To succeed as a 'sunrise industry', SA mining must widen ownership, meet other challenges

The following has been adapted from a chapter Towards Mining Vision 2030, by Joel Netshitenzhe, ANC NEC member and executive director of the Mapungubwe Institute for Strategic Reflection (Mistra) in a book on The Political Economy of Mining in South Africa, to be published in 2018 by Mistra.

South Africa’s mineral endowments present a unique opportunity for a new industrialisation drive and advancement in the economy. This applies across the value chain: from mining equipment and services to extraction, infrastructure development, beneficiation and skills development, as well as research and development. There are also many vistas for more profound empowerment of the previously disadvantaged, including workers, women, communities and entrepreneurs.

What we require is a deliberate strategy to develop a mature mining cluster that touches virtually every aspect of the South African economy and political economy, including adaptation to new realities in terms of the application of technology and labour sourcing. In other words, mining in South Africa can, in earnest, become a sunrise industry. The responsibility to take advantage of this opportunity lies as much with the State as it does with mining companies, workers, mining communities and, indeed, society at large.

The Ownership Challenge

Issues pertaining to ownership and progress in advancing black and women empowerment in mining should be approached in the context of a long-term vision.

Firstly, the declaration of mineral resources as the property of the nation, with the State as custodian, in the Mineral and Petroleum Resources Development Act of 2002 was a logical starting point. Licensees would be afforded the right to explore, prospect, mine and trade, and would pay a royalty fee to the State.

Secondly, the logic behind the empowerment imperative, as it applies in this instance to ownership, needs to be embraced by all: proceeding from the premise that correction of a historical injustice of deliberate exclusion is a logical, ethical and constitutional imperative.

Thirdly, in macrosocial terms, demographic balances in ownership of the country’s mineral endowments is in the long-term interest of all South Africans. Failure to address this issue can breed social anomie.

It should also be underlined that the State not only acts as custodian and regulator but also has the right to own and/or operate mines through a State-owned company. Many years after this was asserted in ANC and government policies, little has come of efforts to merge the various State entities operating in the sector and expand the ownership and operations of State-owned entities.

The weaknesses identified by the Mining Industry Growth Development and Employ- ment Task Team (Migdett) include there having been little focus on share-ownership by workers, the so-called employee stock ownership plans (ESOPs). There has also been inadequate attention to meaningful participation by communities. Mining Vision 2030 should address these matters as an important contribution to dealing with inequality and ensuring that all stakeholders become a full part of the mining sector at all levels. This should be undergirded by systematic approaches to deal with matters of worker representation at decision-making level, agreed processes of identifying the most appropriate arrangement (or combination of arrangements) in each instance in terms of ESOPs and profit-sharing, and financial education of the beneficiaries.

Reckless as some of the decisions by the previous Minister of Mineral Resources appeared to be, as reflected in the content of and process around the 2017 draft Mining Charter, they are impelled by palpable impatience among various strata within the black population. Perceptions of opportunism and unethical behaviour on the part of specific government actors should not detract from the factual reality that breeds such impatience on the issue of ownership.

Advancing Mining Vision 2030

How can some of the detail under contestation be addressed in the context of developing Mining Vision 2030?

Firstly, the contestation around these issues should preferably take place in frank interactions among the partners rather than in the courtrooms. Indeed, the majority judgment of the High Court (Gauteng local division) in April 2018 in favour of the ‘once empowered, always empowered’ principle has confounded, rather than decisively resolved, this and related complex issues.

Secondly, it may be better to avoid retro- spectivity in dealing with the ownership- empowerment principle, accepting that the beneficiaries have indeed benefited, even if they may have exited specific entities or the sector as such.

Thirdly, whatever ownership percentages are pursued should be within the magnitudes and time ranges that decisively enhance empowerment; they should also be reasonable and not destructive of the investment environment.

Fourthly, going forward, the experiences of other empowerment schemes – such as those of Sasol and MTN – which confine black economic empowerment share disposal to previously disadvantaged persons, should be considered.

Fifthly, the State needs to use its regulatory powers and procurement muscle (through State-owned enterprises, such as Transnet and Eskom) more strategically as leverage to encourage direct involvement of black people in the ownership and operation of mines.

Lastly, when approached as a cluster with a variety of linkages, across the entire mining value chain, this sector can also play a critical role in the emergence of black industrialists; this can include vertical integration with private and State mining entities.

Generic Challenges

In addition to ownership, the mining sector is also facing a number of generic issues.

Jobs and human resource development

Modernisation will definitely have a negative impact on the labour intensity of the extractive subsector of the mining industry. As outlined earlier, this has started to play out in several operations, and the trend cannot be resisted for long. Nor can the stakeholders in the industry and broader society adopt a Luddite approach to the bugle of modernisation.

Critical factors that need to be considered in such modelling include the quality of jobs that would emerge from modernisation; job opportunities from operations in areas either ignored or abandoned because they are considered unminable; improvement in safety standards; sustainable post-mining activities; and the employment opportunities that the establishment of a mature mining cluster would generate in backward, forward and other linkages.

To determine the net effect of these and other factors requires appropriate modelling, as well as clear plans on how to phase in modernisation in a way that would preserve employment as much as possible. A critical stream of the visioning should be a systematic approach to knowledge linkages and the allocation of resources and expertise to the development of human resources.

Social and labour plans

The Mining Charter argues for systematic approaches to the development of human resources, labour relations and community development around mining settlements. One of the most critical lessons from the 2012 Marikana tragedy, the 2014 platinum strike and social instability in mining areas generally pertains to community infrastructure development, the living-out allowance and related practices.

While many mine operators have allocated resources for community development, a major weakness pertains to the extent of cooperation between the mining houses and various spheres of government. The major deficit in this regard is the level of social compacting, with each partner identifying and playing the role that is required.

A long-term vision should oblige mining companies to be more actively involved in the conceptualisation and implementation of municipal and provincial development strategies and plans – an approach that demands a major mindset shift on the part of all stakeholders. Systems and structures of accountability to communities need to be improved and should involve those at the highest levels of companies. The capacities and reputational capital of each partner needs to be mobilised for a common purpose and for common benefit.

Use of land

Mining houses own large tracts of land, most of which lies fallow. Creative initiatives are starting to emerge on how such land can be used for agricultural and other purposes. Mining Vision 2030 needs to encompass a systematic approach to this issue on a national scale, with possibilities that would help address not only the challenge of land hunger but also the contribution to community development, job creation and enterprise development.

Post-mining activities

This involves cleaning up after mines are long gone. New technologies can reduce environmental issues, such as, water use, the tunnelling and extraction of large quantities of rock and soil, as well as energy intensity. All these and other initiatives, referred to as secondary beneficiation, need to form part of new approaches to mining.

Informal mining

Historically, South African policymakers and mining operators seem largely to have buried their heads in the sand on this issue. The belief that law enforcement on its own can resolve this matter is shattered every time scores of illegal operators are ‘discovered’, piles of dead bodies are lifted from the bowels of the earth and inconsequential evocative statements are uttered by leaders. A long-term vision for mining needs to include a comprehensive understanding of the factors that drive the scourge of illegal mining, from the macrosocial to detailed operational issues. In this regard, informal, artisanal and small-scale mining need to be embraced as part of economic inclusivity and poverty alleviation. Drawing from experiences across the continent and further afield would stand South Africa in good stead in addressing this issue, taking into account the intended and unintended consequences of such programmes.

The Way Forward

To craft the vision and monitor the implementation of Mining Vision 2030, Migdett, comprising representatives of government, business and labour, should be expanded and appropriately capacitated. Such a platform, also referred to as Migdett+, would serve as the organisational mechanism for social compacting, with requisite strategic foresight and technical capacity.

The Mining Phakisa – arising from efforts to implement elements of the National Develop- ment Plan – which has provided a platform for interaction among government departments, labour unions, mining houses and nongovernmental organisations – seems to have embraced the Migdett+ approach, and has the potential to serve as the technical infrastructure for these discussions and for monitoring the implementation of the vision and plans.

It should also be emphasised that the formal platforms of interaction should not preclude informal interfaces and mini-compacting at subsector or geographic levels, as long as these ultimately feed into the larger formal processes.