I did not know whether to laugh or cry when I saw the lead story in this past weekend’s Business Times (“Bottom of the class — again”). South Africa is, for the umpteenth time, ranked by Canadian think-tank Fraser Institute as one of the least attractive mining investment destinations in the world.
The department of minerals and energy poo-pooed the report, stating rather proudly that South Africa’s laws and regulations were “sound” and that it has “issued a request for bids in respect to the design, implementation, maintenance and support of a mining licensing system”.
It is at this point I wanted to cry.
I left the mining industry at the end of March 2013, after eight years as a senior manager and executive. I was rather intimately involved in industry discussions with the government over the very issues covered in the latest Fraser Institute report. Very little has changed.
For instance, the issue of the mining licensing system was under discussion as long ago as 2010. At the time the industry was so exasperated that it offered to pay for the system and just hand it over to the government to run as the department complained of not having the funds for it.
At about the same time I had opportunity to meet a very senior National Treasury official with whom I shared the industry commitment. He was curious about the cost, and he laughed when I told him the amount. “Do you think the South African government cannot find R60m for something that will unlock billions of rand in investment when billions are returned unspent to the Treasury each year?”
He was also puzzled that the department had never approached the Treasury to fund such a scheme, which it clearly would have been happy to. Since the system introduces transparency into the licensing regime, those with corrupt intentions do not want it. Any applicant can see which prospecting or mining rights are available, who holds them and when they expire.
I guess we should all celebrate that more than 12 years later the same government is still requesting proposals for such a system.
This is not the only case of long-delayed action to encourage investment in mining.
I can provide a long list of problems, including how South Africa missed out on the commodities boom of the mid-2000s because it introduced the Mineral and Petroleum Resources Development Act, which forced all licence holders to reapply.
It was at the Mining Indaba of 2012 that the then mineral resources (I cannot keep up with the changing monikers for the department), Susan Shabangu and her then director-general, Sandile Nogxina told local and international journalists that there would be a “one-stop shop” for mining licences. The “one-stop shop” was necessary because mining licences were issued by the department of mineral resources, while integrated water-use licences were issued by the department of water affairs and forestry (must be called something else now). Then there was the National Environmental Management Act (Nema), which was administered by a different department.
Years later, when I was editor of Business Day, mining writer Allan Seccombe inquired about this and drew a blank. It still does not exist. The outcome of this fragmentation is that each department works to its own timetable, and they are all extremely long. It would sometimes occur that an applicant secures a mining licence but not an integrated water-use licence, which means they cannot start mining anyway.
Only the politically connected could secure all licences within a reasonable time, which was about three years!
It gets worse. Once an applicant has obtained a licence and started mining, they better now try to amend that licence otherwise the wait could be longer. You see, sometimes mining operators encounter geological conditions that are different to what the survey indicated and which informed the mining plan. That plan cannot be changed without regulatory approval, which takes long.
In our regulatory system, the application, done with physical documents, is submitted by hand to a regional office. It can sit there for any amount of time, but once processed, it is physically sent to Pretoria for further processing. Once that is complete, the regional office will inform the applicant.
It is not unknown for applications, or parts thereof, to go missing, causing the entire process to begin from scratch. I can provide a long list of problems, including how South Africa missed out on the commodities boom of the mid-2000s because it introduced the Mineral and Petroleum Resources Development Act, which forced all licence holders to reapply.
That ground new mining investment to an almost complete halt for the better part of a decade between 2002 and 2012. As it does now, South Africa only benefited from higher commodity prices but without the added advantage of extra volume. A private study commissioned by the then Chamber of Mines with a global consulting firm showed that the coal industry alone could have earned an additional $780m (R14bn) had investment in mining and infrastructure matched South Africa’s peers.
Add to these long-standing problems a collapsing national infrastructure, load-shedding, business hijacking, extortion, murder and the permanent problem of corruption, and you understand why very few want to bet on South Africa. This is why president Ramaphosa’s gloating about trillions in investment is so laughable.
South Africa has untold mineral riches, still. The only reason we are not able to benefit from them to the extent we should is that we cannot run our own country properly. We choose to be in denial and use terms like “private sector investment strike” to cover up the mess.
Global investment capital is highly mobile. It does not hang around and wait for countries that cannot manage their affairs out of some geopolitical sentiment. It goes where investments can be made quickly to begin yielding a return in a foreseeable period.
When capital is already within a country, companies simply pay it back to shareholders in the form of dividends or keep it in the bank while they wait for the politicians and administrators to sort themselves out. But I guess in a country so steeped in the theory of witchcraft and conspiracy theories, this is a “strike”.
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