South African miners near crisis as government pushes heavy regulations on local industry
Minister Zwane visits Harmony Gold Doorknob Mine 2015
Source: governmentZA via Flickr
The RM3 is designed to create process control and precise volume calculation in mining using only one simple piece of equipment.
Outside No. 44 Main Street, one of Anglo American’s Art Deco buildings
Source: Johan Wessels via Flickr
The South African government and its miners are clashing over changing legislation.
Historically, South Africa’s native population has been disenfranchised in terms of ownership in industrial mining ventures. In an attempt to increase black representation as well as strengthen the local economic infrastructure, President Jacob Zuma and Mining Minister Mosebenzi Zwane confirmed plans publicized a new draft for the mining charter; listing, among other things, to change the required amount of black ownership in each company. Previously, a charter passed in 2010 required companies to have 26% black ownership at a single time in its history, citing a “once empowered, always empowered” mentality. However, Minister Zwane, who was appointed in 2015, is pushing the requirement to a 30% black ownership at all times. Beyond that, the new charter from Minister Zwane requires junior management positions to be almost 90% black individuals.
Pushes for more local representation in mines include more than just employment demographics. The soon-to-be published charter will also require at least 70 percent of mining company goods be purchased from local South African, black-owned companies. These new requirements are an attempt to boost the local communities and economy, but South Africa’s major investors are unhappy with the changes. Mining heads claim it’s us versus them when referring to the growing rift between mining companies and the South African government. Despite the region containing the largest reserves of platinum, chrome, and manganese, investors are pulling out as regulation tightens. Shares from Glencore, Lonmin, and South32 fell from 1 to 4 percent since the charter draft was made public. Even Anglo American, the mining giant that almost single-handedly shaped South Africa’s global mineral presence, saw shares drop 5 percent and is considering pulling out of the region.
Abandonment could be devastating.
With South Africa securely represented in the top 10 coal producing countries along with accounting for over 75 percent of the world’s platinum production (which can be found in 20% of common household and workplace devices), breaking ties with mining companies would jeopardize the global economy. Conversely, mining makes up 60 percent of South Africa’s exports, dominating that side of trade. South African miners are ready to take their complaints to court. The new charter highlights the growing rift between the industry and government officials, with records showing that ministers and the chamber of mines had not met over the past two months. Should Minister Zwane’s proposed charter become law, the country could see an evacuation of mining companies, virtually grinding South Africa’s exports to a standstill. President Zuma and Minister Zwane’s plans to power the local economy would be undone from such a loss of revenue.
Miners have other plans.
Instead of posing difficult regulations and high taxation on revenues, mining companies prefer the local government to act as shareholder. After buying lands, corporations sell shares to the government and pays out royalties. With the new charter, companies are complaining that the South African government would instill themselves as a “preferred shareholder” who receives extra payment and royalties before any other shareholder gets their cut. Preferring one, lower-paying shareholder over larger, more invested shareholders would lead to a loss in investment.
With this threat looming, miners feel they have no choice than to fight Minister Zwane’s charter, or even fight the South African government itself. The broad resistance on these issues begs the question: is it really worth it?
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