Mantashe flashes middle finger to investors

For a country flirting with economic irrelevance, South Africa’s government has an uncanny knack of alienating the few people with cash in their accounts. 

Witness a bristling exchange at the Minerals Council South Africa AGM this week, in which mineral and petroleum resources minister Gwede Mantashe clashed heatedly with an industry that has evidently tired of being the government’s whipping boy.

The catalyst was the new Mineral Resources Development Bill – legislation ostensibly aimed at hauling the industry into the new millennium, but which will, in practice, send another icy chill through investors. 

At the AGM, Paul Dunne, the president of the Minerals Council, warned Mantashe that “we are coming” – implying that yet another bruising legal battle with the government looms over its mining legislation.

The council has taken issue with numerous elements of the new law. 

For a start, it requires anyone applying for a prospecting licence to have Black ownership. This “imposes an unnecessary burden on prospectors who must sink every rand into drilling and data”, says the Council’s CEO, Mzila Mthenjane.

The problems don’t end there: the law seems to restrict some licences to Black people, hands the minister the power to veto any change in control for listed mining companies, and requires mines to “make available” minerals for local beneficiation.

Dunne, the CEO of Northam Platinum, is mild-mannered and thoughtful. But when even he is moved to confrontation, telling Mantashe that the industry will engage “very, very robustly” on this law, it sets the scene for a fiery clash.

Mantashe, in contrast, is known for his fiery outbursts. So it was no surprise at the AGM that he appeared to take umbrage at this challenge, warning Dunne against making “subtle threats” against the government. 

The minister said that as tough as the industry might be, he is “equally tough”, adding that he always expected that the industry would challenge him in court.

No adult in the room

The prospect of another protracted legal war between the government and mining companies is exhausting. And deeply unnecessary. 

James Lorimer, the DA spokesperson for mining, says the new law “will effectively end the already tottering case for foreign investment in South African mining”. 

He says Mantashe had the chance to ease mining rules and set the industry on a growth path, but instead, he made a case for his own retirement. 

“The mining industry is too important to South Africa to be left in the hands of a minister whose serial mistakes are now crowned by one that would throw away the one industry that could power South Africa out of poverty,” he says.

Lorimer isn’t wrong that mining remains critical to South Africa’s prospects. As it stands, 474,876 South Africans work in the mines, earning total salaries of R191bn. 

But the heart of the problem is the reality that South Africa has not been able to capitalise on the commodities boom thanks to daft policy that deters potential investors, when it should be wooing them.

Last year, for example, with gold en route to record highs, mining’s contribution to South African GDP dropped from 6.3% to 6.1%, while the taxes these companies paid almost halved to R43.6bn.

“This is not due to a lack of potential but rather the result of structural challenges, ranging from regulatory uncertainty to infrastructure constraints,” said Dunne in the Council’s annual report. “While we cannot control global commodity prices, we can ensure that South Africa remains an attractive destination for investment and exploration.”

And it is on this front that the country has fallen parlously short. 

Veteran analyst Peter Major is withering about how poor policy has decimated a sector that put South Africa on the map, and underpinned its industrial ascent. 

“There are a bunch of kids in the room and there’s never an adult to say: ‘Hey, what are the consequences?’” he says.

Other countries changed course, Major says, but not South Africa. 

Zambia and the Democratic Republic of Congo, for instance, flirted with bad policies before seeing sense and putting in place more investor-friendly rules. “Those countries are still probably getting $5bn-$10bn a year in investment,” he says.

But the ANC-led government “created this bad mining policy and they will not let go of it – they would rather die than let go of it”.

This new law, if anything, doubles down on that path. Which illustrates that as much as President Cyril Ramaphosa might go to Washington or Davos and promise a “shared future” and declare grandiosely that the country is “open for business”, talk is cheap. 

By failing to read the room, Mantashe will only condemn South Africa’s mining industry to a future in which it becomes increasingly less relevant, less attractive and, ultimately, less valuable. 

_{Top image: Mineral and petroleum resources minister Gwede Mantashe. Picture: Gallo Images/Misha Jordaan.}