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New Minister has his work cut out for him as raft of issues require his attention

4th July 2014

By: Chantelle Kotze

  

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Newly appointed Mineral Resources Minister Ngoako Ramatlhodi has inherited a challenging portfolio from former Minister Susan Shabangu, with several critical issues that will have to be addressed soon if he is to return South Africa’s mining industry to being the preferred African mining investment destination.

The appointment of Ramatlhodi, a former Limpopo premier, former Correctional Services Deputy Minister and ex-member of the Judicial Service Commission, as Mineral Resources Minister caught most industry stakeholders by surprise when it was announced by President Jacob Zuma on May 26.

During his time as Limpopo premier, Ramatlhodi was the subject of a long-running Scorpions investigation on allegations that he took bribes from a social grants contractor. He also went on record in 2011 criticising South Africa’s internationally acclaimed Constitution.

Last week he was forced to defend himself against media criticism by stating that he had given instructions for the shares he held in a platinum company to be put into a blind trust prior to attempting to negotiate an end to the platinum strike.

Despite initial misgivings, however, the industry’s attitude seems to have softened towards the new Minister. There seems to be a growing appreciation of the experience he brings to the table, his hands-on approach and his can-do attitude towards the current challenges facing the mining industry.

During his first week as Mineral Resources Minister, Ramatlhodi hit the ground running, convening talks between the Association of Mineworkers and Construction Union (AMCU) and platinum mining majors Lonmin, Anglo American Platinum and Impala Platinum to resolve the five-month-long strike on the platinum belt, in the North West.

This involved establishing an intergovernmental task team comprising representatives from the departments of Mineral Resources and Labour, the National Treasury, the three platinum miners and AMCU to break the deadlock.

However, Ramatlhodi soon withdrew from negotiations, which resulted in the dissolution of the intergovernmental task team. Nevertheless, negotiations continued and the strike came to an end last week. AMCU officially signed the wage settlement agreement with the mining houses on June 24, with workers returning to the mines the following day.

While some believe that Ramatlhodi’s withdrawal from the negotiations may have tarnished his reputation, many were impressed by his initiative and determination to do something about the situation.

Law firm Webber Wentzel mining regulatory head Peter Leon commends Ramatlhodi for intervening in the dispute, noting that, as much as it is not the Department of Mineral Resources’ role to intervene in labour disputes, “Ramatlhodi at least stepped in and tried to do something about the dire situation facing mining companies and mineworkers”, which contrasts with the hands-off approach that Shabangu seemed to favour.

Although he withdrew soon after his intervention, partly due to a lack of legal authority to mediate the dispute and partly due to politi- cal pressures, as some in the ruling African National Congress appeared to have perceived his intervention to be too helpful to AMCU, the parties continued to negotiate. It was not long after Ramatlhodi’s intervention that the strike finally ended, but not before it had resulted in a weakening of South Africa’s wider economy and a 0.6% contraction in the country’s gross domestic product (GDP).

South Africa’s foreign and rand-denominated debt ratings have also been downgraded by ratings agency Standard & Poor’s (S&P’s) Ratings Services to BBB- and BBB+ respectively, while Fitch Ratings changed its outlook for the country to negative, a possible precursor to a future downgrade.

In its latest quarterly assessment on the economy, released last month, the South African Reserve Bank stated that annualised growth in real GDP in the first quarter of 2014 would have been closer to 1.6% had the platinum strike not taken place, in contrast to the contraction of 0.6% which, in fact, materialised.

Also welcoming Ramatlhodi’s appointment, the Chamber of Mines (CoM) of South Africa released a statement in May, affirming its belief that, although the South African mining sector faces challenges that require concerted efforts from all stakeholders, Ramatlhodi can add value [to the sector], as “he brings [with him] years of experience in government”.

Despite these endorsements, Democratic Alliance (DA) shadow Minister of Mineral Resources James Lorimer has snubbed the appointment, citing it as a “bad move”.

“Ramatlhodi doesn’t seem to know much about the mining industry, owing to his background in other areas of politics.

“Also of concern to me are the ethical questions surrounding his actions in his capacity as Limpopo premier,” he tells Mining Weekly.

Meanwhile, although the strike has finally come to an end, there are still several critical challenges facing Ramatlhodi and his department.

Leon believes the effective implementation of the Framework Agreement for a Sustainable Mining Industry should be Ramatlhodi’s key priority to ensure sustainable mining and labour stability into the future.

The agreement – previously spearheaded by former Deputy President Kgalema Motlanthe, but now led by Zuma – was signed by labour, industry and government in July 2013.

Leon further cites the need for Ramatlhodi to address several regulatory issues in the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, “which [Ramatlhodi] himself has highlighted”.

The Financial Times quoted the Minister last month as saying he had advised the Presidency not to sign the Bill after hearing the concerns of industry officials: “I wanted to have an idea of what it contains, whether there are concerns and how they can be addressed.”

Leon concurs that the Bill, as passed, still has some shortcomings, despite the CoM’s apparent satisfaction with the final version of the Bill, after it stated in March that it “generally welcomed and supported the approval of the Bill”, indicating that the amendments addressed many of the Act’s initial shortcomings.

Part of the CoM support for the Bill was due to the fact that certain difficult proposals, such as the setting of discounted prices for minerals designated for beneficiation, were initially withdrawn from the Bill. There is now a possibility that there could be an attempt to put certain of these aspects back on the table if the Bill is returned to Parliament. This is another issue that Ramatlhodi may have to juggle in the months ahead.

Leon further avers that several of the Bill’s provisions were drafted in a vague and ambiguous manner, or gave the Mineral Resources Minister broad, rather than guided, discretion, which could create regulatory uncertainty.

Lorimer reiterates this, adding that there are many areas of the MPRDA Amendment Bill that may be unconstitutional for this reason. “If Minister Ramatlhodi were to really do the mining industry and the country a favour, he would persuade President Zuma to send the Bill back to Parliament for further consideration.”

Besides the recommendation that the Bill be sent back to Parliament to review contested clauses, the Financial Times outlines another option for Ramatlhodi – that a separate petroleum Bill be drafted to address criticism that a nascent industry, such as South Africa’s oil and gas sector, should be dealt with separately from a mature industry, such as mining. Implied in this formulation is the view that a cost-compensated 20% free-carry interest for the State in the exploration-heavy oil and gas sector may be appropriate, whereas such a free carry should not apply to the mining sector.

Leon adds that, considering Ramatlhodi’s statements in the media, “it seems he understands that he must, in the near term, create a better and more conducive investment climate for mining and, thereafter, address the next critical issue: mining infrastructure and the energy constraints that the mining industry faces”.

He highlights that, owing to the protracted strike, the mining industry has taken strain, with mining production down by 25% in the first quarter.

Leon hopes that the severe consequences of the strike will serve as a wake-up call to all concerned, adding that South Africa cannot simply resume with ‘business as usual’ without significant introspection. “Issues need to be resolved and the industry needs to be put on a better footing going forward,” he says.

Moreover, Leon highlights government’s insistence on developing State-owned infrastructure, rather than opening it up to public–private partnerships or concessions, as another critical issue that Ramatlhodi needs to address.

He believes that, “as government simply cannot deliver what it should be delivering”, it should rather focus on developing new ideas and ways of addressing the mining sector’s infrastructure needs.

Adding to the Minister’s burgeoning in-tray, Lorimer says Ramatlhodi should take up the suggestions made by the DA and several other role-players, particularly business, to redirect mining royalties to the near-mining communities through an independent and capacitated agency and create a mutually beneficial environment for mining companies and their employees because, currently, none of the money is going to the communities, it is just going to the National Treasury.

In a statement released shortly before Ramatlhodi’s appointment, Lorimer said government had been almost entirely absent from mining communities and that it was not dealing with the problems facing the sector, which he said was evident since the beginning of the platinum strike in January.

He advised government to reform its spending of mining royalties in favour of improving the lives of mining communities. Lorimer highlights that, at the root of the strikes and most labour unrest in the country is a breakdown in trust and a failure to address social and workplace inequality.

The shadow Minister, therefore, believes that by reinvesting a portion of mining royalties in near-mine communities – which have to cope with diverse environmental issues and the influx of migrant workers seeking jobs at the mines – communities will be empowered with the resources necessary to mitigate their challenges.

Lorimer also believes that the pressure on mineworkers to win higher wages will also not be as intense if royalties were redirected to affected mining communities.

Further, he believes Ramatlhodi should establish avenues to ensure that mineworkers who want to work are able to do so freely without being threatened or killed – an issue that came to the fore during the five-month-long platinum strike. The democratisation of trade union practice through secret balloting must be introduced to protect the mineworkers who want to return to work from reprisal, especially if the outcome of a secret ballot were to go against the preference of those willing to remain at work.

Leon and Lorimer agree on what they would like to see Ramatlhodi achieve in his first year as Mineral Resources Minister.

Lorimer hopes that Ramatlhodi will not only promptly address the issues of the MPRDA Amendment Bill but also focus on improving other impediments to business, specifically the effect of safety stoppages on production and their knock-on effect on the economy.

“While there is nothing wrong in principle with safety stoppages, I believe the way in which they are bluntly applied is incorrect. As a result, they are having a far bigger impact on production than they should.”

Leon also reiterates the need for Ramatlhodi to address issues concerning the MPRDA Amendment Bill and labour relations, which is “crucial if mining is to progress and achieve its potential as something that could very well put the South African economy on an entirely different footing, given that mining is responsible for some 60% of South Africa’s exports”.

He would also like to see Ramatlhodi work towards re-establishing South Africa as the preferred investment destination for mining in Africa, “which it should be, given that South Africa has the best mineral resources and infrastructure in Africa”.

Despite Ramatlhodi being in office for just over one month, it is clear that the Minister’s in-tray is overflowing with complex and important issues that need to be dealt with urgently. The pressure is on, and the onus is on him to return the mining industry to its former glory.

Edited by Creamer Media Reporter

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