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The mining industry has, from a historical perspective, played an inherently complex and contradictory role within South Africa’s sociopolitical economy. While the industry has, for more than a century, been the main driver of phenomenal economic growth and industrialisation, it was also partly responsible for institutionalising racial discrimination and the exploitation of cheap labour.
Therefore, it stands to reason that, of all South Africa’s pillar industries, the mining sector has had the longest path to walk in addressing its historical legacy and adapting itself to operate under a radically different dispensation.
On the eve of South Africa’s twentieth anniversary, commemorating the advent of a nonracial democracy, there is little question that the character of the mining industry has radically changed from what it was in the early 1990s.
“The mining industry has experienced an accelerated rate of transformation post-1994 in comparison to several other key industries,” Chamber of Mines president Mike Teke tells Mining Weekly.
“I believe that transformation has happened in a voluntary fashion, with the recognition by the industry itself that we are in a new democratic South Africa and we need to transform positively.”
This milestone in the country’s history provides an ideal opportunity to take stock of the changes that have been effected and to analyse the extent to which the mining sector has transformed and successfully addressed its historical legacy.
While the seemingly obvious starting point in examining the mining sector’s transformative journey over the last two decades would be the promulgation of the Mineral and Petroleum Development Resources Act (MPRDA) in 2004, which ushered in a completely new regulatory environment, the metamorphosis of the industry actually started in the early 1990s, with the unbundling of the powerful mining finance houses.
RESTRUCTURING OF THE INDUSTRY
Before the 1990s, the mining sector was owned and operated by six very large and powerful mining finance houses, including JCI, Rand Mines, Gencor, Anglo American/De Beers, Gold Fields and Anglovaal.
These were essentially multiresource-focused conglomerates that controlled the bulk of the country’s gold, platinum, chrome, coal and base metal assets, and operated according to a group finance model that was essentially introduced at the turn of the twentieth century.
However, when the transition to a new demo- cratic dispensation started, international investors who came flocking back to South Africa soon began to bemoan the lack of commodity speciali- sation, the complex and opaque shareholding structures and the poor systems of corporate governance that were characteristic of those traditional mining finance houses.
It became clear that, to attract much-needed capital investment, the companies would have to undergo significant restructuring. Thus, from the early 1990s, a trend of unbundling and consolidating assets into smaller, resource-focused companies started and continued unabated into the early 2000s to the extent that, by 2004, none of the six traditional mining finance houses remained intact. (While Anglo American and De Beers are still in operation, they can no longer be considered mining finance houses in the traditional sense.)
That restructuring of the industry was given additional impetus by the introduction of the ‘use it or lose it’ principle in 2004. That inherent stipulation of the MPRDA essentially forced companies to relinquish their title and rights to unexploited economic mineral assets that had, in some cases, lain dormant for many decades.
Webber Wentzel mining regulatory head Peter Leon elaborates that the notion of private mineral rights disappeared under the MPRDA and was replaced by a system of State custodianship, where companies lost their property rights and were only allowed to operate a mine by means of a mining licence.
While mining companies hotly contested this development at the time, Leon believes that it did have an ultimately positive outcome. Because the State was now custodian of the country’s mineral assets and could prohibit major mining companies from sterilising mineral reserves by forcing them to ‘use or lose’ their existing mineral titles, new entrants into the industry were now able to acquire and exploit known mineral assets that, under the old system, would probably have remained dormant.
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