JOHANNESBURG (miningweekly.com) – The R52-billion that was wiped off the Johannesburg Stock Exchange (JSE) in 72 hours when the Mining Charter was leaked in 2002 will look like a “storm in a teacup” compared with the impact of the adoption of full-blown nationalisation of South Africa’s mining industry, mining lawyer Peter Leon warns.
Should the no-compensation plan of African National Congress Youth League president Julius Malema be arrogated, the country would not only be shooting itself in the foot, but it would also be shooting mineworkers’ retirement benefits in the foot, because mineworkers’ pension funds are widely invested in the JSE, added Leon, who co-heads Webber Wentzel’s mining practice group and co-chairs the International Bar Association mining law committee.
Taking part in a nationalisation debate with former Department of Mineral Resources deputy director-general Jacinto Rocha and others following the screening of Eric Miyeni’s newly released documentary entitled Mining for Change: A Story of South African Mining, Leon said that it had become apparent that Malema was trying to reverse former President Nelson Mandela’s 1992 position on mine nationalisation.
Leon said that if South Africa were to embark on a Hugo Chavez-type Venezuelan course of socialism and expropriation of mineral rights without compensation, it would mean an upending of South Africa’s Constitutional settlement and investment in South Africa would “simply go out of the window”.
Rocha, who was regarded as a hard-line ideologue during his 13 years as mine regulator, queried the logic of Malema’s line of thought, which concluded that mine ownership could simultaneously produce more jobs as well as greater revenue for social upliftment.
Leon said that the people of Venezuela, Bolivia and, to a lesser extent, Equador, were suffering serious economic problems as a result of their governments intervening ill-advisedly in the minerals economy, while countries like Brazil were faring far better after embracing market-friendly policies aimed at social upliftment.
“People need to look at the contrast between Brazil and Venezuela,” Leon said.
Current De Beers Consolidated Mines director and former mineworker Manne Dipico recalled in the film that Mandela in 1992 drew attention to neighbouring Mozambique’s Frelimo government being unable to run a single mine after nationalising the mining industry.
Dipico added that engineers who knew how to run mines left Mozambique and the Frelimo government found itself unable even to procure spare parts for mining machinery.
“Things just came to a grinding halt,” Dipico said on camera.
National Union of Mineworkers general secretary Dr Frans Baleni cautioned in the documentary that tampering piecemeal with South Africa’s current economic system would not help to alleviate poverty.
“The bigger picture has to be looked at… because you can end up having a new system, but with no benefit to the people, in other words, just a change of ownership but with the workers and the communities getting exploited in the same way as before and the only difference being the owner,” Baleni added.
Leon criticised Malema for choosing to ignore the settlement that South Africans negotiated in the early Nineties, which recognised the right to private property ownership under Section 25 of the Constitution.
“If Malema wants to impose a system of no compensation for the expropriation of mining companies' investments, he will have to deal with the fact that the Constitution expressly prohibits this.
“The fact is we do have a rule of law in this country, we do have a Constitutional Court, thank goodness, which is independent of the government and which hands out some very brave judgements.
“All of those things seem to be overlooked in Malema’s rather simplistic approach,” said Leon, who was personally involved in the fraught Bill of Rights negotiations in the Nineties, which all South African political parties accepted.
He once again condemned the government’s “dilatory” approach to near-mine communities and said that it would be impossible for a mining company to operate properly in the 21st century without a social licence.
Rocha criticised the tendency to “romanticise community development as if it is at all times positive” and pointed to the community problems that the State was experiencing at its Alexkor diamond mine, despite the mining right being completely in the hands of the near-mine community.
The former mine regulator favoured mines in which historically disadvantaged South Africans (HDSAs) owned far more than the 26% that the Mining Charter decreed must be in place by 2014 and pointed in praiseworthy terms to mining companies owned 100% by HDSAs, including Nchakha Moloi’s Motjoli Resources and Ayanda Bam’s Kuyasa Mining.
Bam recalled on film how Kuyasa entered into a lease agreement in a small area owned by BHP Billiton to become what was believed to be the first wholly owned black company to sell the coal it mined into the open market.
“The important thing about it was that we owned 100% of our own operation. We managed it. We took all the decisions. We marketed our own coal. Whatever problems and opportunities that came out of that, they were ours,” added Bam.
Leon agreed with filmmaker Miyeni that poverty and unemployment were social time bombs, but emphasised that nationalisation would be the worst way to defuse them.
As part of the International Bar Association, he was developing a model mining agreement for developing countries.
“Lawyers around the world think that the social licence to operate and the right of communities to benefit directly from mining operations is probably the most critical issue in mining,” he said.