The 2018 edition of the draft Mining Charter will continue an economically harmful and counterproductive mining policy in South Africa. Specifically, the Charter is likely to deter new mining investment and solidify economic inefficiency in mining at the cost of the broader economy. This is view of the business interest organisation Sakeliga after submitting comment on the draft Mining Charter and its likely consequences to the Department of Mineral Resources.
Piet le Roux, CEO of Sakeliga, says: “Mantashe’s Mining Charter continues the folly of an economically detrimental mining policy and will most likely be a disastrous brake on new mining investment. By proposing, among other follies, the transfer of a sizable 10% shareholding in new mining projects to qualifying employee and community schemes on a non-transferable free carried interest basis, government will raise the risk exposure of financial capital in mining companies. This increased risk is certain to restrict important capital investment in new mining projects.”
Le Roux criticises government’s presumption, evident in the Mining Charter and other policy documents, which is to dictate how businesses should be spending their procurement rands. “The Charter stipulates onerous procurement requirements to mining companies, outlining in detail the broad types of BEE enterprises and local suppliers from which mining companies must buy large percentages of their procurement goods and services.”
In its submission, Sakeliga points out that economic efficiency requires businesses to produce as much output of products and services as possible with minimal state interference in markets. In Sakeliga’s estimation, the 2018 draft Mining Charter, sets onerous and economically harmful regulatory prescriptions on important commercial decisions made in the local mining industry.
“We regard coercive dictates on procurement as highly problematic and in opposition with the beneficial workings of free markets. Government will effectively reduce procurement competition in the mining sector at the cost of the efficiency of mining output.” Le Roux continued and warned: “At worst, the Draft Mining Charter will solidify rent-seeking in mining supply chains. The result, as with many of the ANC government’s empowerment follies, will be a concentrated benefit to a limited number of BEE beneficiaries and broad-based economic harm through a hampered and less efficient mining industry.”
Sakeliga’s written submission to the DMR is available at the following link.