New mining rules ‘threat to investors’, says Carroll
THERE are glaring shortcomings in the Mineral and Petroleum Resources Development Amendment Bill that could hamper South Africa’s ability to attract and retain investment in mining, says outgoing Anglo American CEO Cynthia Carroll.
The bill was approved by the Cabinet in December and interested parties have until the end of this week to comment. It gives the minister huge discretion in controlling beneficiation and listing minerals as strategic resources — among other changes it proposes to the Mineral and Petroleum Resources Development Act.
Ms Carroll said on the sidelines of the Mining Indaba in Cape Town on Tuesday: "We need to have a lot of conversation about that bill because it would give us serious concern. It means a lot of the decision-making is open-ended."
Otsile Matlou, director of mining at law firm Edward Nathan Sonnenbergs, said the amended bill would mean each time a share of a listed miner was traded, the minister had to consent. The minister and the department "do not have capacity to do so".
"Shares of listed companies will effectively cease to be tradable," Mr Matlou said. South Africa’s ability to raise funds for mine development and production from the capital market "would essentially cease to exist", he said.
Mineral Resources Minister Susan Shabangu told the indaba the amendments were designed to address shortcomings in the act which had led to court battles between miners and her department over interpretation.
Any questions or gripes would have to be raised at parliamentary hearings, she said. "We are waiting for Parliament’s conclusions and then we’ll implement it."
Anglo is a major exporter of thermal coal from South Africa and a key supplier to Eskom. Coal companies rely heavily on export markets for their profits, while Eskom buys a cheaper, lower-quality coal for its boilers.
Public Enterprises Minister Malusi Gigaba and Ms Shabangu have said the government considers coal to be a strategic mineral, which could lead to restraints on offshore sales.
Ms Carroll said if Anglo American could not export coal from South Africa it would not be able to sustain investments in the country.
"On the beneficiation side, the government needs to be very thoughtful and strategic about what businesses or industries it wants to create," she said.
"You can’t be all things to all people. They have to be very selective and make sure their decisions make economic sense."
Ms Shabangu said the government had earmarked beneficiation as a growth engine for the economy and a source of new jobs. "We want to ensure we don’t just pay lip service to beneficiation, but we can identify what we need for new industries in South Africa."
Ms Carroll told the indaba South Africa would succeed only "if it fosters an environment that is conducive to business and attractive to international investors". This required stable labour relations, the maintenance of law and order, and regulatory stability, she said.
Companies would not invest if they feared onerous and unpredictable regulatory change, "nor will they invest if there is a threat that existing regulatory requirements will be enforced in an arbitrary and unequal manner".
Randgold Resources CE Mark Bristow said mining code changes proposed by several other African countries would make them even less competitive compared to other emerging markets.
In countries where Randgold operated — Mali, Côte d’Ivoire and the Democratic Republic of Congo — a substantial slice of the revenue pie went to the state despite the fact that Randgold had funded the discovery and development costs and carried all the risk.
"The host country is already a significant, if not the main, beneficiary of its mining activities. That is why it is disturbing that there is a growing tendency among sub-Saharan mining countries to want more, without giving anything back," Mr Bristow said.
Even a moderate change in existing codes would diminish such countries’ ability to compete for direct fixed investment or to encourage reinvestment.
"There’s a much better way for these countries to get more from their mining industries, and that is to participate positively in the value-creation process," he said.
"Governments’ role should be firstly to provide a stable, business-friendly regime that will attract — or at least not drive away — investors, and then to partner the mining company in the development cycle, helping to drive the project up the value curve and sharing fairly in its proceeds."