First Baxter expressed the importance of mining in South Africa, however, he said the Chamber of Mines and the industry had lost confidence in the Mineral Resources Minister, Mosebenzi Zwane, and in his leadership of the Department of Mineral Resources (DMR).
“Significant corruption allegations against the Minister and the DMR have not been cleared and the proposed judicial commission of enquiry into state capture has not been established. The industry does not believe that the approach adopted by the DMR is serving the national interest of the country,” said Baxter
Crises, what crises?
Baxter stated that the South African mining sector was in fact in crises.
He noted that key governance and policy challenges in South Africa had eroded business and investor confidence. In effect, he noted, policy and regulatory uncertainty had frozen new investments in the sector.
Baxter said it had become extremely difficult to get any company investment committee to approve any new greenfields project in the country today.
“Real mining GDP in 2016 of R226 billion was less than the R242 billion reported in 1994. Real mining fixed investment has shrunk over the past two years, with large parts of the industry continuing to report losses.”
Baxter noted that it was very concerning that the Minister Zwane paid scant attention to this crisis in his conference presentation yesterday, and said the Ministers avoidance was perhaps because his department had not provided any assistance to help the industry through the crisis.
He further noted that the industry was surprised that the Minister claims to have received positive feedback from any investor on the DMR’s Charter, as well as the state of the industry.
“This has not been the industry’s experience, and it is the industry that engages with investors and raise capital on a regular basis.
“The economic opportunity cost of the failure to get the policy, legislative, administrative and operating environment right, in order to promote investment, growth, transformation and job creation in South African mining is material.”
Baxter said the DMR was perpetuating a) Uncertainty regarding the ownership element of the mining charter, b) Uncertainty regarding the finalisation of the MPRDA Amendment Bill, which is incomplete after being published nearly five years ago, c) Uncertainty regarding the Minister’s proposed section 49 moratorium on new right and section 11 applications, and d) Uncertainty created by double financial provision for environmental rehabilitation.
Solutions to SA mining crises
Baxter did note there were solutions to restoring the dream of a prosperous, growing and transformed mining sector.
“To get mining back on track requires policy and regulatory certainty, and government oversight that recognises mining’s unique characteristics, that a) Mining is a high risk industry, with long lead times from exploration through to mine development and ultimately closure, b) That mining is very capital intensive, with a large portion of capital being spent in development of the mine, b) That the sector is exposed to cyclical commodity markets, and is generally a ‘price-taker’ that cannot pass on cost increases to the final consumer; and c) That mining is geographically determined, and requires access to cost competitive and efficient infrastructure.”
Baxter ended by saying to encourage investment into mining, policies had to recognise the characteristics of mining and help reduce the risks of investment in long term projects.
He commended the industry for being resilient, and commended stakeholders for trusting that mutually agreeable solutions are possible.