” around self-generation of electricity.
“This is one of the biggest bottlenecks that we have, which we discovered when mining companies started to apply for licences to do self-generation.”
In spite of the self-generation threshold being lifted by the president more than six months ago they're still having to deal with different levels of government and different government institutions to get the necessary permissions, says Langenhoven.
“It's like snakes and ladders. You may climb one day and then be bitten by a snake and drop further back than where you were the day before.”
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