Day-to-day engagement with key stakeholders in the mining industry does not, generally, leave one with an optimistic view for the mining industry in 2016, and the reasons are not difficult to identify:Commodity prices that continue to sink to long-term lows; reduced commodity demand; China's "rebalancing" and the resultant slow down; regulatory uncertainty; increase in costs of production; an infrastructure that is under strain (power, water, road, rail, and ports); ever increasing investor caution, if not, outright lack of confidence; significant reduction in mineral exports; overall contribution to foreign direct investment; and the value of the industry on the Johannesburg Stock Exchange Limited.
A key concern of many current and prospective investors is the legal or regulatory uncertainty. The general view that is expressed is that certainty is a cornerstone of any prudent investment decision. A good example relates to ownership, generally, and compliance with the Mining Charter, in particular. Government's stated intention is to amend and update the Mining Charter, during the course of 2016, to specifically address (increase) black economic empowerment ownership and introduce stringent penalties for non-compliance.
The "once empowered always empowered" debate that raged in 2015 is likely to have a significant impact on government's thinking going into the amendment process and it is possible that the key aspects raised by industry will be anticipated in the proposed amendments. If this is the case, it is possible that the amendments will be challenged, adding to the current uncertainty created by the fact that, despite the previous minister's undertaking and commitment to addressing the matter expeditiously, this has not occurred, and the matter is subject to a High Court application that seeks to have the original Mining Charter and the Mining Charter, as amended in 2010, declared unconstitutional.
In addition to the empowerment aspects, proposed amendments to the Mineral and Petroleum Resources Development Act 28 of 2002 (the MPRDA), which were made in 2012, have not been settled and passed into law. It is possible to put a positive spin on this, namely that, as a result of the extensive criticism that was raised in relation to the proposed amendments, the comments were being taken seriously by the previous minister, Minister Ramatlhodi, and this has contributed to the delays. Having said this, the process appears to be dragging out and it is extremely difficult for stakeholders in the industry to make proper decisions, particularly where decisions must, necessarily, anticipate the potential impact of the proposed amendments.
Given the state of South Africa's mining industry, it is absolutely essential that the new minister, Minister Zwane, places a firm hand on the rudder and guides the South African mining industry, with the assistance of all stakeholders, off the rocks.
Warren Beech, Head of mining at Hogen Lowells
