The Mineral Resources Development Bill approved for public comment by the cabinet last week could be the death knell for mining in South Africa, says Peter Major, veteran mining analyst and director of mining at Modern Corporate Solutions.
“It’s like giving the dead body one last kick before you walk away, just to make sure the guy’s properly dead,” he says.
“The industry is already on its knees. It got its guts ripped out with the Mineral & Petroleum Resources Development Act (MPRDA) in 2004, and each additional bill that comes out is like pouring concrete in the grave. It’s like you've done a whole bunch of damage to something but you’re not quite finished.”
Much has been made of the fact that the bill addresses artisanal mining rights, but most investors don’t care about artisanal mining rights, Major says. “They care about proper, big mining rights.”
What about the argument that the lack of legislation for artisanal mining has encouraged illegal mining?
“It’s not the lack of legislation that encourages illegal mining. It’s putting half-a-million men out of work that encourages it because of legislation like this new bill which stops new investment, chases away existing investment, closes shafts and mining companies.
“The reason we have all these artisanal miners is because the MPRDA was a body blow to the industry; it slammed the door on 95% of foreign investment. Without investment and reinvestment the industry shrinks, and when the industry shrinks it puts experienced miners on the street who do whatever they can to stay employed, whether it’s legal or illegal.”
The Presidency has extolled the new bill, which it says will streamline regulatory processes and incentivise investment.
“These are cut-and-paste words they’ve been using for two decades now,” says Major. “They’ve written a piece of legislation without thinking about the implications or working through the consequences. And then they make this asinine statement.”
The reality is there’s going to be more bureaucracy, more state control, more power for the minister and more transformation codes of practice made into law “so now you can go to jail if you don’t comply”.
“It’s just layer after layer of more legislation disincentivising investors. What foreign investor do they think is even going to look at this? They’re going to say, ‘You’ve already nationalised my assets, told me I’ve got to give 30% to somebody I don’t know who doesn’t contribute, and purchase 70% of what I need from the ANC’s BEE cronies.’”
“It’s like the president who tells the world South Africa is open for investment just sits back and lets his ministers implement their bizarre wet dreams at no matter what cost to economic growth and jobs
— Peter Major, director of mining at Modern Corporate Solutions
On top of this mineral resources minister Gwede Mantashe has made it clear he is looking for a way round the 2021 Supreme Court of Appeal decision that once empowered means always empowered.
Major says what he struggles to get his head around is that the cabinet has given the bill, which makes mining even more convoluted and complicated, its stamp of approval.
“Has the cabinet even read it? Do they understand the consequences for investment? Do they actually care about investment? The answer appears to be no, no and no. This bill is a perfect example that they couldn’t care less about the average unemployed miner and getting him back to work.
“Cabinet has the ability to kill it and send it back because it looks more draconian than anything yet. It doesn’t have one redeeming feature to attract any investment, local or foreign.
“Look at the headlines. Harmony Gold just went to Australia and bought an old copper-zinc mine for $1bn (R18bn). They could have got a brand new copper-zinc mine in Prieska right under their nose for 10% of that, that will produce the same amount.”
What this says is that not only are foreigners avoiding investing in mining in South Africa, but locals cannot get their money out fast enough.
“When local companies are flying out of South Africa, why would a foreign company want to come in?”
Faced with a plethora of rules and regulations that the bill makes more convoluted than ever, locals are buying anything just to get their money out, he says, citing Sibanye Gold’s expensive acquisition of Stillwater in the US.
“Not only is government locking the door to foreigners coming in, they’re incentivising locals to get the hell out.”
The bill raises disturbing questions about President Cyril Ramaphosa's leadership, Major says.
“It’s like the president who tells the world South Africa is open for investment just sits back and lets his ministers implement their bizarre wet dreams at no matter what cost to economic growth and jobs.
“I don’t want to say he’s a cheerleader for Mantashe, but he’s certainly given him a platform and the backing to inflict mortal damage on this industry.”
He wonders if Ramaphosa even looked at the legislation, making the point that he has the power to veto it and send it back.
“How can he go round saying South Africa is open for investment and then approve a bill that makes it absolutely clear that the government is not open for investment, they’re not interested?
“We’re in the greatest commodity boom the world has ever seen. We’re in a 22-year super cycle here, and our industry is dying. And this bill is another bakkie load of rocks thrown on the grave in case one of the bodies is still alive and trying to crawl out.”
The cabinet should have read through each item in the bill and asked how it was going to make mining in South Africa more attractive for an investor, foreign or local, he says.
“But they clearly haven’t because then they’d have seen there’s been no change at all unless to make us less attractive than ever. If they did read it then investment in our mining industry is clearly at the bottom of their concerns.”
He says it’s difficult to quantify the extent of disinvestment because the likes of Harmony, Sibanye and Anglo don’t call it that, they say they are “diversifying”.
The reality is that the mining industry in South Africa is dying, Major says.
“Mining companies are not reinvesting here enough to expand operations, they’re just ticking over. All their expansion is going on out of the country, nobody is expanding here readily. And in mining if you’re not expanding you’re dying.”
This new, government-approved bill will hasten the process.
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