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Is the South African mining industry in a crisis?

October 2015

It has been interesting to follow the debate whether the South African mining industry is actually in a crisis or not. This debate is irrelevant. The effects of the downturn in demand, tumbling commodity prices, increased and rising production costs, labour unrest and work stoppages can be felt and seen. It only takes a trip to key mining areas such as Witbank, Middelburg and Rustenburg, to name a few, to see this impact.

Not to acknowledge that there is a crisis means that the focus may not be on what can be done in the short- to medium-term to mitigate the effects – after all, the first step to recovery is acknowledgment of the problem.

The Leaders’ Declaration – Mining Industry Commitment to Save Jobs and Ameliorate the Impact of Job Losses seems to be a step in the right direction. The 10 interventions that have been identified are substantially based on an acknowledgement of the current state of the industry and, possibly, what the contributing factors and challenges are. While it has no doubt taken a substantial effort by the participating partners, government, labour and business, to seemingly have reached alignment on the 10 commitments, even if this is limited, as expected, certain key aspects have been worded carefully.

One of the key aspects, which has received extensive attention, is the job losses in the mining industry, and the various processes associated with downscaling and closure of operations. An aspect under debate is whether the notification to the minister, provided for in section 52 of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), is legally required, because the Regulations, which are required to be implemented to give effect to the notification processes under section 52 of the MPRDA, have not yet been promulgated. The consultation with organised labour, which is provided for in section 52 of the MPRDA, is also the subject of scrutiny, in view of the extensive provisions contained in section 189 and 189A of the Labour Relations Act 66 of 1995 (LRA).

Various divergent views have been expressed regarding the consultation processes that are at the heart of the LRA and should play a material role under section 52 of the MPRDA, and the processes and structures that are required to be included in the Social and Labour Plan.
It is interesting that the first intervention area in the Declaration relates to the delay of the implementation of retrenchments. Intervention area 1 provides that "the intervention allows for consultations to be extended to the extent that they will continue during the Section 189 of the Labour Relations Act notice period, to allow for the implementation of the interventions". Intervention area 1, while being loosely worded, seems to acknowledge the importance of the consultation process.

The effects on the mining industry include a substantial increase in the number of mining companies and service providers to the industry being placed under business rescue. Whether or not the business rescue process is an effective and efficient method of dealing with distressed assets remains to be seen. However, Intervention area 4 supports facilitating the sale of distressed and other mining assets to save and create jobs in the hands of other operators. This seems to be a rewording of the "use it or lose it" principle and an acknowledgement that other operators may be in a position to extract the mineral cost-effectively.

One of the primary challenges remains attracting investors who can deliver on their promises. Intervention area 9 supports investment promotion and market development, including joint promotional activities and increasing demand for South Africa's minerals. This, in view of the extensive challenges facing the industry, is a mountain to climb. Everything starts with a first step. Perhaps the implementation of the proposals to promoting the mining industry abroad, and the leveraging of ties to Brazil, Russia, India and China, using platinum as a reserve asset, and the use of platinum fuel cell technology for energy, will be the step in the right direction

The team

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