BUSINESS
BACKSLAPPING
BETWEEN MINERS AND MANTASHE
By Eamonn Ryan
A
t this year’s Joburg Mining Indaba
held in October, the mood was
completely different. Mining bosses
at the Indaba were enthusiastic in their
praise of new minister Gwede Mantashe,
if only because he was willing to hear their
side of the story. Some spoke of receiving
late-night calls from the minister for help
with sticky details of the new, improved
Mining Charter.
For the first time in history South Africa
has a mines minister who has actually
worked in the industry. He understands
the need to have open doors and robust
conversations. Now the country can start the
process of getting this once-great industry
back on its feet.
This is a minister who believes in
negotiation and compromise – a skill
developed no doubt during his time as
a trade union negotiator. The result is
a Mining Charter that is not subject to
change, at least not for the next five years,
which is precisely what mine bosses have
been calling for. They say regulatory
certainty, rather than the actual terms of
the charter, is the key to unlocking mining
investment in South Africa.
Mantashe has clearly identified mining
as the means to create jobs and spur
economic growth. He implored South
African mine officials to stop criticising
the mining industry to foreigners, thereby
creating wrongful perceptions of realities
on the ground. South African mining is far
from a sunset industry, he told the Mining
Indaba. It has the potential to rise again,
creating hundreds of thousands of jobs in
the process. One of the ways government
18_QUARRY SA| NOVEMBER/DECEMBER 2018
intends to make this happen is by making
mining rights conditional upon meeting
BEE supplier and local content targets. If
all goes according to his vision, mining
could be the engine for the revitalisation of
downstream manufacturing industries.
A key obstacle to mining investment
that has now been removed from the
new Mining Charter is the requirement
that mining exploration companies have
BEE representation. An alarming statistic
disclosed at the Mining Indaba is that
South Africa, once synonymous worldwide
with mining, now accounts for just 1% of
global exploration. Mantashe appears to
understand that exploration is essential
before new projects see the light of day
and that it is pointless to subject this non-
revenue-generating activity to onerous BEE
requirements.
For all the budding bromance between
Mantashe and mine bosses, there are still
plenty of challenges to overcome if mining is
to return to its glory days.
Economist and head of economists.co.za,
Mike Schüssler, put a dampener of optimism
when he told delegates that mining inputs
costs are running well ahead of general
inflation. Among the worst offenders are so-
called administered prices over which mines
have no control – such as electricity, water
and rates and taxes. Electricity increases
have been running at four times the level
of consumer inflation. Transnet rail and
harbour costs are likewise a drain on mine
profitability. Mine labour costs increases,
too, are running above the national average.
A result of these costs and inefficiencies is
that South Africa used to each year export
What a difference a year can make. Last year in a statement of
sincere unease, the Minerals Council of South Africa shunned
former mines minister Mosebenzi Zwane, believing he had
ulterior and nefarious motives. Government then was intent
on pushing through a version of the Mining Charter that many
believed was suicidal for the industry.
Mineral Resources Minister Gwede Mantashe.
more than 1 000t of granite blocks. Today it
exports 250t, simply because other countries
such as Brazil can do it so much cheaper.
It will take a coordinated attack on all
these cost sources before mines start to
see a decent return on capital. Schüssler
attributed much of the blame for this
situation on the surge in ‘administered costs’
– such as electricity and water – in South
Africa along with the rise in labour costs all
of which had been running for an extended
period at rates well above South Africa’s
domestic inflation.
At the launch of PwC’s Mine Report 2018
the day before, Andries Rossouw, PwC
partner, noted that the aggregate cost of
electricity in mining had increased from
5% of the turnover of the mining industry a
decade ago to almost 10% in 2018.
Investors are better off in a risk-free money
market account than betting on mining,
Schüssler told the Indaba, and that has to
change before mining can really take off.
South Africa still has plenty of minerals
below ground, even gold, so it is way too
early to write off the country’s mining. But
now the hard work begins: knocking off
a percentage point here and there from
electricity, water, harbour and rail fees and
labour. Will Mantahse be able to get labour
to lock itself into a multi-year wage increase
at or below inflation? If he can do that he
will be a miracle maker, and could very well
go down in history as the man who saved
South African mining.