South Africa’s mining industry is in “crisis” as companies operating in the country have lost confidence in the sector’s minister and new investment has “frozen” due to policy and regulatory uncertainty, the Chamber of Mines chief executive said on Friday.
“The industry does not believe that the approaches adopted by the department of mineral resources are serving the national interest of the country.” — Chamber of Mines.
Speaking at Paydirt 2017 Africa DownUnder conference in Australia, Roger Baxter said there are a number of critical factors impacting South Africa’s investment attractiveness, including the fact that the industry “does not believe that the approaches adopted by the department of mineral resources are serving the national interest of the country.”
Examples of the dire state of the sector, Baxter pointed, can be found everywhere. “Real mining GDP in 2016 (R226 billion or roughly $17 billion) is smaller than it was in 1994 (R242 billion or about $19 billion),” he said. “Investment has shrunk over the past two years [and] the industry made an accumulated loss of over R30 billion (about $2.3 billion) in 2015.”
Baxter also said 65% of South Africa’s iconic platinum sector companies had been loss-making this year, adding that the minister has not provided any assistance to the industry through the ongoing crisis.
Mines Minister Mosebenzi Zwane has come under fire after announcing a new Mining Charter that hiked the requirement for black ownership to 30% from 26%.
It also established that mining companies must pay 1% of turnover to their black empowerment partners, which if in effect last year it would have consumed 95% of the 6 billion rand (about $465 million at today’s rates) paid in total dividends by the industry in 2016.
The Chamber of Mines has tried stopping the implementation of the new rules, claiming the revised norms have not only raised costs and imposed new levies to fund community development, but they’ve also put at risk some major deals recently announcement.
So far, the directives remain in place. What’s more while presenting at the same conference on Sep.7, minister Zwane said the Mining Charter was law and would be implemented.
South Africa holds the world’s biggest reserves of platinum, chrome and manganese, and the mining sector as a whole continues to be a major employer. Last year alone, the industry contributed 7.7% to gross domestic product and accounted for 25% of the country’s exports.