A powerful team of private lawyers will fight the mining companies in court. With an attorney backed by four advocates, it is clear that the Department of Mineral Resources (DMR) plans to fight tooth and nail to keep its Mining Charter III intact. It promises a quick fix for the black majority calling, in tough economic times, for a larger slice of one of the richest cakes in Africa. The mining industry of South Africa contributed 7.1% of the country’s GDP in 2015, employing more than 450,000 people and paying more than $1 billion in royalties and taxes.
For a start, Mining Charter III calls for an increase in the black ownership of mines from 26% to 30% at all times. In court, the Chamber of Mines, which represents 90% of the country’s mining companies, will argue for “once empowered, always empowered” policy in that once a mining house has borne the cost of transferring ownership, into black hands, it is deemed to have done its job. This would make most companies compliant overnight.
What has become clear, since it was gazetted on June 15, is that even though it was more than four years in the making, many agree this was a hastily and poorly written document, full of holes, compiled without consultation with the industry. A source in mining says even the savvy, powerful, legally trained, regional managers of the DMR weren’t even consulted. All of this is likely to weaken the DMR’s case in court. Martin Madlala, the spokesman for the DMR, was unavailable for comment.
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“I think just the whole approach is terrible and the content is flawed. If you look at what it says about prospecting rights of 50% black ownership, plus one share; when you are prospecting you must take drill samples of the ore body. One hole will cost you R200,000; for an emerging black miner, where does he get the millions to do that with?” says Frans Baleni, the former head of the National Union of Mineworkers and current central committee member of the South African Communist Party.
The head of the New York Stock Exchange-listed DRDGold, which produces more than 140,000 ounces of gold from mine dumps around Johannesburg, feels that the 70% black ownership requirement for procurement could infringe the General Agreement on Tariffs and Trade (GATT) rules.
“Very little in this document is right, it is a shambles… I don&#8217;t think it can be executed,&#8221; says Niel Pretorius, the CEO of DRDGold.
<blockquote>&#8220;We will not be applying for mining licences in this country anymore because of the new mining rules. We do have mining licences to last us for 10 to 15 years, but there won&#8217;t be any more applications for now,&#8221; says Pretorius.</blockquote>
Defeat in court would mean a rewrite, watering down the new mining codes. It’ll be a setback for the government. Either way, after years of attempting to be a team player, capital in mining is likely to become a lot more defensive, allocated in the interests of shareholders and little else.

‘It’s A Shambles’

Sure, optimism shone forth in Cape Town like the late summer sun bouncing off Table Mountain, as more than 6,000 powerful people, including more than 20 government ministers, headed for the biggest mining gathering on the planet.
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There were more mining companies this year, up 50% on last year, after more than five years of decline. The keen-eyed investors were back and looking for contenders across the continent. A fruitful place to be for the brave, like the motorbike riding maverick Mark Bristow who has spent the last 20 years making money digging gold in mines from Mali to Cote D’Ivoire. Two decades ago many fellow South Africans may have laughed at Bristow for taking risks far from home, in what many see as barren land for mining, but now they’re laughing on the other side of their faces. At the Mining Indaba, Bristow’s Randgold Resources announced it had increased gold production, for the fifth year in a row, plus it was debt free with more than $500 million in cash. Many mining companies would kill to be in that position.
Among the investors looking to blaze a trail across Africa is the Lagos-based African Finance Corporation that began life, in 2007, with a fund of $1.1 billion and now has assets of $3 billion, according to one of its directors, Osam Iyahen. It is a public-private fund, 42% owned by government, that invests in: oil; gas; resources; infrastructure and power. In January, it broke ground on a $200-million bauxite mine in the Boffa region of Guinea Conakry, just 15 kilometers from the coast, with plans to ramp up to 15 million tons.
“I think there has been a rebound in the industry this year,” says Iyahen in Cape Town.
“Last year was a bit of a disaster. People were not interested in talking about transactions; all they were worried about was protecting their downside. There was a lot of sulking going on.”
You could be forgiven for thinking the host nation is still sulking. South Africa, the biggest mining country on the continent, has been like a boxer on the ropes since the power cuts and global financial collapse of 2008. More than 60,000 jobs have been lost since 2012; capital expenditure ground to a halt and the South African industry lost R38 billion (about $2.8 billion) in 2016 alone, in a year when mining output fell 4.8%.
“We have to get our house in order in South Africa, capital is a coward and it goes to the place where there is least risk. We have to remember mining is a global game now and it is easier than ever for foreign investors to move capital around. Our grandchildren will live with the legacy of what we do now,” says Kieran Whyte, a lawyer and partner at Baker McKenzie, who specializes in energy and infrastructure.
The last few months of 2016 were better as commodity prices lifted, according to the Chamber of Mines, especially the risk haven of gold in the wake of the unpredictable, to put it kindly, presidency of Donald Trump.
“I think we are seeing the green shoots here, we just have to watch out for frostbite,” says Roger Baxter, the CEO of the Chamber of Mines, with a smile on the first day.
Baxter was alluding to two cold fronts: the first, the fact that South Africa – that mined more than a third of the world’s gold – is no longer the king of mining. In fact, in these troubled economic times, more and more nations, from West Africa to South America, are ready to accept foreign investors with open arms. A sign of the times is that, on the eve of the Mining Indaba, analysts in Cape Town were extolling the virtues of the copper, gold and coal mining nation of Chile.
The second frosty front is regulatory uncertainty. The South African government, which has met six times with the Chamber of Mines, has been working on amendments to its mining law since December 27, 2012. It promises to gazette the amended Mineral and Petroleum Resources Development Act (MPRDA) by the end of March; the Chamber of Mines feels it could be April.
<div id="attachment_4588" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-4588" class="size-medium wp-image-4588" src="/wp-content/uploads/2017/04/Mark-Bristow_JC-300x200.jpg" alt="" width="300" height="200" />Mark Bristow</div>
What is likely to be in the bill could cause conflict. It is expected there will be greater ministerial discretion and set in stone that all mining companies have to have 26% black ownership at all times. One of the problems is black shareholders, once they have passed their lock-in date, often cash in their stakes by selling to white shareholders, thus diluting the empowerment stake.
The Chamber of Mines, which represents almost all South African mining houses, disagrees strongly with this. It feels that once mining companies have borne the cost of financing black shareholdings it has done its job regardless of dilution. If this so-called “once empowered, always empowered” principle is accepted, many of the country’s biggest mining houses will be compliant overnight.
“I have never seen the Chamber of Mines so aggressive. Normally they get along to go along, but it seems the worm has turned,” says one mining insider in Cape Town.
It is all likely to end up in court where mining lawyer Peter Leon reckons they have a strong case.
“All they have to do is challenge section 100 of the MPRDA. This gives the minister the power to promulgate the act, but doesn&#8217;t give the minister the right to rewrite or amend the act. That would blow it out of the water,” says Leon.
There appears to be little sign of a U-turn by the government over an issue that could further confuse and deter investors.
“We don&#8217;t want to encourage a place where courts take the place of government. We don&#8217;t agree with the norm that if you don&#8217;t agree with us you take it to court,” says South African mining minister Mosebenzi Zwane.
It’s a cold front that could mean a Chile future.

Beware, It’s Chile Out There

Khanyisile Kweyama is dynamite in a petite package. She is the first black woman to be appointed Executive Director for South Africa at Anglo American, the world’s biggest platinum producer. She has also staked her claim in the mining sector as the current Vice President of the Chamber of Mines in South Africa, and has recently responded to the call to national duty, taking on a seconded role as the CEO of Business Unity South Africa (BUSA).
We meet Kweyama in the offices of CNBC Africa in Sandton in Johannesburg for a quick coffee and her thoughts on how she broke barriers to become a player in South African mining’s big boys’ club.
In 2014, when the country was in the throes of its longest and costliest strike in the platinum mining sector, Kweyama and her team were right at the front, desperately trying to put out the fire tearing into the country’s investment case.
She recalls the unusual phone call from Anglo’s global CEO, Cynthia Carroll, to confirm dinner arrangements in the midst of this storm. Although she expected her local insight would be sought to protect the company, its workers, and keep communication alive with the unions, she didn’t expect to leave dinner as the company’s Executive Director.
“As the Human Resources Executive, I thought I had a clear line of sight into the company’s succession pipeline. I didn’t see this coming,” she says.
Black empowerment in South Africa keeps a close tab on black appointments. Naysayers were quick to point out that hers was another window-dressing move on the part of the company.
“This is going to be an issue that women, and black women in particular, are going to have to take on boldly and without flinching. There is expectation for us to prove ourselves over and beyond our capabilities. Create your niche and outperform,” says Kweyama.
When she received the call to serve as the CEO of BUSA, she says the enormity of South Africa’s economic stagnation made her firm up her decision. She accepted.
As CEO, she has to bridge the yawning silence between business, government and other stakeholders.
“The country is stuck. We need to do something to move beyond the anemic growth phase we’re in. No one can do it alone.”
Her typical day includes meeting with union leaders, participating in ministerial and presidential deliberations, taking the lead on capturing the input of business, contributing to NEDLAC (the body tasked with finding a middle ground around South Africa’s labor tensions), and all the while, working at the chamber of mines with a broader team to reinvigorate life into a struggling industry.
Kweyama is accountable to a range of ministers. Her roles spill outside of the borders as BUSA also participates in regional and international fora in a myriad Southern Africa Development Community (SADC) initiatives that fight for better trade terms for the region and emerging markets.
For a woman comfortable juggling numerous roles and making decisions that impact on a range of organizations, she prefers the backseat at home.
“My husband is the boss at home. He’s a medical doctor and he lives in his own world. He too has significant industry challenges that he has taken a lead on but we try not to bring our corporate challenges home.”
If there ever was a prize for the strangest love story, Kweyama and Cyril would take it hands down.
It goes thus.
She had needed a flu shot and called on a friend to administer it. Unable to do so because she was in the salon having her hair done, her friend arranged for Kweyama to come to the salon, for the flu shot to be delivered, and for Cyril to administer it. That was the beginning of their love story.
Kweyama’s family is her biggest support. She is a mother to eight children, of which two are her biological offspring. She is also a spiritual mother to many through her church and community.
“Prayer keeps me going. I always pray for guidance and when I get stuck I have to remind Him that we haven’t come this far to be stopped by this nonsense. Show me how to surmount this hurdle.”
Luckily for Kweyama, her prayers seem to be helping.

IMG_9354

No Small Feat In The Big Boys’ Club

Ignore Elize Strydom at your peril. The chief negotiator for the Chamber of Mines may have a calm, affable and measured manner about her, but her warning to society could not be filled with more thunder and fire.
“We have five years to get things right in South Africa or we will have an Arab Spring on our hands. We have tremendous inequality that makes for a ticking time bomb in this country,” says Strydom, the labor relations expert.
She speaks to FORBES WOMAN AFRICA just days after the country’s longest-ever strike, affecting the platinum sector, finally ended (see opposite page). In the same week, the gold mines that traditionally use centralized bargaining (which Strydom leads for industry) had to turn to the labor courts to uphold an interim order preventing trade union Amcu (Association of Mineworkers and Construction Union) from calling a protected strike.
Amcu is the dominant union in the platinum sector but has only about 19% of the total members in gold. Their hardline presence is nevertheless shifting the dynamics of labor relations across the board. Strydom says Amcu represents “a whole different animal” at the negotiation table. They are the elephant in the room. As Strydom points out: “As unskilled labor goes, miners are relatively well paid, yet in the case of the strike in the platinum sector, miners were prepared to sacrifice everything and go without pay for five months. It means we are talking about issues that are much more than just about wages and money.”
It speaks volumes and Strydom puts the watershed moment for labor, government, business and society as a whole, at the Marikana massacre in August two years ago. Forty four people, mostly miners, were killed. The ripple effect from that dark week in the winter of 2012 changed the country and labor relations irrevocably. It has forced government, industry and labor to respond differently. Strydom is up for the challenge – she has to be. In her favor is her track record of breaking molds and surprising everyone by treading where she’s not expected to be. She joined the Chamber in 1999 and became the first woman to lead wage negotiations for the organization, first for the coal sector in 2001 and then for gold in 2005.
“Bless the coal sector. They trusted me in 2001, even though they were quite skeptical a woman could lead the negotiations. But by the time I was moving to gold, they were sad that they were losing me,” she says from her corner office in the Chamber of Mines Building in downtown Johannesburg.
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She comes armed with a master’s and doctorate in income law, company law and labor law, but Strydom is known to also don a hard hat and make unexpected visits to mines, choosing to descend three kilometers underground to understand conditions  mineworkers face every day.
“I’m not an ivory tower person,” she says. She has also been called a capitalist with a socialist heart. She’ll accept the label because she says it’s what makes her fully engaged with an agenda that is not just about pitting two sides together over money. The bigger agenda of socio-economic upliftment and a sustainable and transformed mining sector is what she knows is the bigger prize.
Right now that means focusing on implementing the Framework Agreement for a Sustainable Mining Industry. It’s a government-driven initiative and a document adopted a year ago. It compels organized labor, business and government to meet new targets and address the legacy issues that still cast long shadows over a sector that still props up the economy and gives employment to around 500,000 people.
It’s a framework agreement that is itself framed by multiple inherited pressures. The biggest of which for Strydom, who was at one time a university lecturer, is a failed education system that’s perpetuated a low skills base and a culture of paternalism, that’s pernicious and dominant on South Africa’s mines.
“To me, our biggest failure is that we have lost 20 years of education and now have a lost generation that has not had proper schooling,” says Strydom.
It means her work is never over, not even when she is finally able to take a week’s break in the bush.
But when the break’s over, she’ll be building relationships with new players in the negotiations arena, shoring up old allegiances. She may also be called on to work on more everyday challenges, like developing a buddy system for female miners, overseeing designs for two-piece overalls for women miners or weighing in on how many centimeters a spear can be, before it’s classified a dangerous weapon and banned from a mine.
“It is a challenge, but it’s also an opportunity. It can be exhausting and depressing but I remain fiercely loyal to the mining industry,” she says.
And Strydom isn’t known to flap or spread crises too far out from her. It’s not her style. She says: “I know the essence of me, who I am, and that’s how I can keep my balance, even in mining, which make no mistake, is a tough, tough world.”

IMG_5837

Fiercely Loyal  In A Man’s World

When entrepreneur Maureen Dlamini took over as CEO of the Chamber of Mines of Zambia (CMZ), she had no idea what she was getting into. It’s arguably the toughest job in Zambia; running the lifeblood of the country – copper mining. Dlamini keeps the flow of private investors and government in line. What’s more, until two weeks into the job, she’d never been down a mine.
“It was 14 January, two weeks after I began as CEO, that I had my first taste of the mines. I was in awe. I looked at the size of the machinery and the size of the pit. It gave me a different perspective of the mines. Actually seeing it, I had a greater respect for investors. You really don’t know that you will get the return you anticipated. You are dealing with nature, you could have disasters, you could have flooding. To have enough faith to invest $2 billion when your return is not immediate, is something I learned to respect,” she says in her office in Lusaka.
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Copper. It is the industry that died and came back to life. Zambia has been exporting since the 1920s, but it’s been a rollercoaster ride complicated with colonial privatization, nationalization, and then privatization again.
According to the World Bank, Zambia has the largest known reserves of copper in Africa, 6% of the world resource. It means businesses are flocking to Zambia as if it were the days of the 1849 California Gold Rush.
For Dlamini, the job in mining is a far cry from what most people expected of her, she says. She worked in finance with the likes of Barclays, First Line of Africa and was the former Executive Head of the Johannesburg Stock Exchange’s (JSE) Africa Board before moving to home, Zambia.
In Lusaka, she went into business with her brother to run Zambezi Airlines, a private airline, but the business failed to take off. Controversially, its operations were shut down by the government citing safety concerns. It went bankrupt in 2012 and Dlamini was thrown out.
“My agent just called me and said there was a job…I said yes I’ll try it.”
This was how Dlamini took the position of CEO of the CMZ; the rest was history. Dlamini even had to put her dreams of becoming an interior decorator on hold to take up the position.
“My real passion is interior decorating. I love event management. From here I could do it and work until 4AM. I would love to be able to do it at some time at my own pace. My friends say to me I love to challenge myself, and maybe that’s why I am in the mining sector,” she says.
Her first step was to Kansanshi mine, in Solwezi in the North Western Province. She traded arranging furniture to begin her new job in a hard hat and overalls. Now back in Lusaka, she wears a suit and is making a mark in the male-dominated industry.
“After a while, you get used to it. I think my background, especially in the JSE, is that I don’t feel the pressure. I had good mentors. If you are not going to do something don’t string me along. Don’t sit quietly and give me excuses later on. It’s just a waste of time and money.”
Kansanshi’s is a story of good news and the bad. Thanks to copper, Solwezi has become one of Africa’s fastest growing towns in a few short years. It was once a tiny village on the northern borders of Zambia 16 kilometers from the border of the Democratic Republic of Congo, 581 kilometers from Lusaka, and a million miles from the rest of the world.
According to research by the International Council on Mining and Metals (ICMM), mining is on the rise in 2012, 32% of tax revenue collected was from mining; in 2008, the percentage was half that. The bad news is that the mines have to deal with lack of infrastructure and skills development, says Dlamini.
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“It needs a combined effort, not just the mines. The local authority needs to play a significant role in terms of town planning, in terms of creating social services. If you look at the mines there, Solwezi is one of the richest authorities in terms of revenue from mining authorities. But the challenge is we don’t know if that money is remaining in Solwezi or is dispersed to other towns in the country. The infrastructure in Solwezi is non-existent. Everything is clustered around one street, because there is a lot of emigration, there are a lot of social evils coming into the town,”
says Dlamini.
According to Dlamini, the reliability of data collection from both government and private sectors is also hampering investors. The Zambian government records mining GDP contribution to be at 8% when it should be 12% when researched by the ICMM, she says.
“Our biggest challenge is changing the perception of the mines. We need to get the facts straight. This is the backbone of the economy. At the end of the day, it’s finding that balance where we don’t irritate investors and irritate the government,” she says.
Despite its challenges, Zambia has won back its claim to be the copper power house of Africa. At the helm is Dlamini. She might be new to the industry but she knows all about making money, taking risks and losing it all. There is no doubt that the mining companies and government will find her one tough nut to crack.

The Woman With  the toughest job

If there ever could be heaven on earth, this was it. The sun peeped over Table Mountain and lit the winding streets below with a brilliant light as I walked through Cape Town to the first morning of the Mining Indaba—the 20th annual gathering of investors and mining experts. Its rays exuded optimism and felt like a warm, comforting hand caressing your face.
Without wishing to stretch the metaphor, South Africa’s mining minister, Susan Shabangu, tried to emulate the sun’s rays in her keynote speech.
“This is Africa’s time; indeed Africa has arrived and we shall seize the opportunity with both hands,” says Shabangu.
True, it is Shabangu’s job to hold the line when her country’s mining industry is under attack, especially with an election coming up on May 7. Even so, this was a speech too far; dismissed by most at the Mining Indaba. She was at pains to present a rosy picture, saying the number of mines and mining revenue had increased; further that South Africa had topped a list of 158 countries, compiled by the World Economic Forum, for corporate auditing and reporting. She also mentioned billions that will be spent on infrastructure and pledged to protect investors.
When it came to the strike on everyone’s lips in Cape Town—70,000 workers at the platinum mines, which earn 9% of South Africa’s export earnings—there was disbelief when Shabangu said there was no need to be complacent and there were many areas that needed improvement. The understatement of the year, in light of a strike that cost the South African economy 10,000 ounces of platinum and more than $40 million-a-day.
Roger Baxter, the chief economist for the Chamber of Mines, warned that 45% of the platinum shafts were either loss making or marginal. A long strike, followed by a high wage settlement, may push many more over the edge, he says. South Africa has 80% of the world’s reserves of platinum and 40% of supply; by the next Mining Indaba, the latter figure is likely to have fallen. This is one reason why many foreign investors, looking for a competitive return, say off-the-record, they are fighting shy of South Africa for now.
“The world mining funds are flush with cash right now, but they don’t want to put it here because they are very risk averse at the moment,” says one investor in Cape Town.
“They may look at an easy project, but let’s face it most of the easy projects in Africa have gone.”
Another concern for investors is the threat of South Africa’s government amending its mining bill to give the mining minister the discretionary powers to make certain minerals strategic. That would mean the producers of minerals, like iron ore and coal, could have to ask the government for permission to export and accept prices fixed by the state. For South African power generator, Eskom, this would be a boon because it could have all the coal it needs for its power stations in the country at a price it can afford. Critics, like mining lawyer, Peter Leon, has called the move creeping nationalization and warns it could frighten investors.
“It means we are closed for business,” says a former coal mine boss in Cape Town.
The Chamber of Mines paints a less worrying picture. It says that the government is unlikely to touch prices and a clause in the bill ensures consultation with the mining industry over exports. The bill was due for review on February 18.
“We are still engaging with the government,” says Baxter.
What is likely is that the government is going to push ahead with the transformation towards the 26% black ownership promised by the Mining Charter 10 years ago. In 2014, the Mining Charter—a voluntary document signed by the mining companies—will be reviewed. It is widely accepted that the ownership figure is far short of the target. Foreign investors often don’t understand South Africa’s often clumsy attempt to rebalance the scales after apartheid; the mining companies complain the process of transferring equity, to those who didn’t have the vote before 1994, is expensive and futile.
“Many mining companies put transformation systems in place thinking that 2014 will be the end of it. Nothing is further from the truth,” says Shabangu.
There is more hope across the rest of the continent for mining held in the rugged hands of the Australians. It seems the Australians don’t know what a difficult project is and are pouring billions of dollars into mining, from the Democratic Republic of Congo to Ghana, in some of the most inaccessible corners of Africa.
The Mining Indaba heard there are 246 mining companies operating in Africa. They include Sundance Resources, which is spending $5 billion on building two iron ore mines, 40 kilometers apart, in Cameroon, near the border with Congo-Brazzaville. It is hoped that by 2018 they will be producing 35 million mt of iron ore every year.
The project is an 11-hour drive from the capital and the Australians will also build a 500 kilometer heavy gauge railway to the coast to export the iron ore.
“Risk? Mining is risk and we Australians have a way of tackling it,” chuckled Giulio Casello, the managing director of Sundance Resources.
“What really impressed us on this project is that Cameroon put together a committee of experts to help us set up this project. Cameroon doesn’t have a mining industry and clearly wants one.”
Another Australian carving his way through the African outback is Harry Anagnostaras-Adams, who spent 30 years working in the banks of Sydney and now spends his days trying to figure out how to get gold out of Ethiopia. Through his resources company, KEFI Minerals, he spent $6 million buying Tula Kapi Mine, 500 kilometers west of Addis Ababa. The mine, which has two million ounces of gold in resources and another million in reserves, went for a knockdown price—ten cents in the dollar—because the previous owner had failed to deliver.
Anagnostaras-Adams will invest $150 million in the mine with the hope of producing 60,000 ounces by 2016.
“It is not for the fainthearted,” he says.
“The response to us trying to fix the problems of the mine was like greased lightning. The government always wanted us to get the show on the road; I was impressed by their pragmatism.”
There were other encouraging signs at the Mining Indaba. Brazilian resources giant Vale told how it was going to invest billions into increasing output from the Moatize coal project, in the north west corner of Mozambique, from 4.7 million mt to 20 million mt. More than $2 billion will be ploughed back into the mine; $3.4 billion will go into building a railway line from the Moatize, through Malawi, to the export port of Nacala. Another billion dollars will build up Nacala so it can ship more coal.
There were also encouraging words from the Toronto Stock Exchange, the great mining fund raising bourse in Canada. Graham Dallas, the head of business development for the holding company TMX, said around $800 million had been raised in 2013 for mining projects in Africa.
“I think if you have the right asset and the right management you can still raise foreign investment. It is not all doom and gloom, things have been better, but there is no reason to despair.”
If this optimism was not enough, Nick Holland, the CEO of Gold Fields, was brave enough to make this prediction.
“I think China is going to come back. I’ll stick my neck out and say there could be a mining boom by the end of next year,” says Holland.
This is the kind of bullish approach that has sustained mining in Africa and built the Mining Indaba into one of the biggest industry gatherings on the planet. Twenty years ago, the Mining Indaba held its humble beginning in one room in the Cape Sun; in 2014 it has expanded to fill the vast International Convention Centre. African mining has to play a clever game over the next 20 years or risk ending up back in one room at the Cape Sun.

Tag: Chamber of Mines

FORBES AFRICA SOCIAL MEDIA

‘It’s A Shambles’

Beware, It’s Chile Out There

No Small Feat In The Big Boys’ Club

Fiercely Loyal In A Man’s World

The Woman With the toughest job

No More Easy Money In Mining