Call for greater State participation in mining could lead to conflicts of interest – by Leandi Kolver (MiningWeekly.com – January 17, 2014)

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JOHANNESBURG (miningweekly.com) – Should the State play a larger role in South Africa’s mining sector, as envisaged by the African National Congress’s (ANC’s) 2014 election manifesto and the ‘State Intervention in the Minerals Sector’ (Sims) report, the establishment of an independent regulator would be essential to prevent conflicts of interest, Webber Wentzel head of Africa mining and energy projects Peter Leon said.

In his yearly January 8 statement, ANC and State President Jacob Zuma indicated that the ANC was moving ahead with measures to strengthen the State mining company and to ensure increased beneficiation for industrialisation. This statement was echoed in the ANC’s election manifesto, which stated that “the role of the State-owned mining company will be strengthened”.

Leon told Mining Weekly Online that, while the manifesto did not deal with the issue of the State-owned mining company in detail, the Sims document explained that the State would play a key role by ensuring the compulsory beneficiation of “strategic” minerals at “competitive” and “affordable” prices, and that a more direct role would be played by the State mining company through the “development of strategic minerals” and “supporting, where appropriate, vertically integrated value chains that strengthen strategic industries”.

However, he pointed out that, while the establishment of an independent mineral regulator to deal with the conflict of interest created by this increased State participation was proposed in the Sims report, it was not followed through at the ANC’s national elective conference at Mangaung in December 2012.

He added that limiting the State mining company’s activities to certain “strategic minerals” or to supporting “strategic industries”, did not address the underlying problems with the State’s bifurcated role as player and referee, as the State itself would declare minerals as strategic.

“While the State mining company is answerable to a government-appointed board of directors, it is important that it is managed at arm’s length,” Leon said, adding that some of these issues could be dealt with should the company fall under the Department of Public Enterprises, thereby ensuring that the Department of Mineral Resources was not in a conflicted position.

“It has also been suggested that the State mining company should be listed on the JSE, to enable it to tap into private sector investment, as well as to ensure that it is held to the same set of rules and disciplines as other listed mining companies,” he said.

Meanwhile, Cadiz Corporate Solutions mining consultant Peter Major said the ruling party was trying to micromanage the private sector’s mining industry, adding that a greater role for the State in mining was not a bad idea but that it should do so through its own holdings and own managed assets.

He added that the ANC’s aim to increase beneficiation could be problematic, as most mining companies would not be able to afford establishing beneficiation plants – additional to those they have at present.

“Also, if those plants are built, you have to build them to a certain size [which then often creates] a marketing problem. Also [the mines will the be] directly competing with the people they used to sell concentrates or roughly finished products to,” he stated.

STRATEGIC MINERALS

The ANC’s election manifesto also stated that “strategic minerals will be identified for policy interventions in the manufacturing, energy, agriculture and infrastructure sectors. Active measures will be taken to ensure security of supply of these minerals to achieve national objectives such as industrialisation and local beneficiation”.

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