OPENING ADDRESS AT THE MINING INDABA 2013 bY Ms. SUSAN SHABANGU, MP, MINISTER OF MINERAL RESOURCES OF SOUTH AFRICA: CAPE TOWN INTERNATIONAL CONVENTION CENTRE.

4th FEBRUARY 2013

Programme Director, Mr Jonathan Moore, Honourable Ministers here present, Members of the Diplomatic Corps, Leaders of the mining industry, The investment community, International friends visiting our shores,Delegates and distinguished Guests:

I am pleased to be here, once again, to welcome you to this august gathering. It has come to epitomise an annual pilgrimage of the mining industry on the southern tip of the continent of Africa. It is crucial to the wellbeing and progress not only of our own country, but of the global mining community that we serve in various ways.

I am convinced that all of you, including our distinguished visitors, will continue to be treated to our particular version of African hospitality. This is characterised and driven in the main by the spirit of ubuntu currently on display throughout the country as we host the premier soccer tournament of our continent.

Last year following our gathering here, the country was engulfed by dark clouds, which seemed to be billowing all around us. There was serious unrest in some mines, and the blot of Marikana on the landscape which is uncharacteristic of a democratic dispensation. President Zuma established the Independent Commission of Inquiry on Marikana, headed by retired Judge Ian Farlam. The proceedings of the inquiry are well advanced and expected to conclude in the near future.

During our gathering last year, we were also ceased with the issue of “Nationalisation”, which was being bandied about wantonly by the self avowed experts in national policy. In some cases, it was even being presented as a fait accompli. This was done despite as the ANC was celebrating its centenary year and doing so in a manner that was as consultative as it was meaningful – which process has always distinguished the movement that brought freedom to this land. I am pleased that the resolution of the ANC elective conference reaffirmed our long-stated position that nationalisation is not consistent with the policy of the movement, and by extension that of government.

This year marks a centenary of one of the most repressive laws enacted by the apartheid regime, the Native Land Act, which created a system of land tenure that deprived the majority of South Africa’s inhabitants the right to own land, which had major socio-economic repercussions. Two years earlier, The Mines and Work Act was passed to legally establish the South Africa’s employment “colour bar”, coded as introduction of duties and responsibilities of workers in Mines and Works in South Africa. It is indeed impossible to reflect on the effects of colonial dispossession of Africans without reference to this historical development, the effects of which remain pronounced today and present a real challenge to the sustainability of our democracy, if they continue unattended.

This battery of repressive legislation created an abnormal society we inherited and found expression in the eminent poverty, inequity and a critical mass of unskilled labour force, which culminated in high levels of unemployment and marginalisation of the majority of South Africans. As the Nobel Laureate Amartya Sen puts it: “Poverty is not (only) a condition of low income and lack of assets. It is a condition of vulnerability, exclusion and powerlessness. It is the erosion of the people’s capability to be free from fear and hunger and have their voice heard.”

It is precisely for this reason that our transformation agenda is seeking to redress and build a normal, inclusive society through decisive regulatory reform. In the main, this historical background has informed our approach to the question of transformation and growth of the sector as mutually inclusive, both of which constitute the central pivot for the mining industry.

The landmark regulatory reform introduced in 2004 represents the depth of a “social pact of a special type” among mining stakeholders, namely government, business and organised labour. Stakeholders also committed to a transformation window and targets to be achieved within a timeframe of 10 years ending next year. Let me clarify that transformation does not end in 2014 – it is an intrinsic component of our industry and should be considered a business imperative, as opposed to a compliance issue. Notwithstanding remarkable progress we have made on the socio economic front post the introduction of the Mineral and Petroleum Resources Development Act No. 28 of 2004, deep structural challenges still run deep and linger very much on the horizon.

The South African government is committed to the development of a sustainable and vibrant mining sector in the context of the the National Development Plan, which provides a socio-economic development vision and a guiding principle of the nature and character of the society South Africa is working towards. The mining industry represents an important constituent of the aspirational society defined in the National Development Plan. Inextricable link of transformation and sustained growth

Our regulatory reform has unlocked the development potential of the mining industry in South Africa. The number of mines has increased from 993 in 2004 to 1592 in 2013, while associated revenue generated grew astronomically in nominal terms from R98 billion to R370 billion. In the same vein, employment in the mining industry grew from just under 449 thousands in 2004 to marginally below well above 530 thousand in June 2012, before it started to regress slightly in the third quarter of last year.

This performance is factual and demonstrates the vibrant nature of the South African mining sector, which continues to provide opportunities for both local and international investment. We will continue to ensure that en an enabling environment is created, while at the same time developing an environment that is responsive to the changing global economic environment and the dynamism of the contemporary mining industry. It is important for all mining stakeholders to be flexible and adaptable to the constantly changing environment to secure long term business sustainability. I caution you to be wary of an ill-informed rhetoric on our investment climate in mining and conduct an objective comparative analysis of South Africa’s investment environment with other mining jurisdictions and you would be in a position to make an appropriate determination of the innate potential.

For instance, some South African mining companies listed abroad have delivered unmatched returns last year, at the height of the difficulties experienced in the global economy. A common feature of most of these companies is that their assets are largely operated in South Africa. This fact is in discordance with the assertion by some that would have the South African assets seen as posing a threat of contagion rather bolstering these companies’ portfolios.

As we encourage the mining sector to invest in this country and on the African continent, it is imperative that it grasps the complexity and the magnitude of the challenges. We observe with grave concern the agitation for short term gains which are unsustainable in the long term. These practices are not in the interests of any stakeholder, including the shareholders as these are based on the principle of “downsize and distribute” rather than “retain and invest”. This behaviour prioritises short term profitability over long term business sustainability, and fails to recognise the centrality of addressing the socio-economic quandary of the populace in the latter. We should work together to respond to the clarion call of Amartya Sen and to ensure that we realise our respective ambitions. There is room for both private and public returns, indeed they are interdependent. It was the ancient Greek sage Aristotle who said: “The whole is greater than the sum of its parts.”

Dr Oladiran Bello, Head of the Governance of Africa Resources Programme at the South African Institute of International Affairs, wrote a piece in last Friday’s edition of The New Age in which he made a startling observation. It was that most, if not all, mining companies list what they euphemistically increasing form of “resource nationalism” globally as a “serious investment risk which threatens both foreign investment and resource-producing states alike”.

Just like Dr Bello, I am also grappling with the meaning of this, for it is surely used to discourage the government, acting on behalf of the people, from ensuring that mineral resources found beneath the soil are and should be used to benefit of the people as a whole. This is the same clarion call that is being made by the governments of Australia, Chile, Peru, Indonesia, Brazil, and even Botswana and many other resource-rich jurisdictions.

May I add that our government is fully conscious of the reality that mineral development cannot happen unless capital is invested by the private sector.

What is needed is that we should all work together we should all work together to ensure that we balance the needs of shareholder value as we return the benefits in equitable measure to the people from whose treasure chest this resource extraction occurs.

My department stands ready to work with all of you to ensure that we build a mining industry that is resurgent, resilient and is able to function successfully to its full realisable potential. Our confidence in our ability to play our part is bolstered by the resourcing of efforts to enhance our administrative capacity as concerns licensing.

We acknowledge the short term challenges facing the mining industry broadly and PGM sector specifically, compounded by a bleak global economic and financial growth as forecast by institutions such as the International Monetary Fund (IMF). This outlook was recently confirmed by business leaders at the recent World Economic Forum two weeks ago. We are seized with these challenges through our well entrenched tripartite structure, MIGDETT, and I am confident that the collaborative work of stakeholders will yield desired outcomes yet again. Through this forum we are also working diligently with Anglo American Platinum and organised labour partners to engage constructively to find enduring solutions which will find expression in platinum sector wide solutions, consistent with the principles of the Platinum Task Team which I established in June last year.

A number of credible platinum analysts present views on platinum outlook in a medium to long term that coalesce to a significant upside prospect for the sector. The resurgence of one of the companies that experienced the largest labour tensions and reached the lowest ebb in production unfolds a progressive business model that recognises the importance of all stakeholders inclusively and corroborates the positive signs of recovery in the horizon. This is both characteristic and reminiscent of the theme of the recent World Economic Forum aptly titled “dynamic resilience”, which is a common feature of the mining industry’s tripartisan establishment.

Let me hasten to congratulate those mining companies that have worked relentlessly to transform and grow the sector, contributing towards national development. The census results of 2011 reflects a demographic characteristic which indicates that our population size has increased noticeably from 40.5 million in 1996 to 51.7 million in 2011. The findings also confirm that South Africa is a young nation, an envy of many countries, with a median age of 25 years in 2011, from which we are also appositely placed to leverage the population dividend for the growth of the economy generally and the mining industry specifically. Our training programmes must therefore focus on youth development, as this investment makes business sense for the long term planning and sustainability of the mining industry.

In the coming year we will work with business, our institutions such as the MQA and with the Department of Higher Education and Training (DHET) to ensure that we plan for future training needs of the industry.

I am encouraged by the substantial increase in enrolment of both young females and males in engineering qualifications, with female enrolment doubling since 1996. This suggests that the base skill requirements for the sustainability of the industry are being built, but must be nurtured and protected.
The census findings also confirm prevalence of net positive migration into provinces where mining has grown substantially. This is why our legislation has always recognized the need for social investment in both host communities and major labour sending areas.

Unfortunately, inequality still persists in the workforce, in which the average annual household earning of white families is still 6 times that of black households, albeit some demonstrable progress has been made from the differential of almost 10 times in 1996.

I am delighted that we published the Mineral and Petroleum Resources Development Amendments in December last year for comments from stakeholders. We will be submitting these amendments to the Parliament of South Africa for finalisation during 2013. We are confident that this process will be concluded during the course of the year, and all stakeholders as we have observed with keen interest that there are only a handful of areas of concern. We invite all stakeholders to make their representations through formal submission as allowed for by South Africa’s established legislative process.

Let me reiterate that our focus on amendments is to, amongst others, remove ambiguities in the Act that previously created room for multiplicity of interpretations, to ensure that the Act remains current and relevant, align provisions of the Act with relevant legislation resident in other parts of government and to strengthen administrative processes as well as provisions for sanctions to non-compliance.

In evaluating the negative effect of fragmented approach to licensing requirements for a mining, and have initiated a process towards an integrated licensing approach in government, in conjunction with my colleague Minister of Water and Environmental Affairs. Our respective officials are already at an advanced stage of finalizing modalities for an approach to licensing requirements for mining, which is aimed at rationalizing this process, enhancing turn-around time and the quality of licensing being considered and endorsed for mining. This process also forms part of the amendments to MPRDA and other relevant legislation.

The modalities include that DMR will implement the National Environmental Management Act in order for the industry to be regulated by a single environmental legislation.

With regard to the issue of timeframes, it was necessary to align the regulatory and administrative processes of the relevant authorities towards an integrated, seamless authorisation framework that we anticipate will greatly enhance efficiencies and promote investment.

The new process, however, is expected to herald a significant improvement in service delivery, both in terms of certainty regarding security of tenure when mining or prospecting rights are issued, and in terms of meaningfully improved turnaround times resulting from the respective processes being finalised in parallel rather than sequentially as was previously the case.

We are even more encouraged that most stakeholders are fully supportive of the proposed MPRDA amendments. For instance, the chrome value chain role-players spanning independent chrome prodders, producers of chrome as by-product, integrated ferro-chrome producers, independent smelters, marketers and technology providers, have agreed unanimously on accelerated exploration of mechanisms for differentiated pricing mechanisms for chrome produced in South Africa. This is a progressive shift, as it begins to set the pace and tone on the possibilities of appropriately leveraging the mineral wealth as comparative advantage to enable a globally competitive national industrialisation programme of government.

The Act also introduces an important provision to enable classification of minerals as strategic, under certain conditions. Such minerals that are critical for stimulating developmental priorities will be prioritised.

We are also amending the Mine Health and Safety Act this year as our commitment to continuously improve health and safety working conditions in mines and ensure decent employment in the industry. While the safety performance of mines has steadily and cumulatively improved in the recent years, some sectors of the industry remain at the lowest performance quartile of the industry. Accordingly, we are concerned about the occupational diseases that afflict current workers long after they left employment. We are intent on presenting the Mine Health and Safety Amendments to parliament in the latter part of this year.

The government also contributes to the development of the mining industry in various forms. On exploration, we are encouraged by the steady growth in the exploration budget in the African Continent, which surpassed 20% of the global share by 2010, indicative of commitment by mining and exploration companies towards advancement of the economic state of Africa and equally, by African governments in creating enabled investment environments of mutual benefit. This positive development is also being underpinned by the increasing geo-political stability in the Continent, which is being fundamentally driven by African leaders for the benefit of Africa Herself. Certainly, Africa has come a long way from the first decolonization of Ghana in 1956 to the democratization of South Africa in 1994.

In South Africa, we are working determinedly to restore our exploration eminence of the 1990’s, during which time we had as much as 6% of the global share of exploration. We invite you to work towards this objective and on our part, we have increased investment in the Council for Geoscience to enhance the geo-scientific knowledge of the country. This knowledge reveals the residual potential for exploration and encourages participants in the exploration community to positively consider investments in the country. The recent discovery of a noteworthy shale gas deposit is testimony to value of geo-scientific knowledge and the potential value that still lies in South Africa for development.

On mining and mineral processing, we are mindful that mining is both water and energy intensive, while the supply and balance of these two is fairly precarious at present. It is therefore imperative that the manner in which the mining industry consumes water and energy should continue to be evaluated with a view to improving efficiency while promoting growth and innovation of new technologies. Consequently, Mintek has undertaken substantial work on technologies such as sensor-based ore sorting as part of our intention to bring to the industry energy and water efficient mineral processing technologies.

In an effort to boost investment in research and development as well as to improve the productivity and efficiency of current methods to process Platinum Group Metals, last year, Mintek launched a multi-million Rand demonstration plant, in collaboration with Anglo American Platinum, to jointly assess the potential of the water atomising technology, a development which demonstrates the government’s commitment to add value and maximize the returns from the exploitation of our mineral resources.

As you are aware, South Africa’s long mining history has left an unfortunate legacy of derelict and ownerless mine sites. We have worked to quantify the liability of these derelict and ownerless mines. While we deal with the ills of the past which now present an ecological, economic and health challenge, we also need to work to ensure that history does not repeat itself. which we need to avoid repeating. This is why government has introduced clear regulations as regards environmental management and protection in mineral development, and why we hold as central for sustainable development the practice of concurrent rehabilitation.

I have also mandated both Mintek and the Council for Geoscience to rehabilitate a number of sites which have been identified as hazardous and which have become the responsibility of the State. To date, over 100 dangerous mine openings in populated areas across the Witwatersrand have been closed. The closure of mine openings is continuing and expanding into other provinces. This rehabilitation is also being expanded to look at other impacts of mining, with asbestos and coal mines currently being prioritised.

On diamonds, you would all be aware that we are hosting the Kimberley Process Certification Scheme (KPCS) as chair this year. It gives me great pleasure and pride that this international organisations and governments, sanctioned by the United Nations in terms of Resolution 55/56 of 2000, was conceived in South Africa, the “Cradle for Humankind” and has returned to its birthplace in its tenth anniversary.

In August 2012 South Africa took over responsibility for the hosting, planning and management of the 35th International Geological Congress – “the world cup of geology” – to be held in 2016 here in Cape Town. The process is being led by the Council for Geoscience with support from the Geological Society of South Africa. This event is coming back to South Africa after 86 years, as it was last held in South Africa in 1929. I would like to make a special appeal to the exploration and mining industry in particular to support this important event and assist us to showcase the tremendous geological heritage of the African continent.

We have established a State Owned Mining Company by resuscitating the African Exploration, Mining and Financing Company (AEMFC) that was instituted as a subsidiary of the Central Energy Fund (CEF). The Cabinet of South Africa has endorsed the process of hiving off the AEMFC from the CEF and establishing it as a standalone State Owned Mining Company. We are finalizing modalities of hiving off the AEMFC and resourcing it appropriately to be optimally functional. This company already holds several prospecting and mining rights in the country and has launched its first coal mine in 2010, which is generating net positive cash flows. The State Owned Mining Company is already operational and its creation is fully supported mining industry stakeholders. I invite you to explore sustainable partnerships with the State Owned Mining Company.

In conclusion, I wish you well in your deliberations during this Indaba and urge you invest in responsible development of mineral resources in South Africa and the African Content. The potential of mineral development requires governments, business and other social partners to work together to define and adhere to mutually beneficial objective of a balanced development of mineral resources. We have met with our social partners in December last year through the Mining Industry Growth, Development and Employment Task Team (MIGDETT) establishment to agree on our programme of action for 2013. We are scheduled to meet again next week to augment our programme intended to ensure continuous improvement of our mining performance in its entirety. South Africa is indeed open for open and your investments are welcome in this country.

I thank you

I am confident that through our embedded democratic values, we will collectively resolve all the challenges facing the industry. We are however, all in this together. We have no other recourse than to work together to build a democratic jurisprudence whose socio economic benefits are shared by both shareholders and our people alike.

 

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