A new mining bill is about to empower blacks, to have a share of the industry that once contributed 45% of GDP. But the traditional mining giants are not happy. Pusch Commey reports.

South Africa's economy was built on mining. The discovery of gold in the Witwatersrand (1886), and diamonds

The infrastructural development brought by mining has served as a foundation for other industries and sectors that now account for 65% of the economy.

Mining still contributes 8% of GDP (it was 45% 50 years ago) and employs over 500,000 people. An intensive diversification program by previous governments diminished its contribution.

Globally, South Africa is one of the world's leading mining countries with huge quantities and a broad range of mineral reserves. It has the world's largest reserves of platinum, manganese, chrome and gold.

In Africa it is the leading producer of all metals and minerals save diamonds, cobalt and phosphates.

Its natural resources include gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin, uranium, gem diamonds, platinum, copper, vanadium, natural gas, and salt. Export earnings from mining is in the region of US$8 billion.

Labour

For decades, the mining industry has depended on migrant labour from Southern Africa, namely Mozambique, Botswana, Lesotho and Zimbabwe. Poor commodity prices on the world market, especially that of gold, has caused significant retrenchments in the industry with major implications for the regional economies.

The industry is traditionally dominated by six large mining houses: Anglo American/De Beers, Goldfields, Gencor/Billiton, Rand Mines, JCI and Anglovaal. Their core business has been gold, platinum, chrome, coal and base metals. These companies have exercised control over mining resources for many decades.

With the opening up of the economy, the concept of the mining house--where everything from procurement to marketing was done in-house has given way to outsourcing.

This has brought new opportunities to other smaller companies like structural engineering firms. In fact the most successful mining company in South Africa last year, Daggafontein Mines, boasted a staff complement of three, with all functions being outsourced.

Opportunities have also opened for many small mining companies with active support by government and with emphasis on black economic empowerment.

With the advent of multi-party democracy in South Africa, there has been some pressure to ensure that blacks, long excluded from the mainstream economy become players in the mining industry and not mere spectators.

The transformation process has required that the traditional players voluntarily sell some assets to emergent entrepreneurs. A pioneering step was taken by Anglo America in the unbundling of JCI to the empowerment group, Nail-New African Investments.

Other significant moves thereafter has been the sale of Alexkor Mines, formerly managed by the state, to a consortium of black investors. De Beers has also sold part of its Marsfontein diamond mine to a black consortium.

Strategic alliances have also been formed. The world's largest platinum producer, Anglo Platinum, has formed an alliance with the local Bafokeng tribe in developing new platinum mines. In the previous dispensation, Anglo American only paid royalties to the tribe which owned the land.

Of note are the new players in the mining industry, like Mvelaphandi Holdings headed by the ANC stalwart, Tokyo Sexwale. Patrick Motsepe of African Rainbow Minerals also comes in for mention.

However, limitations on capital has considerably slowed down the process of black participation, especially with the dwindling of foreign direct investment since 1994.

New mineral bill

The recently passed Minerals and Petroleum Resources Development bill has drawn much heated debate because it goes to the core of the shaping of the new South Africa.

The bill has sought to basically level the playing field by bringing in players who have been excluded through decades of racial politics to ensure that benefits from mining is equitably spread. As a starting point it has reverted all mineral rights to the state.

In South Africa, unlike in the rest of the world, private individuals own most of the mineral rights. Most are white farmers and big mining companies. Underlying this is the 1913 Land Act which gave 87% of the land to whites together with everything that goes with it. The consequences are obvious in that South Africa is in the top 10 of the most unequal countries in the world.

The Principal objectives of the bill are:

1) To ensure a meaningful participation by previously disadvantaged groups and redress the results of past racial discrimination.

2) To attract foreign direct investment.

3) Contribute to rural development and support communities who live around mining operations.

4) To redress environmental damage.

5) To encourage social and environmental awareness.

The prime concern of the Chamber of Mines has been security of tenure, which in effect means "we get to keep what we already have". With the threat of capital flight, the issue has been addressed, in that the bill after several discussions has been amended, based on two concepts, (a) the state gives security of tenure to existing and future operations; (b) provided they apply for new licences and observe the law.

A "use it or lose it" approach will ensure that licences taken out to obstruct competitors will no longer be the case. And licences will last for an initial 30-year period, well above the average 22 years in other countries. But the Chamber of Mines is still unhappy.

Of late, panic has set in with a leaked copy of a proposed mining charter which aims to give black businesses 51% ownership of all new mines within 10 years. It has been described as the meat on the bones of the bill. It underscores the government's determination to ensure that blacks are not just mere spectators and servants at the dinner table.

As usual, there will be a big fight and big threats from the mining industry. But black economic empowerment seems non-negotiable, and consequently a fine balancing act will have to be found.