Date: 29/03/2004
Source: Department of Minerals and Energy
Title: P Mlambo-Ngcuka: SAMDA general meeting


SPEECH FOR MINISTER PHUMZILE MLAMBO-NGCUKA, TO BE DELIVERED AT THE SAMDA SPECIAL GENERAL MEETING TO BE HELD AT GOLDFIELDS CORPORATE OFFICE, 29 March 2004

1. Introduction

Ladies and Gentlemen, I appreciate the invitation to your 1st Special Annual General Meeting. I cannot say I am surprised though; we have been on this road together for a longer time. Our histories are in many ways similar in that we represent structures that were formed because the structures of the time did not fulfil our needs. We formed a new government for reasons I will not belabour since we all know them. You formed the South African Mineral Development Association (SAMDA) because the existing organisation representing mine owners at the time, viz. the Chamber did not suit your needs.

We were together when we changed the mining law of this country, also because it was proving to be inadequate for dealing with the needs of all South Africans. We were also together during the turbulent times of negotiating the mining charter. It seems such a long time ago when you, my staff and other stakeholders sat behind closed doors seeking to get a dispensation that would be acceptable to all. Those were trying times, but with old soldiers like the leaders of your organisation and those from the National Union of Mine Workers in our camp, we did not really expect to lose. That year was one for producing paper work and this year will be one for delivery and getting hands dirty. I have already announced that the Mineral and Petroleum Resources Development Act will be promulgated in May. That means that applications for conversions of old order rights will start coming in. That is the time when the teeth of the charter you negotiated will be tested. Together we will have to show that all that fuss was worth it otherwise the world will be laughing at us again.

2. The Charter and Mineral Rights Conversions

You asked me to talk about the Charter and Mineral Rights Conversions. The Act, provides for the abolition of all old order rights, and as such it is a requirement of the law that holders of old order rights obtain conversion of such old order right or apply for a new prospecting or mining right.

The Act stipulates the criteria for the conversion of an old order right into a new order right. One of the criteria for such conversion is the compliance with the empowerment provisions stipulated in the charter. As such, only those companies, whose empowerment credentials are impeccable and comply with the requirements of the Act, will be converted.

You all know that the charter comprises seven pillars viz.:
* Human Resource Development
* Employment equity
* Mine Community and Rural Development
* Housing and living conditions
* Procurement
* Ownership
* Beneficiation

I want to make it clear that all of the above are essential for making empowerment as broad-based as possible. I will not allow companies to compromise any of them. Since the signing of the charter in October, 2002, my Department has been having informal discussions with the various mining houses in order to assess progress regarding compliance, clarify some of the issues and ensure that there is a common understanding on the requirements of the charter. From these discussions indications are that some companies may be ready to convert as soon as the Act is promulgated because they already comply with most requirements of the charter. Even those companies who are not presently compliance-ready have shown the DME plans that indicate that they will be able to convert within the required period.

There are some companies, however who have been very proactive in dealing with charter issues and even gone further, signed social and labour agreements with organised labour, set up funding for the plan and set up BEE trusts to fund skills development and build up affirmative procurement.

I will now touch on a few details that seem to be unclear to some people. You will notice that in some issues in the charter it may seem as if companies may get away with showing us plans of what they will be doing in five years, and boom, they get their conversion. Let me make it clear, that it is not the case. The charter was worded like that to show that we are realistic in that we acknowledge that some changes cannot take place overnight. The charter was signed two years ago. I would be extremely suspicious of companies who were then at Zero HDSA participation in management who would suddenly have leapt to 40%. To me, that would smell of tokenism. At the same time I would not want companies to wait for the stipulated five years to convert because then we would have the "drivers licence card" scenario. What I would expect is for a company to come to me and say:

" Honourable Minister, presently I have 25% HDSA participation in my company, I have identified the following people as having a potential to be managers, so many of them are being mentored by Ms X, the manager of the planning division and her performance agreement includes the mentorship clause. I expect those people to be ready in two years time. I have also seconded so many to our London Office to learn the ropes of our financial management. This is the budget I have to make sure that after five years I will have the necessary pool from which to draw management material. I respectfully plead with the Minister to grant me the conversion".

To which I would respond:

" I agree, the plan looks reasonable. I will grant you your conversion. But, let me remind you that there is a provision for periodic reviews of compliance in the charter. If after five years I find that you have not complied, all hell would break loose. You might be thinking, rightly so, that at that time I will no longer be Minister of DME but let me assure you that what I am saying will be contained in my handover speech".

The same goes for all the pillars, which have similar stipulations.

One other issue I would like to touch on ladies and gentlemen is the ownership issue. If a company comes to me and say that they have sold a 26% share to a BEE company, the first thing I scrutinise are the credentials of that BEE. If the BEE company has fifty + 1 share holding the selling company gets credit for the whole 26%. If, however, the BEE share is only 30%, the credit will be only 30% of the 26%.

The other thorny issue for mining companies is that of beneficiation. I will reiterate that I acknowledge that Paseka is not a gold chain-maker, he is a miner. But, I also know that Paseka is a very intelligent man. If he would apply his mind, he would find ways of causing beneficiation to occur. We, or at least I am very passionate about the beneficiation issue, which is why we have made it have a similar weighting as the equity.

3. SAMDA Challenges

I will now touch on the issues that I think will be challenges for you, though on my side they are expectations, i.e. what the nation expects of you. You will recall that when I started my speech, I said you formed SAMDA because you felt that the chamber would be inadequate for your needs. I also said we have been partners for a long time. I therefore do not think that it is unreasonable of me to expect something from you.

3.1 Active Participation in Mining

You all know that the charter recognises both Active and Passive ownership. However, it concerns me that most of the deals that make headlines only have passive ownership. I would like to see more people making their hands dirty. I personally do not think that speculating in mining shares constitutes empowerment. Active involvement means that skills are being developed and transferred. If you are a mine manager you will ensure, hopefully, that the interests of your fellow Black people are taken seriously. I know of a company that was bought by Black people, I will not name it. What the new owners did was to retain all the racist white managers to run the company for them. The way employees of that company are treated is shocking. The new owners are only interested in profits. So, what has changed for the ordinary worker is the colour of the Baas. I do not expect to hear of such stories from SAMDA members and the only way you can assure that such things do not happen is to be actively involved in your business.

3.2 Mentoring

At some stage I expect you to stop being called empowerment companies because somehow it gives the impression of needing somebody to empower you. I expect you to grow and start empowering other new entrants. I have been told that this business is "dog eats dog" and survival of the fittest. Is it really like that and, if it is, does it have to be like that? Why did we have to intervene if the result is going to be exactly the same as what we were trying to change?

3.3 Fronting

This particular practice is one of my pet hates. Did we go through all this trouble to have the very people we were trying to help collaborating with the present owners in thwarting our efforts? I have told my staff to be particularly vigilant as far as this is concerned. I also expect you to whistle blow. You know all the fronters, do not let them get away with it.

4. Conclusion

To conclude, ladies and gentlemen, I will reiterate that this year will provide a stiff testing ground for us. I expect the going to be tough but I am sure that we have enough brains under this roof that would be prepared to assist should we encounter insurmountable challenges. I wish you all the success in all your endeavours and I wish the new board a very successful term of office.

Thank you.

Issued by: Department of Minerals and Energy
29 March 2004