Mr Allan Brown, Head of Commodities at Deutsche Bank,
Mr Tim Clarke,
Members of the Investment and Mining Community,
Ladies and Gentlemen,
May I thank Deutsche Bank most sincerely for inviting us to address this important annual conference. This provides us with an opportunity to address a number of issues that are critical for our mining industry.
To begin with, let me deal with the matter of the nationalisation debate. Interestingly, some people, even in our own country, have already issued a verdict on the subject – even though the African National Congress (ANC) itself has not - and these people have even gone to the extent of saying that it is not a question of “whether” but rather a question of “when” nationalisation will occur.
It seems to me that some members of the media and the business community here in London and elsewhere have also been caught up in this unnecessary frenzy. What we are dealing with here is not different from what happened to Cinna the Poet after the assassination of Julius Caesar.
Poor Cinna, gentle friend of poets of genius like Catullus, was reportedly killed at the funeral in 44 BC for what some in the mob, baying for the blood of the conspirators, called “his bad verses”. Others cried: “Tear him to pieces. He is a conspirator, as was immortalised by Shakespeare in his masterpiece about the Ides of March. So we may be victims of being confused with Cinna the alleged conspirator when we in fact represent innocent victims, but with open minds for discussion.
I am drawing these comparisons because I am aware that over the past while the issue of nationalisation of mines has received much attention within the investor community and more broadly within the mining industry. In my country, the issue has also occupied a lot of political and media space for a variety of reasons.
I am fully aware that my own repeated assurances as well as numerous statements by government and our President, have not yet removed the investor concerns in this regard. No matter how often our government states the obvious, that nationalisation is neither South African government policy, nor is it ANC policy; the controversies and potential fears do not seem to disappear.
I have made the point before that South Africa is an emerging democracy, and it is a society that holds dear its hard-won democratic dispensation. My political party, the ANC, fought hard over many decades to establish this democratic order in South Africa. As such it can only live by its ideal of promoting and consolidating the constitutional democracy it has created and deepened over the past 17 years.
Within the ANC, there is a long-standing tradition of robust contestation of ideas and policies. The history of the ANC attests to the fact that issues of race or social cohesion, land distribution, the role of the state in the economy, and approaches to the solution of the extremes of wealth and poverty in the country have dominated the political economy debates amongst the diverse groupings within the party.
In many ways, this is not unique to the ANC or peculiar to South African society either. Modern history, both in the East and in the West, attests to the ongoing and often tense controversies around policy choices that revolve around the control of the means of production.
The current nationalisation debate in our country, likewise, has a broader domestic and global context. In the recent past, two sectors have attracted special and controversial attention. One is the mining sector; the other is the financial sector. Over the past decade, the banking and financial sector, in particular, has been the centre of much of public policy debate.
As we gather here, there is a worldwide movement spreading fast under the banner of “Occupy Wall Street” (OWS). According to the current issue of The Economist Magazine (Oct 22-28, 2011), in over 900 cities there has been and continue to be such demonstrations, London’s St Paul campers included. The visible and widespread excesses in the financial sector and its social consequences have led to the emergence of a grassroots movement to express dissatisfaction with the prevailing order.
The super cycle of commodities over the past decade likewise has made the mining sector a visible source of wealth creation. Unlike the banking sector, mining operations often take place in areas where poor communities and the underdeveloped regions coexist. This contrast is both ironic and socially problematic. As such it is not surprising that the mining industry the world over has become the centre of political and public policy attention. From Australia to Chile, from South Africa to Canada, from India to Venezuela, from Zambia to Russia, the communities are clamouring for a higher share of their benefits from the resources in their regions.
Public policy making, and political leadership, cannot be oblivious to the indignation expressed by the masses. However, responsible political leadership needs to strike a balance between the needs of the society, especially the poor, and the sustainable approaches to economic development and growth. The history of my Party, the ANC, in this regard is instructive.
The ANC has been guided by the Freedom Charter. Upon assuming government in 1994, President Mandela as he travelled the world including the occasion of his State Visit here to the United Kingdom stated that the fundamental position of the ANC is that of a mixed economy.
So ever since 1994 we have not deviated from this policy position. We have stuck to this despite the ideological contestations within the broad alliance that is led by the ANC. And may I remind the audience that this contestation has been there since time immemorial and I am sure this will continue- and continue it should as this is a requirement of a vibrant democracy. However, it is the ANC that is in power and not sections that make up the broad church that the ANC is. Accordingly it is ANC policy that will prevail and nothing else.
The ANC like any other political party runs government so as to ensure that the citizens of our country benefit from the economic endowments the country has. In this respect, you will recall that the previous (pre-1994) government left the country effectively bankrupt.
There was macroeconomic instability; there were no foreign reserves to cushion the country in the event of trouble; the treasury was writing cheques every day for money that the country did not have and was quite wishfully hoping to have; homeland governments were spending money with the misconception that the then national government will pay. I can go on and on listing a litany of gross troubles that the country was going through. Suffices to say that the mining industry itself was not in a much better shape, certainly not friendly or favourable to new entrants or new investors.
However, even in the midst of all that gloom and doom the ANC took responsible economic policy decisions am convinced that when the ANC discusses the report of the Research Team that is looking at this matter of nationalisation it will be guided by the prescripts of what I have said today. It is my understanding that this report will be made available towards the end of 2011.
It is evident that there are serious social and economic reasons that have given rise to the debate about the merits or otherwise of nationalisation. It is a fact that the prevalence in our country of the evil triplets of poverty, unemployment and systemic inequality invariably leads to despair, suffering, and widespread socio-political discontent. Policy controversies and political reactions to such critical issues are bound to push for the extremes with regard to policy positions - be they the occupation of financial centres or the nationalisation of natural resources.
It is in this context that there is an imperative for the harmonious coexistence between the communities and the mining industry. We have to work together with the mining industry to resolve tensions that exist between communities and mining companies and this we must resolves a matter of, with the full consideration for the welfare of the communities and workers.
The next and exciting chapter in the SA mining sector is to set in motion a multi-pronged beneficiation strategy over the coming years. To this end, the Cabinet has already approved a beneficiation policy framework, and my department is currently finalisation the beneficiation action plan in consultation with all affected parties. The urgent elimination of the infrastructural bottlenecks remains our topmost national priority. As you know, President Zuma himself is chairing the Cabinet Commission that is mandated to deal with infrastructure issues. We are therefore resolute in our commitment to the promotion of our mining industry to achieve both industrial growth and social transformation. These parallel goals we will pursue via a process of continuous consultation with the affected parties including the mining industry.
In this context, I am pleased to note that one of the differentiating attributes of the South African mining industry is the unique ability of all stakeholders to tackle current and impending challenges as a collective. Our track record on collaborative work dates back to the 1990s at the time of the gold crisis, during which we established a working group to develop mechanisms to mitigate against the impact of the crisis.
The latest collaborative effort is the formation and work of Mining Industry Growth and Development Task Team (MIGDETT), which was established at the outset of the global financial crisis (2008) and has yielded positive results over the past three years.
Within this multi-stakeholder process, we have developed a medium term growth and development strategy for the mining sector in the country. This process has, amongst others, identified a number of changes and reforms that our mining legislation (Mineral and Petroleum Resources Development Act, MPRDA) requires for the ease of administration and the prevention of multiple interpretation of the Act. In this way, we will remove all ambiguities, and ensure a more efficient regulation of the licensing system. We are confident that when such reforms are made, issues such as the partitioning of mineral rights will be made possible.
As I have stated before, and it is a common knowledge, that over the past decade our mining industry suffered from the lack of adequate infrastructure, be it electricity, roads, or export logistics at the ports. I am pleased to report that my government has invested a great deal of political and financial capital in ensuring that our requisite infrastructure is adequate. In fact, President Zuma is chairing a Cabinet Commission to ensure a successful and timely implementation of our national infrastructural programme. Whilst this is our short term intervention, our National Planning Commission is set to release its medium term programme of infrastructural development later in November (2011).
I am also pleased to announce that we are working on creating a single window for processing mineral rights as well as the associated environmental authorisation and water licenses. This will go a long way to ease the administrative processes both within the government as well as for mining companies. I like to highlight that this goes to demonstrate that in our interactions with the investment community and the industry players, we listen, assess and implement whatever measure is in line with our national interest.
Such legal reforms alongside our initiatives to improve the administrative operations will go a long way to help South Africa regain its global competitiveness in the sector. Given the reported and considerable present resources base of the country, estimated by some at US2,5 trillion, improving the country’s competitiveness is critical for unlocking the socio-economic potential of this sector for the country.
Whilst the ANC is mulling over the issue of nationalisation, the Dept of Mineral Resources is focused on working effectively around the clock to improve its own operational efficiencies. In this regard, the appointment of the Director General, Dr Thibedi Rammontja, is a key step which will stabilise the top management of the Department.
It is stating a fact that compliance is a critical element of any regulatory regime. At the Department we have established a multi-disciplinary enforcement and compliance unit which has the required expertise from across the various disciplines of the DMR. As a result, we are now able to act in cases of transgressions and non-compliance with the commitments that have been made.
Our compliance is particularly determined to help improve the health and wellness standards. Whilst I do appreciate the efforts made by the industry in this regard, the fact is that there is much left to be desired. I am convinced that SA’s competitiveness in this sector is as much about efficiency as it is about safety and wellness of our workforce. Sustainable competitiveness in this sector requires long term commitment to world-class health and wellness standards. In this regard, whenever Section 54 of the Act, which deals with safety matters, is invoked it focuses on the section or sections of the mining operations that are declared as unsafe. We take careful measures not to disrupt the entire mining operations.
Against the backdrop of the above initiatives, I remain committed to creating a favourable and globally competitive mining sector in South Africa. To achieve this, domestic and global investments are indispensible. As we promote this multi-stakeholder partnership, all policy and administrative hurdles we will navigate carefully and responsibly.
We march ahead confidently on the basis I have outlined.
I thank you!
