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Opposition calls on President to back Minister on developmental pricing issue

James Lorimer

James Lorimer

Photo by DA.org.za

16th February 2015

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Amidst apparent disagreement in his Cabinet about mining policy, President Jacob Zuma needed to step in and provide leadership so that potential mining investors had certainty about South Africa’s mining policy, Shadow Democratic Alliance (DA) Mineral Resources Minister James Lorimer has urged in a media release.

Great concern had been caused in the mining industry owing to Mineral Resources Minister Ngoako Ramatlhodi reopening the debate about developmental pricing, the Opposition MP and DA mining spokesperson reported.

“The whole industry seems perplexed by his indication that government is still considering the designation of strategic minerals as part of its developmental pricing policy,” said Lorimer, adding that the issue had resurfaced hot on the heels of the President sending the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill back to Parliament out of fear that “this very policy would put South Africa in violation of the General Agreement on Tariffs and Trade and thus be in violation of our own Constitution”.

The Minister’s remarks had indicated confusion in government as to where mineral policy stood after the Bill’s return to Parliament for reconsideration and fierce contestation in government over what mining policy should be.

Lorimer cautioned on the high risk of unintended consequences potentially lurking within the developmental pricing concept and contended that, in this case, developmental pricing would make mining subsidise industrial projects, potentially causing manufacturing to grow and mining to shrink.

As South Africa’s Chamber of Mines president, Anglo American CEO Mark Cutifani commented to Mining Weekly Online that the possibility of the South African mining industry providing effective subsidies to underpin inefficient mineral beneficiation beggared belief in a modern country, which was trying to assert its regional economic credentials.

Cutfani added at the time that it was critical that the economics of mining were clearly understood, along with the conditions required to invest in an uncertain outcome.

“In mining we know very little about the resources we mine and we have to make large capital decisions on limited knowledge. If we then have to be the supporter of downstream inefficiency, we are setting ourselves up for failure.

“Let me be clear: it is not that the mining industry does not support beneficiation, but the laws of economics are simple and all-powerful,” he commented.

South Africa needed to compete where it had competitive advantage, and the most important thing legislators could do was to create an environment that incentivised the massive investment needed – in the mining industry, first and foremost, but also in the downstream businesses that made economic sense.

The DA was thus calling on the President to back his Mineral Resources Minister, or any voices that were trying to create investment certainty for mining in order to provide South Africa with jobs, foreign exchange and tax revenues.

Last week Mining Weekly Online quoted Ramatlhodi as saying that vigorous opposition to the manner in which the government intended pricing the soon-to-be-announced strategic minerals had resulted in his seeking legal counsel to bring the tendentious matter to early finality.

The Minister said that mine-gate price setting was being vigorously contested and that he was examining the possibilities of testing some of the provisions of MPRDA Amendment Bill with the Constitutional Court to avoid negative repercussions later.

“I want to lance open the boil now, so that there’s no comeback on policy issues in the foreseeable future. I want us to bring finality to this issue, one way or the other,” Ramatlhodi told the Mining Indaba in Cape Town, adding that in doing so, he would be guided by government policy, the mining industry as well as legality, reminding that legality was the main reason why the President had referred the MPRDA Amendment Bill back to Parliament.

Cutifani, as chamber head, pointed out that eight out of every ten South Africans benefit “directly and literally” from mining, and at the chamber’s 123rd annual general meeting in Johannesburg, he declared the mining industry as South Africa’s best chance of eradicating poverty.

“In the end, we're an industry for the people,” he reiterated.

Edited by Creamer Media Reporter

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