How uncertainty is culling SA’s mining industry.

The prolonged uncertainty created by the introduction of Mining Charter III and the Mineral and Petroleum Resources Development Amendment Bill [B 15D – 2013], has left SA’s mining industry in limbo. An industry that can ill afford any more financial setbacks.

Instead of bringing more black ownership with the Broad-Based Black Economic Empowerment Charter for the South African Minerals Industry (Mining Charter III), the Department of Mineral Resources (DMR) has created a roof fall in the industry which has put the brakes on resource development.

According to the South African Chamber of Mines, the industry has been on a financial back foot for years, recording a R31 billion loss in 2015 with 60% of the significant platinum sector operating at a loss.

The industry already operates in an uncertain environment with fluctuating commodity prices and exchange rates compounded by increasing cost pressures. The reduced deal flow, as investors seek to divest and look for opportunities elsewhere, is adding additional pressure as investments dry up.

The announcement has created employment uncertainty with the blue collared workforce. Job losses in the industry have become commonplace, as the sectors contribution to GDP decreases, so does the opportunity to retain, let alone grow, employment opportunities.

The Mineral Resources Minister, Mosebenzi Zwane, has been reported saying (and reiterating) that “he strongly believes the new Mining Charter is realistic and achievable.” so concerning is the loss of employment in the mining sector, that this issue has become a public interest focus area of the Competition Commission in considering whether or not to approve mining mergers.

Minister Zwane is adamant that rapid economic transformation should not just be lip service. By introducing Mining Charter III, he will be increasing black ownership of the industry to 30%, the effect of this announcement has catapulted the industry into a crisis.

The mining industry has achieved 26% black ownership, the financial viability of the additional 4% mandated by DMR has added another risk to an already uncertain market.