Mining in focus
To grow the South African mining industry, the mills will have to mill more ore.
guidelines to the 2018 Mining Charter were
only rolled out in December 2018, meaning
that any regulatory certainty it may have
brought to market, was not reflected in M&A
activity last year.
Second is the mining industry’s
dependence on public utilities for the
supply of water and electricity. Eskom’s
proposed electricity tariff increases would
be highly detrimental to mines. In other
jurisdictions there have been amendments
to legislation, such as increases in taxes on
mining companies in the DRC, Tanzania,
and Zambia. This impacts on M&A activity
throughout Africa, not just in South Africa.
Mining M&A activity, particularly
in the gold and platinum sectors, is not
expected to recover in 2019, but will likely
remain at last year’s levels. A slight uptick
in M&A activity might be seen among
bulk commodity miners, such as those in
the iron ore, manganese, chrome, and coal
sectors. Those sectors fared well in 2018,
but the overall mining sector in South
Africa saw an aggregate loss of about R11-
billion, including impairments in gold and
platinum.
[32] MINING MIRROR JUNE 2019
Focus on social licence
Recent court judgments have also
complicated the operating environment for
miners, placing greater emphasis on social
licence to operate. A recent Constitutional
Court judgment made it clear that full and
informed community consultation was
required. A subsequent ruling by the High
Court found that full and informed consent
of customary communities, whose rights
in land are protected under the Interim
Protection of Informal Land Rights Act
of 1996, is required for mining rights to
be granted in terms of the Mineral and
Petroleum Resources Development Act of
2002 in relation to the land they occupy.
Previously, miners were able to negotiate
with the head of a community to conclude a
transaction but will now have to obtain the
consent of the entire affected community,
which may consist of opposing factions. This
will be highly problematic and will place new
mining development in a state of stagnation.
The Department of Mineral Resources has
appealed the High Court judgment.
In addition, the Competition Commission
and the Competition Tribunal have recently
placed increasing emphasis on public interest
aspects of mergers, which significantly delays
M&A deals.
But there are positives. There is hope for
the mining sector in the regulatory certainty
brought in by the new Mining Charter. There
has also been a recognition by government
that mining is a great contributor to the
economy and to the country’s foreign
exchange reserves. Mining contributes about
40% of South Africa’s foreign earnings.
The Ramaphosa administration has
brought about a fundamental shift, creating a
greater degree of trust between government
and the mining industry. At the recent
Mining Indaba, both the minister and the
president stressed the importance of the
co-operation necessary between mining
companies and their host communities.
However, there is also the recognition that to
contribute to community upliftment, mines
must be profitable and cannot be constrained
by overly burdensome taxes, royalties, and
regulatory prescripts. There is now a shared
vision that mining can be developed and can
contribute significantly, both socially and
economically.
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