New empowerment policy needed for mining in SA – IRR

Mineworkers work deep underground at Harmony Gold Mine's Cooke shaft near Johannesburg, September 22, 2005.

Cape Town – The ownership targets set out in the third revision of the Mining Charter will primarily benefit South Africa’s state mining company and a small elite at the pinnacle of the ANC, says Anthea Jeffery, head of policy research at the Institute of Race Relations (IRR).

In a report released this week, Jeffery said that an entire new approach to empowerment in mining is needed with a different scorecard that will focus on economic empowerment for the disadvantaged.

New Charter will fuel abuses

The new Mining Charter, gazetted on June 15 this year, has upped black ownership targets significantly – all existing holders of mining rights are required to increase their black economic empowerment (BEE) ownership from 26% to 30% in a year.

READ: Mining Charter – hope of a different final version
There are also additional BEE requirements, such as that applicants for new prospecting rights will need to have a minimum 50% plus one black person shareholding, while mining companies will be compelled to distribute 1% of their annual turnover to BEE shareholders every year.

“A key risk from the new Mining Charter,” Jeffery notes, “is that its onerous requirements and often vague terms will pave the way for further abuses of its kind.

READ: FIC fines bank that helped Guptas buy mine
“Gupta-linked companies are thus likely to benefit substantially from the new rules. So too will South Africa’s state mining company – the African Exploration Mining and Finance Corporation.”

She points out that the ANC and its allies like to pretend that state ownership and control of the mining industry will increase and spread the benefits of South Africa’s mineral wealth.

“But international experience shows that state mining companies generally fail, managing to produce only a fraction of what the private sector is able to achieve.”

The reasons for this is that state mining companies are often plagued by poor management and diminishing competitiveness.

“State mining companies are often captured by small and privileged elites, which use them for their own gains rather than in the national interest,” Jeffery opines.

Meaningful empowerment

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