2018 will be crucial to the flickering fortunes of Africa’s most advanced mining industry

The first three months of 2018 will be crucial to the flickering fortunes of Africa’s most advanced mining industry. They are likely to be months littered with litigation argument and acrimony.

The resource rich industry of South Africa – once a world leader in mining employing a million people and producing more than half of the world’s gold –has seen more than two decades of decline. Corruption, falling productivity, rising costs and dithering over regulation have taken a heavy toll.

In 2016, according to Statistics South Africa the South African mining industry’s real GDP was 2.6% smaller than it was in 1994.The financial services sector grew by 168% over the same period. On top of this, the South African mining sector has slid, according to Fraser Institute Investment Attractiveness Index that measures best practice in policy, legislation, regulation and operating environment.

Hanging above all of this is a court result and a judicial hearing regarding a controversial rewrite of the Mining Charter that has taken more than five years to get nowhere. It was released in April, after minimal consultation, to outrage from the Chamber of Mines. The mining companies objected to the increase of black ownership from 26% to 30% to be maintained at all times.

This is the issue that the Chamber of Mines took to the Gauteng High Court in November. The mining companies argue that a “once empowered always empowered” principle should apply; in that once a mining company has borne the cost of transferring shares into black ownership it is deemed to have done its job regardless of any dilution of the stake. The Chamber of Mines hopes for a judgement in the first quarter of 2018-victory in court could send the Mining Charter back to the drawing board.

“A full bench of three judges heard this case. This is one reason why the decision is going to take a while. The three judges have to arrive at a majority decision and that takes time, but we are hoping to have a decision by the end of March. I think it was a difficult case and not easy to argue from a legal perspective. I am optimistic, but it will be a tough one,” says Elize Strydom, the head of legal for the Chamber of Mines.

The mining employers pin higher hopes on the judicial review of the amended Mining Charter, set for February 19 20 and 21, again at the Gauteng High Court, again before a full bench of three judges led by senior High Court Judge Dunstan Mlambo.

Observers believe this case, in particular, is likely to bring a lot of pressure down on Mining Minister Mosebenzi Zwane. In this judicial review, it will not merely be the mining employers against the Mining Charter, there will be seven organisations that number the unions, including the National Union of Mineworkers and Solidarity, plus Lawyers for Human Rights representing communities who live near the mines.

“I think the review is a lot easier for us because there are so many flaws and measures in the Mining Charter that are beyond the powers of the minister. For instance, the minister indicated that 2% of the proposed 5% skills levy is to go to an empowerment agency that he has yet to create. This is not in his power to do this – that is within the power of the minister of finance. What we hope is that the minister will have to start again from scratch. Then we can sit down with the unions and interested parties to come up with something that we can all work with,” Strydom said.

Whether minister Zwane will be there to negotiate is another question amid the uncertainty. Moves are growing apace to encourage President Zuma to resign early in a dignified exit that will mean the dissolving of cabinet.

A new broom could mean renewed confidence among foreign investors with president-elect Cyril Ramaphosa being painted as the mining-savvy, business-friendly, leader.

Whoever takes over, at least one political analyst believes the damage has been done more than a decade ago with the advent of the Minerals Resources and Petroleum Development Act. The legislation ushered in black empowerment and virtually nationalised the country’s mineral rights overnight.

“I think foreign investors have been fighting shy of South African since the mineral resources were taken over by the government in the early 2000s. I don’t think the removal of one man is going to suddenly make the mining investors in Toronto and London think we are a great place to invest. I think the country has to improve its economic fundamentals first. The country has massive unemployment, too much spending on welfare and this lingering political chaos,” says Moeletsi Mbeki, a political analyst.

If the Chamber of Mines carries the day at the judicial review it is likely judges will instruct that the Mining Charter be torn up.  That could trigger a rewrite process that could take even more years and with it bring even more uncertainty.

Related Content

Equatorial Guinea Signs First and Historic Mining Contracts

Download logoThe Ministry of Mines and Hydrocarbons has signed the very first mining contracts in the country’s history. Five Mining contracts were signed with three different companies and follow the conclusion of the country’s first mining bidding round last year, EG Ronda 2019. The agreements include one gold exploration contract in Block (I) with Manhattan Mining Investment Co; three prospecting contracts with Blue Magnolia Ltd in Block (B) for bauxite and precious metals, B

Equatorial Guinea awards Contract to American Company Nexant for Methanol-to-Derivatives Plant

The Ministry of Mines and Hydrocarbons (MMH) of Equatorial Guinea, in collaboration with the Atlantic Methanol Production Company (AMPCO), awarded American company Nexant the feasibility study for the construction of a new formaldehyde production plant in Punta Europa. The project is part of the Year of Investment and was previously agreed during a meeting last January between H.E. President Teodoro Obiang Nguema Mbasogo, H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons, Mar

Coronavirus – South Africa: COVID-19 impact on the economy

Download logoThe Department of Trade, Industry and Competition (the dtic) has noted with concern a series of recent comments and news articles that give the impression that the Minister of Trade, Industry and Competition, Mr Ebrahim Patel, has underplayed the extent of the costs that Covid-19 and the lockdown will impose on the economy. This is exactly the opposite of the truth. The impression seems to be based on an interview that Minister Patel conducted with the Sunday Times shortly after he

Rosgeo, Russia’s leading geological company, signed first contracts to start exploration and increase the potential of mineral and hydrocarbon resources in Equatorial Guinea

Download logoJSC Zarubezhgeologia and JSC Yuzhmorgeologia, internationally operating subsidiaries of the Russia’s state-owned joint stock company Rosgeo and the Ministry of Mines and Hydrocarbons (MMH) of Equatorial Guinea have signed two services contracts for the initial phase of seismic acquisition in transit zone and state geological mapping in the Rio Muni area, Equatorial Guinea. These contracts follow the signing of a Memorandum of understanding between both entities during the Russ

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

More from CNBC Africa

Uganda Securities Exchange CEO on how COVID-19 is impacting the bourse

The economic turmoil caused by the COVID-19 pandemic has had wide severe impact on financial markets not leaving behind stocks, bond and commodity markets. Uganda Securities Exchange CEO, Paul Bwiso joins CNBC Africa for more.

COVID-19: How the pandemic is accelerating the digitalization of healthcare

The COVID-19 pandemic has caused huge disruptions in healthcare provision, highlighting the need to adopt and invest in digitalization. Dr. Wanjeri Millicent Loice, Director and Content Manager, Toto Health Kenya joins CNBC Africa for more.

AfDB’s Nnenna Nwabufo on how COVID-19 has impacted African economies

According to the African Development Bank’s revised African Economic Outlook, though the continent is expected to rebound next year; it could lose a quarter of a trillion dollars in economic output for the rest of this year and 2021. Nnenna Nwabufo, Acting Director-General of East Africa Regional Office at the AfDB joins CNBC Africa for more.

Kenyan sports minister Amina Mohamed to bid for top WTO job

The Geneva-based body is seeking a replacement for Brazil’s Roberto Azevedo who is stepping down a year early at the end of August at a critical juncture for the trade watchdog.

Partner Content

Maktech’s Godwin Makyao: Now Is A Time of Entrepreneurial Opportunity in East Africa

As an executive decision-maker in both the telecommunications and tourism industries, Godwin Makyao could not have experienced a more diverse set of...

Sanlam launches urgent job-preservation initiative in response to COVID-19

Sanlam Investments is responding to the COVID-19 pandemic through large-scale support of the recovery of South African companies, from small enterprises to...

Trending Now

Steinhoff agrees to sell stake in Conforama France to Mobilux

JOHANNESBURG (Reuters) - Scandal-hit Steinhoff International agreed to sell its shares in furniture retailer Conforama France to Mobilux Sàrl, the parent company...

Namibia to ground national carrier’s license over cash hole

WINDHOEK (Reuters) - Cash-strapped Air Namibia will have its planes grounded at midnight on Wednesday after it failed to secure enough funding...

Uganda growth to sink as low as 0.4% this year – World Bank

KAMPALA (Reuters) - Ugandan economic growth is set to plunge to as low as 0.4% in 2020 from 5.6% last year as...

How retirement funds can contribute to rebuilding SA’s economy

Sanlam Benchmark Symposium: Sanlam has conducted research across a wide breadth of employers, retirement funds and professional consultants to benchmark their employee benefits experiences of the lock-down as well as their expectations of the future in a COVID-19 impacted economy. Chris Bishop spoke to Viresh Maharaj, Managing Executive, Sanlam Corporate Distribution, about the outcomes of the research and current trends in the Industry....
- Advertisement -