Revising Mining Charter: public hearings day 4

Meeting report

Bravura Consulting Submission
Ms Alana Bond, Head of Sustainable Development: Bravura Consulting briefed the Committee on the Consultancy’s submission.

Among some of the challenges that assuaged the Charter, Bravura noted that the procurement measurement in the Charter was not broad-based or focused on sustainable transformation and was open to abuse and fronting. Enterprise Development was barely mentioned and not measured and ownership did not deliver broad based benefits.

On beneficiation noted in the Charter, Bravura recommended that that element be divorced from the Charter and a holistic, nationwide strategy be agreed on by government, the mining industry and other key stakeholders to ensure beneficiation is done properly and in a way that will create real value and economic growth. With respect to Mine Community Development, Bravura recommended that mining companies have large community involvement and initiatives need to be driven by communities. On Employment Equity and Human Resource Development, the demographic requirements should be more realistic (i.e. Women percentage targets versus world-wide standard).

Bravura recommended that external bodies for verification of annual reports be created to help create a more standardized approach and take some of the pressure off of the Department of Mineral Resources. A high value creation opportunity for the mining industry to promote holistic approaches that include all the different elements of its operations, including environmental and socio-economic aspects should be created. There was a need to clearly state what constitutes compliance, since it would be legally difficult to revoke licenses without this. The revised Charter should clarify all possible sources of confusion in order to ensure real transformation occurred, including exactly to which business entities it applied to.

Bravura recommended that clear targets and measures for Enterprise Development beyond just foreign multinational capital goods suppliers’ contribution to a “community fund” be set. There should be the encouragement of mining companies to adopt a holistic, integrated and strategic approach to community development and to work together to impact communities. Prospecting and mining licenses and the selling off of mine assets should be granted to real, operating entrepreneurs not to individuals looking to make a quick few million and any further ownership transactions should be entirely broad based, focused on employees, labour sending areas and mine communities. Finally the Consultancy advocated that the mining sector needed to move away from a compliance mindset to one of strategic transformation with a focus on the business case.

Discussion
Ms F Bikani (ANC) asked how Bravura Consulting was trying to improve the situation in the mining sector as it related to 26% black ownership.

Ms Bond responded that her company was doing all that it could to advise its clients to work towards increasing black ownership in the mining sector. Bravura Consulting was an ardent supporter of increasing black participation in the sector and advised its clients accordingly with a view to altering mindsets. The Consultancy was working to achieve real change as opposed to merely checking boxes of compliance.
Mr M Sonto (ANC) commented that the presentation had been good. He sought further expansion on mining community development. He asked what could be used to measure community development in the Mining Charter.

Ms Bond responded that strategic thinking needed to be undertaken to encompass community development in the Charter. Bravura Consulting had applied to the government’s job fund to pilot a community development project and was also working to create entrepreneurship projects to assist communities to get involved in the mining sector.

Mr E Lucas (IFP) commented that there needed to be more black owned mines in the country but one of the major obstacles to achieving that goal was in securing financing. How could potential black owners secure financing for their ventures?

Ms Bond responded that the first aspect in getting financing was in ensuring that black entrepreneurs were involved in the industry. The practice of selling rights once some prospecting and studies have been done needed to be stopped. It enriched a few when the mining companies bought those rights out to add to their collection. Mining was capital intensive and not an industry where quick money could be made unless the system was abused. People had to be committed for the long haul. And as to financing, rather than buying out the mining rights, one mechanism for solution was to let the larger players fund the mine exploration and operations through equity stakes, rather than bank financing (which was very hard to find). This could be encouraged through many mechanisms, possibly in ownership offsets. These larger players should also be any kind of mining institution, including the large and successful majority black owned mining companies. Everyone needed to do their part for transformation, especially those who had benefitted extensively to date.

Mr C Gololo (ANC) asked whether Bravura Consulting was recommending that beneficiation be separated from the mining charter.

Ms Bond responded that since beneficiation was optional and not directly measured other than as an offset to ownership, mining companies simply weren’t incentivised to work on this. In addition, it seemed senseless to have all the different mining companies in South Africa trying to do something on Platinum beneficiation, for example. Not all beneficiation was suitable for South Africa and not all of it would be economically viable. Bravura suggested pooling mining and government resources to fully research the space and identify where beneficiation could best be done to the benefit of South Africa, particularly in the area of creating jobs which were labour intensive. This was probably best done outside of the Mining Charter.

J Rocha Consulting Submission
Mr Jacinto Rocha, Mineral Law Consultant: J Rocha Consulting briefed the Committee on the Consultancy’s submission.

The Consultancy highlighted that ownership as outlined by the Charter was the most emotionally and politically charged and popular element. The major debate on ownership was on broad based ownership as opposed to a wider ownership spread. Broad-based ownership was politically sound but represented a commercial disaster as it undermined meaningful participation. It was socially misleading with respect to benefits. In terms of procurement, the Charter had set procurement targets but they raised more questions than they answered and provided a challenge with respect to measuring the outcomes.
On beneficiation, BBEE included ownership of and participation by Historically Disabled South Africans (HDSA). There was no specificity in the Charter as to how beneficiation offsets would promote the ownership of and participation in the beneficiation by HDSA’s and that was problematic. There was no clarity as to whether beneficiation offsets would result in greater beneficiation in South Africa. Mr Rocha asserted that beneficiation offsets, where applied, did not promote beneficiation, but undermined HDSAs ownership in the mining sector.

Mr Rocha concluded that transformation in the mining sector still had a long way to go and that government must be consistent on BEE issues. The Department of Mineral Resources (DMR) could not be the lone champion on transformation. He suggested that the DMR develop a database on Employment Equity, BEE and other areas pertinent to transformation.

Discussion
Mr E Mtshale (ANC) asked Mr Rocha to explain his understanding of beneficiation.

Mr Rocha responded that his presentation was not questioning beneficiation but was rather proposing offsetting as a viable alternative.

Ms Bikani said that some of the views stated in the presentation were general and did not necessarily relate to the Mining Charter. The presentation should have had more of a focus on addressing the Charter. She asked how realistically transformation could be applied to the Charter.

Mr Rocha responded that he had focused on the Charter in previous documents supplied to the Committee. He said that a focus on individual companies was needed to achieve transformation in the Mining sector as widespread BBBEE was hard to attain.

Mr Sonto said that the presentation should have included recommendations on the Charter. He asked what Mr Rocha’s views on the Charter were in relation to transformation.

Mr Rocha responded that he had focused on the Charter in previous documents supplied to the Committee. He said that a focus on individual companies was needed to achieve transformation in the Mining sector as widespread BBBEE was hard to attain.

Ms M Njobe (COPE) asked what form of Broad Based Black Economic Empowerment could be successfully implemented in the mining industry.

Mr Rocha responded that to achieve industry wide transformation would be hard but if the focus was on individual companies then 26% could be reached and possibly exceeded.

Mr Gololo sought clarity on the assertions made in the presentation on BBBEE. He asked what solution Mr Rocha proposed on transforming the industry.

Mr Rocha responded that to achieve industry wide transformation would be hard but if the focus was on individual companies then 26% could be reached and possibly exceeded.

The Chairperson asked whether Mr Rocha believed that 26% black ownership could be achieved by 2014. He asked whether beefing up the inspectorate in the Department of Mineral Resources (DMR) would ensure that compliance with respect to transformation was met.

Mr Rocha responded that to achieve industry wide transformation would be hard but if the focus was on individual companies then 26% could be reached and possibly exceeded.

National Youth Development Agency Submission
Mr Siviwe Mkoka, Executive Director for Research and Policy: NYDA presented the Agency’s submission.

The NYDA expressed its support for the Review of the Mining Charter. It welcomed the progress indicated by the Review Report of October 2008. It appreciated the acknowledgement made by the review on the failures of achieving important targets especially on ownership for Historically Disadvantaged South Africans. It was noted that whilst the review report of the charter acknowledged the absence of disabled people as a designated group, it failed to recognize the youth as a designated group.

The NYDA proposed that the Charter set targets for youth as a designated group outlined by the Broad Based Black Economic Empowerment (BBBEE), Act 53 of 2003 and Codes of Good Practice championed by Department of Trade and Industry. It proposed that the target for youth should be set at 5% for all components of the charter. That target was supported by the recommendation of the Youth Development Strategy of the Department of Mineral Resources. The Charter should also set a target for disabled people as one of the designated group for all components that is set to achieve.

Discussion
The Chairperson asked the NYDA to expand on its view on skills development.

Mr Mkoka responded that the NYDA wanted the Charter to encompass all aspects of development in the mining sector including skills development with a view to assisting the youth.

Ms Bikani asked whether the NYDA had specific programmes to assist unemployed youth in the mining sector.
Mr Mkoka replied that the Charter in the mining sector excluded young people and the NYDA wanted to see a change in the policy to benefit young people. The NYDA was funded over three years by R1 billion and the funding was used to focus on providing out of school youth with skills which would assist them in securing employment.

Mr Lucas commented that the Committee needed to find ways to get skilled people who were unemployed into the industry.

Joy Global Africa Submission
Mr Matimba Mahange, Manufacturing Director: Joy Global Africa presented the organisation’s submission to the Committee.

Joy Global Africa felt that the Charter did not recognize Department of Trade and Industry (DTI) codes of good practice and B-BBEE, namely scorecards for capital equipment and technology companies creating non-uniformity and confusion. Foreign-listed multi-nationals were effectively penalised for investing in local manufacturing. The cost of compliance to BEE and B-BBEE was lower for importers and dealerships, which generated profit overseas, thereby encouraging foreign companies to reduce and/or avoid local procurement. The codes and Mining Charter did not recognize the value of foreign manufacturing and technology investment. The Charter provided inadequate structure and process for recognition of local value creation, creating uncertainty.

The organisation was of the view that local procurement created jobs and should therefore be promoted more extensively by the Charter. The organisation highlighted that manufacturing was being attracted to China as tempting benefits were promised to businesses that relocated there.

Joy Global Africa recommended that preference be given for SA manufactured products that meet requirements. It recommended that foreign listed multi-nationals should receive recognition for South African procurement and local content. It recommended that the Mining Charter be aligned with “preferential procurement policy framework” & the DTI’s Broad-Based Black Economic Empowerment Codes. It suggested that an eighth criterion on B-BBEE scorecard for local content be included in the Charter.

Discussion
Mr Lucas commented that competition from China tended to offer cheaper prices than those offered locally and that needed to be addressed.

Ms Bikani commented that more needed to be done to develop local markets so that job creation could be effected and the development of local people could happen.

Mr Mahange said that more needed to be done to promote international companies that had setup in the country and were promoting the use of local materials and developing them in the country as opposed to foreign companies that worked through dealerships and added nothing to the local economy.  

The meeting was adjourned.