Exclusive Opinion Piece
The two decades since our first democratic elections in 1994 have brought changes to every aspect of South African life, not least of all to the minerals sector; but many of the changes in mining have not been for the better, and have led to more than a few lost opportunities.
When Nelson Mandela assumed the mantle of President of the Republic of South Africa after the April elections, it suggested an era of boundless possibilities – both negative and positive. The run-up to the final voting stage had been fraught with uncertainty and conflict, leaving investors skittish and unwilling to commit themselves to a new dispensation. At the same time, the prospects of returning to the international community held great promise for individual businesses and the economy in general.
It probably has to be said that most mining companies were scarcely ready for what was to come. The industry was operated essentially by a few large mining houses who continued more or less as they had done for decades. They owned the mining rights to their deposits through their ownership of the surface rights to those properties, and could explore, plan and develop (or not) as it suited them.
Gold was king, and the gold miners were the centre of the mining universe, controlling and funding most of the collaborative action (through the Chamber of Mines and other bodies) and collective research (through the Chamber of Mines Research Organisation) that mines required. SA was still the world’s largest gold producer, although it would remain so only for another couple of years; output had been dropping almost steadily since its record production level of about 1,000 tonnes in 1970.
Trade unions were actively fighting for workers’ rights in the sector and were gradually being incorporated into decision-making processes on vital issues like wages and living conditions. The Leon Commission had made its report on mine health and safety, auguring the new Mine Health and Safety Act that would shortly follow and entrench certain important principles protecting workers.
Single-sex hostels – and all their concomitant ills – were still the common form of mineworker housing, and the scourge of HIV-Aids was starting to wreak havoc among workers and their families.
In the twenty years that followed, the mining houses saw their world turned upside down. A phase of corporate re-engineering stripped down the well-resourced technical powerhouses like Rand Mines, Anglo American, Anglovaal, Gold Fields of SA and General Mining. Leaner, commodity-focused entities were spun off to ‘release shareholder value’ and deliver higher profits to investors.
Expertise drained from the sector as experienced engineers and managers were jettisoned in the interests of higher margins; sadly, many of those would never return to the sector, finding new careers in other disciplines. This led quickly to a serious erosion of skills at (or available to) mining operations, so it should be unsurprising that standards on mines have dropped along with general levels of competence – and mines now often accept mediocrity instead of demanding best practice.
Collaboration between mining companies was rolled back as pressure on spending grew, and research was one of the first fields to suffer. The functions of Comro were subsumed into the state-run Council for Scientific and Industrial Research, where they have been scaled down almost to a point of irrelevance – especially in the vital field of rock mechanics.
Attempts to address the issue of hostel accommodation led to the wide take-up of ‘living-out allowances’ – a policy that suited the mining companies’ strategic scaling down of services but created at least as many problems as it solved. A more fundamental malady – the migrant labour system – remained virtually untouched, and has underlain much of the discontent surrounding the Marikana tragedy and the subsequent platinum sector strikes.
These strikes in turn have threatened the stability of the mining sector’s labour relations and bargaining structure, which took decades to evolve. The result has been a backward step in health and productivity that will take years to recoup. Indirectly, the damaging strikes have also put many youngsters off the idea of a career in mining (certainly in platinum mining) – which will further undermine our need to recover the skills base on mines.
Government’s increased involvement in mining, aimed ostensibly at promoting the sector’s growth and opening it up for new entrants, has in practice often had rather the opposite effect. Moving from a system of privately-owned mineral rights to a state-owned model was one of the most significant policy changes of the 1990s. Hopefully it will still prove itself to be the right one, insofar as the system can encourage mineral development, broaden access and prevent sterilisation of resources.
However, this intervention has been overshadowed by the ongoing and unsettling debate on mine nationalisation, and beset with bureaucratic and regulatory challenges that have not made life any easier for what has become a struggling industry. The Mine Health and Safety Act passed in 1996, for instance, granted ‘Section 54’ powers to an under-capacity inspectorate to halt production on mines under certain conditions; this knee-jerk response has gained popularity despite its side-effects, while many of the more substantive health and safety risks remain.
After years of debate, nationalisation remains a talking point among political players; despite regular denials by the relevant minister, not all investors are convinced by government’s stated commitment to mining tenure and procedural fairness. It is not difficult to see why, when this playing field is further complicated by changing black economic empowerment requirements, the opaque and drawn-out processes for permits and licenses, and recent talk of ‘strategic mineral’ status for coal.
Governments the world over simply do not have a good record when it comes to running businesses; so as the state has become more involved in matters that affect the day-to-day running of mines, it has become more difficult to run them efficiently.
Certain aspects of what the mining sector has really needed over the past two decades, however, have not been forthcoming. Key among these are a reliable supply of affordable electricity, and an enabling rail infrastructure – particularly for the coal sector. As mines have deepened in search of gold and platinum reserves, technical and other costs have risen; more specialised equipment is needed at greater depths, demanding more electricity to power it. Eskom’s rocketing prices have pushed up mines’ energy costs drastically in the past decade, and supply interruptions now constitute a significant risk to profitability.
As the coal sector looks beyond its historical resource base in Mpumalanga to replace production by opening new fields in places like the Waterberg, it is constrained by a lack of rail infrastructure to bring product cost-effectively to power stations where it is needed. Indeed, even the existing national rail infrastructure is run-down and not conducive to supporting economic growth.
Twenty years on from 1994, we have a rich heritage in our mining sector but we have failed to grasp and exploit the opportunities that it offered. The recent mining boom experienced by most mineral-rich countries has essentially passed us by, and we are now ranked sixth among global gold producers – behind Peru and the United States.
This is despite our leading educational institutions and high-level technical ability in areas like seismicity and ventilation. Even some of our infrastructure stands as hopeful signs of what we could still achieve: the Sishen-Saldanha rail line and the world class Richards Bay Coal Terminal are just two of these.
But we appear to lack the collaborative leadership that is required to agree a vision for the future of the mining sector, and to engineer a workable plan in which every stakeholder is committed to a meaningful role. It is not an easy time for the country as a whole, with rising disappointment about our many shortcomings on the road to a better life for all citizens.
However, it is a critical time for government, business and labour to find a way forward – through a common goal and mutual respect for each other’s positions. This may be a tall order, but we are fast running out of time to achieve it.
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