House Chair, South Africa, once the jewellery box of the world, now has a mining industry in terminal decline. It is dying, not because the mineral resources are running out, but because of government ineptitude, poor policy choices and militant trade unions. It is dying because investors no longer wish to put capital into a country where the word of the government is no good.
Despite the current high prices of gold, palladium, rhodium and other minerals, of which South Africa is one the world's leading sources, we can longer compete globally in terms of mining production. Despite the fact that we sit on the world's largest mineral reserves valued at between $2,5 and $4,7 trillion, our costs of production have skyrocketed primarily due to increased labour costs.
We have had several consecutive quarters of mining production declines and have recently lost our position as the leading gold producer in Africa to Ghana, despite that country having much smaller gold reserves. And we have lost an estimated 75 000 jobs in the mining sector since 2012, all of which calls into question the director-general's statement during the APP presentations to the portfolio committee. He said:
"We have achieved our vision of a globally-competitive, sustainable and meaningfully-transformed mining and minerals sector."
Globally-competitive! Competitive against who?
When the Mining Charter was first introduced in 2004, the ANC- led government assured mining companies that the BEE requirement of 26% shareholding would not be amended. That created certainty as companies could invest and plan, knowing the environment they were operating in. But that went out of the window with Mining Charter III. Suddenly, the BEE- shareholding requirement jumped to 30%. And there is no guarantee that it won't change again in
the future, creating more uncertainty in an already-uncertain sector of the economy.
The new requirement is that mining companies purchase 80% of their services from South African companies; 60% from BEE entrepreneurs; 10% from BEE women or youth-owned enterprises; and 10% from BEE-compliant companies. Likewise, at least 70% of all mining goods must be purchased from similar companies. In certain instances, some of the BEE companies do not have the required products on hand or the required skills and they are forced to import them, which affects their bottom line, the mining companies' bottom line, turnaround times, and does nothing to facilitate skills development of their workforce.
The inflexibility of these regulations is basically throwing BEE companies under the bus. The impact of this cannot be underestimated. In June this year, Continental Tyres announced that it was ceasing production of its underground mining tyres and laying off 170 workers, a decision that has been attributed directly to the policy uncertainty surrounding the Mining Charter. And that's just one example.
Last week, we heard that the Minerals Council of SA has taken the revised Mining Charter on judicial review. The primary reason for this is the charter's failure to recognise past empowerment deals for transfers of mining rights and applications for new mining rights. But a further concern is the regulatory overreach by the Minister in actually reviewing the charter in the first place. It has been argued that the Minister has no authority under the Mineral Petroleum Resources Development Act, MPRDA, to revise the terms of the charter. Charter III now includes the provision that the Minister has the unlimited power to amend it at any time. That does nothing for policy certainty or investment attraction!
The Department of Mineral Resources has dropped the ball on mineral rights administration and has finally admitted what everyone else could plainly see, i.e. the SA Mineral Resources Administration Database, Samrad is woefully inadequate. It is quite bizarre then, that at least 22 countries with much more progressive mining regimes use South African technology to do the same job, the technology created right here in Cape Town. And yet, our government refuses to consider it. Instead, they
seek a customized solution that not only administers mining rights, but bolts on departmental human resources and financial administration, amongst a whole lot of other things. We can fix this problem quickly and cost effectively if we use existing resources instead of trying to re-invent the wheel.
We need to acknowledge that South Africa is no longer attractive to mining investors. According to the Fraser Institute's Mining Investment Attractiveness Index, South Africa ranked 48th out of 91 jurisdictions in 2017; and in terms of mining policy, South Africa ranked 13th out of 15 African countries. So, in fact, our policies are chasing investors away. This is borne out by the disinvestment strategies of the bigger players, and the sharp decline in the number of new entrants and new mining operations.
A recent report by Corruption Watch indicated that billions of rand worth of mining royalties have been squandered, stolen or diverted. The royalties which are collected by Sars are placed in the National Revenue Fund where they disappear into the black hole that is state capture and unadulterated government incompetence and mismanagement. These funds must be ring-fenced
and independently administered and audited to ensure that they go to the communities they are intended to benefit. A further concern in this regard relates to the role of traditional leaders in negotiating the royalty agreements and administering the funds at a local level, often in secret and without the community having any say in the matter. This is not fair and cannot be permitted to continue.
Perhaps and most importantly, Minister, it is time to reign in the unions. As a former mineworker and unionist, you will know ... [Interjections.]