Denis M. Tull*
South Africa is one of the world’s most resource-rich countries. More than sixty minerals are extracted there, so mining is very diverse and half of all leading international mining companies are active in the country. Nevertheless, the sector is currently experi-encing a structural crisis. Domestic problems such as infrastructure inadequacies (e.g. transport and energy) and regulatory deficits prevented South Africa from benefiting from the global resource boom of 2001 to Q&&+X+&§&%$X&$%$''&t-down – followed by the Euro crisis – entailed further negative effects. Since 2009, there has also been an ongoing debate about strengthening regulation and even nationalization. The Chamber of Mines of South Africa called the present situation a “decade […] of lost opportunities.”1
Minerals in the National Economy
While South Africa has no explicit raw materials strategy, the government places great weight on mining because of its potential to help reduce poverty and unemployment. It remains un-clear how exactly these goals are to be reached. The potential for political and social conflagration in the mining sector came to light in August 2012, when protests by striking miners escalated into violence and thirty-four workers were shot dead by the police.
The South African mining sector is almost a century old and the nation’s industrial foundation. The coun-try has the world’s largest deposits of platinum group '&+4& &%$8$X &+& <&+`Q'%%&+&
4 percent), chromium (72 percent), gold (30 percent), and aluminosilicates, and the second-largest reserves of fluorspar, titanium, vermiculite, and zirconium.2
* The author would like to thank Maud Salber for her excel-lent research assistance for this article.
It
1 Chamber of Mines of South Africa, Annual Report 2011 (Johannesburg, 2011), p. 10, http://www.bullion.org.za/
documents/AR_2011-small.pdf (accessed October 9, 2012).
2 Government Communication and Information Service, South Africa Yearbook 2010/2011, Mineral Resources (Pretoria, 2011), p. 372, http://www.gcis.gov.za/content/resourcecentre/
sa-info/yearbook2010-4&++&$X& Q`#>$ $'-prehensive data on South Africa’s minerals production, see
is the leading producer of platinum (77.7 percent of
$X $$%`Q<%'4#&
&%`Q'%a-%&+&4& &%`Q% $''4#& &%`Q%
second- &+ $& $8'4.9 percent) and titanium (20.3 percent). Once very important, gold production has been declining for years and shrank by 50 percent during the past decade, leaving South Africa merely the fourth-largest producer of gold (7 percent share).3 Five products – platinum group metals, coal, gold, iron ore, and manganese – made up & &%$8$8 ¨+$'%& +&+%
2011. About 3 percent of all direct investment in ex-ploration for non-energy raw materials goes to South Africa, ranking the country only tenth globally.5 With a share of 9.6 percent of GDP (2011), mining remains an important pillar of the national economy.6
In 2010, 20 percent of private investment (12 per-cent of total investment) went to the raw materials sector.
The relative decline in its share of GDP (which was one 88%&+` &++8 $'&<& +8$%$8 the economy and the simultaneous growth of other sectors. High commodity prices have in fact produced significant growth in the real value of mining pro-duction over the past decade. Raw materials represent about 35 percent of total exports earnings (2011).
About 500,000 people work in mining and another 500,000 indirectly depending on mining.
7
Thomas R. Yager, “South Africa,” in USGS, 2010 Minerals Year-book, vol. 3 Area Reports, International (Reston, February 2012), pp. 37.1–#Q^""'%& +#++#$<"'%& +"X+"
country/2010/myb3-2010-sf.pdf (accessed October 9, 2012).
Iron ore in particular is considered to have
3 Österreichisches Bundesministerium für Wirtschaft, Familie und Jugend (BMWFJ), World Mining Data 2012 (Vienna, 2012), http://www.bmwfj.gv.at/EnergieUndBergbau/Welt BergbauDaten/Documents/WMD2012druckbar.pdf (accessed February 27, 2013).
4 Chamber of Mines of South Africa, Facts and Figures 2012 (Johannesburg, 2012), p. 2, http://www.bullion.org.za/
documents/F_F_2012_Final_Web.pdf (accessed February 13, 2013).
5 Department of Mineral Resources, South Africa’s Mineral Industry 2009/2010 (Pretoria, 2010), p. 7.
6 Susan Shabangu (MP, Minister of Mineral Resources), Budget Vote Speech to the National Council of ProvincesQ]=Q#
7 Chamber of Mines of South Africa, Facts and Figures 2012 (see note ), p. 2.
great medium-term growth potential. Platinum is also growing in significance, although declining demand from the European Union, which receives a quarter of South African platinum exports, has caused a deep production crisis, at least in the short run.
South Africa exports 70 to 90 percent of its raw materials, and the government has declared it a high priority to increase added value (“beneficiation”) and the export of processed materials. In 2011, the Depart-ment of Mineral Resources published a strategy paper covering these points, but its implementation has yet to be decided. Recycling is addressed by the National Waste Management Strategy. In 2007, 70 percent of '&%+Q& &%$8+&& Q%& &%
of used plastics were recycled.9
The Raw Materials Policy Institutional Setting
The Department of Mineral Resources (DMR) is respon-sible for the formulation, implementation, and moni-toring of policy for non-energy raw materials.10
The most powerful political actors after the govern-ing African National Congress (ANC) are undoubtedly the Congress of South African Trade Unions (COSATU) and the mining companies, which are mainly orga-nized in the Chamber of Mines. The National Union of Mineworkers (NUM) is the largest constituent union
The three main sections of the DMR are responsible for raw materials policy, regulation, and health and safe-ty. South Africa’s nine provincial governments have no powers of their own concerning mining. Since mining affects almost all areas of public life, certain other ministries are also tangentially involved, for example the Department of Water Affairs and the Department of Environmental Affairs in the licensing process. The DMR oversees several geological and tech-nological agencies that support its work, including the Council for Geoscience, which is the country’s geological survey, and the Council for Mineral Tech-nology Research (MINTEK).
8 Department of Mineral Resources, A Benefication Strategy for the Minerals Industry of South Africa (Pretoria, 2011).
9 Department of Environmental Affairs, Recovery, Re-use and Recycling (Pretoria, May 2010), http://www.wastepolicy.co.za/
$'&"%'+<""4&++&$X& Q`#
10 The Department of Minerals and Energy was divided in 2009 into the DMR (www.dmr.gov.za) and the Department of Energy.
of COSATU with 360,000 members. Apart from two smaller state-owned mining companies, the sector is in private hands, although the government plans to expand the state’s mining activities by establishing a major state-owned mining enterprise. Ownership structures in the mining sector have changed signifi-cantly since the fall of apartheid. Major South African firms such as Anglo American, which used to be South African-owned, have been internationalized. At the same time, about 10 percent of the shares of almost all mining companies have passed to black South Africans.
Despite undeniably positive social developments, even twenty years after the end of apartheid South Africa still faces enormous socio-economic problems.
Its figures for income inequality remain among the
$ ¨+$ +#X$& &%$8&$$%
lives below the national poverty threshold of 500 rand per month (about €1.60/day). The official unemploy-'&% &+X$& &%4%$88=%& &
percent).11
These grave social problems define the framework of the national raw materials policy – and the debate about it. From the government’s viewpoint, the top priority is to advance social and economic develop-ment, especially for the black majority. Using the resource base for broader development effects and job creation is thus a strategic goal. Two arguments have pushed mining to the center of the South African debate: first, the sector was a pillar of the exploitative and discriminatory system of apartheid; second, the nation has not benefited adequately from its rich raw materials base.
The clash between South Africa’s liberal economic order and political demands for intervention reflect the structural heterogeneity of the governing coali-tion, whose three members are politically homogene-ous neither internally nor with one another. The co-existence of almost every political stripe within the ANC (Marxists, neoliberals, black nationalists, etc.) makes it near impossible to find a coherent political course, especially where the domestically weak Presi-dent Jacob Zuma must take care not to alienate inter-est groups that are important for his re-election. The debates about state intervention in the mining sector were initiated by the nationalist wings of the ANC; in particular its youth organization and the metalwork-ers’ union have demanded nationalization of mining
11 “South Africa’s Textbook Saga Shows Need to Tackle the Basics,” Financial Times, July 2, 2012.
The Raw Materials Policy
and other strategic sectors (e.g. land, the banking sector), if necessary without compensation. That debate, however, does not alter the fact that the economy has remained orthodox liberal, even under Zuma’s presidency. Hardly anybody in South Africa believes that nationalization of mining is an option, while the heterogeneity of the ANC and the deep international integration of the economy will avert radical policy changes.
Nonetheless, certain structural obstacles will pre-vent full exploitation of national potential in coming years, with a massive lack of skilled labor and inade-quate infrastructure only adding to the problems.
After years of neglect, the government is now trying to catch up, for instance investing massively in transport and energy infrastructure (railways).12
Concepts and Strategies
Moreover, two major coal-fired power stations that are vital for creat-ing added value in the mincreat-ing sector will be added to
&&%& ='X=#
Even though the government and the ANC publish strategy documents on a regular basis, there is no official, comprehensive strategy on the raw materials sector. Nonetheless, certain strategic pillars can be identified. The government views the country’s raw materials endowment as a source of social and eco-nomic development. There are two problems with this, the first being the unresolved relationship between state and private business. Like other re-source-rich countries, South Africa tends to assign the state a larger role in important economic sec-tors. In 2007, the ruling party officially adopted the concept of the “developmental state” or a “mixed economy,” wherein the state is ascribed a central strategic role in structuring the economy, allocating resources etc. This was done in order to overcome the triple problems of unemployment, poverty, and in-equality: “The developmental state should maintain its strategic role in shaping the key sectors of the economy, including the mineral and energy complex and the national transport and logistics system.
Whilst the forms of state interventions would differ, the over-riding objective would be to intervene stra-tegically in these sectors to drive the growth,
develop-12 For an overview of government infrastructure policy, see Standard Bank, South African Quarterly Review (Johannesburg, August 2012).
ment and transformation of the structure of our econ-omy.”13 This approach coexists with a laissez-faire orthodoxy, with President Zuma advocating an inter-nationally competitive mining sector as an accelerator for growth and employment. A rather optimistic gov-ern'&%8$ &+ &+Q³$X+$X&
created in the mining sector by 2020.15
The second problem is that the South African state lacks the capacity to drive development, as desired by the government. Paradoxically, government repre-sentatives and critics agree on this point – but it remains undecided how the government will resolve the contradiction. Since a strategic framework is lacking, it is not surprising that policy measures and instruments have not yet been coordinated into a comprehensive raw materials policy.
Policy Measures and Instruments
Regulatory Framework
While the South African regulatory framework is more investment-friendly than that of many other G20 members,16 conditions in the mining sector have worsened over the last decade in this respect. South
8 +8&%8 $'$ %&> +& %+-tute’s Policy Potential Index of investment locations.17
Mining is regulated by the Mineral and Petroleum Resources Development Act (MPRDA) $8Q replaced private ownership of mineral rights with one of state custodianship. The state grants mining licenses to private firms on a first come, first served basis. Currently, the government is considering
replac-13 Polokwane National Conference Economic Transforma-tion ResoluTransforma-tion, quoted in Maximising the Developmental Impact of the People’s Mineral Assets: State Intervention in the Mineral Sector (SIMS) (Pretoria, February 2012), p. 71, http://www.anc.org.za/
docs/reps/2012/simsreport.pdf (acces+&$X& Q`#
14 Jacob G. Zuma, State of the Nation Address (Cape Town, February 9, 2012).
15 South African Government, New Growth Path (Pretoria, 2001), p. 11, http://www.info.gov.za/view/DownloadFile
$%4&++&$X& Q`#
16 World Bank, Doing Business 2012: Doing Business in a More Transparent World (Washington, 2011), http://www.
doingbusiness.org/reports/global-reports/doing-business-2012 4&++&$X& Q`#
17 %"Q$8 + %&$$8 countries; Fred MacMahon and Miguel Cervantes, Fraser Institute Annual Survey of Mining Companies 2011/2012 (Vancouver, 2012), http://www.fraserinstitute.org/uploadedFiles/fraser-ca/
Content/research-news/research/publications/mining-survey-2011-#84&++&$X& Q`#
ing this method with public auctions to enhance transparency and competition. Applicants must fulfil certain social, environmental, and economic condi-tions. Noted observers believe that South Africa missed out on the recent resource boom because of changes in the regulatory framework and the vagueness of some of the MPRDA provisions.
The awarding of mining licenses is often a time-consuming process taking more than a year, especially since responsibility is not held by the Department of Mineral Resources alone. The water and environment ministries have their own approval systems with dif-ferent timetabling, relating to environmental impact assessments, water rights, and advance planning for the environmentally and socially compatible closure of mines. Contamination of soil and groundwater caused by many of the six thousand neglected and abandoned mines is a serious public health problem.
The DMR is currently drafting proposals for an inte-grated and transparent interagency licensing pro-cedure. An internet-based application system was introduced in 2011.
Black Economic Empowerment and Corporate Responsibility
One very distinctive feature of the South African mining business is positive discrimination in favor of historically disadvantaged mostly black citizens (Black Economic Empowerment or BEE).19
The MPRDA also requires companies to take action to foster economic development and provide social security benefits for workers and mining communi-ties. These measures go well beyond conventional corporate social responsibility, in that they are codi-fied in law and thus legally binding, while CSR
The Mining Charter, which is part of the MPRDA, regulates BEE.
It contains nine specific requirements that mining companies must fulfil in order to support economic participation in the mining industry by black South Africans. The government’s aim is for at least 26 per-cent of every company to be owned by black citizens X=#]%%$'%&+'++$
+&+-&+4& &%`%+& <+&+-&+4& &%`8 $' com-panies where black South Africans own at least 25 per-cent (so-called BEE companies).
18 Peter Leon, South African Mining Industry at the Cross Roads, address to the African Mining Network (Johannesburg, June 2012).
19 BEE is obligatory for companies in all sectors that wish to do business with the state, which means de facto that BEE is obligatory for all companies.
where is most often a discretionary matter. Mining companies are required, for example, to organize and fund development projects and to arrange regular con-sultation with communities affected by mining activi-ties. These obligations often require the construction of education and health facilities as well as the pro-motion of job opportunities outside the mining industry.20
There is, however, a great discrepancy between the aspirations and reality of the MPRDA requirements. In the mining industry (and elsewhere), BEE has failed to produce social transformation. Even representatives of the government admit that its focus on property rights has only contributed to the creation of a small circle of wealthy elites, whose companies often benefit from public procurement and corrupt business prac-tices.21 Moreover, the DMR has a reputation for being influenced by political lobbying by ANC elites.22 This is not surprising, given the lack of strict divisions between government and party. As conceived by the ANC, in the political hierarchy of South Africa the ruling party is positioned above the government, which acts as the executive body of the former liber-ation movement. Conceived as an instrument to cor-rect historical injustices, BEE thus ends up fueling political machines. According to conservative esti-mates by the National Prosecution Authority, at least 20 percent of the state procurement budget is lost to corruption and mismanagement every year.23
Furthermore, mining companies fail to properly implement the social and economic measures listed above. Five years after the Mining Charter took effect, the Department of Mineral Resources found “shocking levels of non compliance.”
20 Southern African Institute of Mining and Metallurgy, The Rise of Resource Nationalism: A Resurgence of State Control in an Era of Free Markets or the Legitimate Search for a New Equilibrium?
4*&$%Q`Q#88#Q^""#+''#$#"
Conferences/ResourceNationalism/ResourceNationalism-#84&++&$X& Q`#
Social and labor
stan-21 “Mantashe: I Have Serious Issues with BEE,” Fin24, August QQ^""#8%#$'"$%$'="]%+&-I-have-serious-issues-with-BEE-4&++&$X& Q`#
22 “Special Report – Why South African Mining’s in Decline,”
ReutersQ>&X =QQ^""# && +#$'" &""
""-south-africa-mining-Y¬!
4&++&$X& Q`#
23 “South Africa’s Textbook Saga Shows Need to Tackle the Basics,” Financial Times, July 2, 2012.
24 Department of Mineral Resources, Mining Charter Impact Assessment Report (Pretoria, 2009), p. 22, http://www.info.gov.za/
<&"$%$>&$%4&++&$X& Q 2012); Bench Marks Foundation, A Review of Platinum Mining in
The Raw Materials Policy
dards in mining regions remain appalling. Health and safety rules are often ignored, resulting in about 120 fatalities every year (2010 and 2011).25
The willingness and ability of mining companies to abide by CSR standards is often limited. This is even the case with BEE companies, including those owned by members of the political elite. The prevalence of strikes and social protests has accordingly increased in recent years, and the resulting production losses have become a serious problem not just for the companies.
They also represent a growing challenge for the ANC and the mainstream unions (especially the NUM), which claim to represent the interests of the miners and their families. Growing social tensions and un-fulfilled promises of economic wealth have repeatedly resulted in violence, either between rival unions, or between miners and the police.26
Support of Domestic Production
These developments culminated in the incident near the Marikana Mine, run by Lonmin, where thirty-four people were shot dead during a strike in August 2012. The event threw the government into its worst political crisis since the end of apartheid and led to an expansion of protests into almost all parts of the mining industry and beyond. Two months after the shootings, almost 20 percent of the mining workforce was on strike.
As demanded by radical elements in the ruling tri-partite alliance, nationalization of the mining sector stands no chance of realization. However, like other major producers, South Africa is considering measures to maximize the income generated by its resource wealth. Even though results from this discussion had yet to be legislated by early 2013, it is already clear that they will include certain elements that can be expected to increase state intervention in the mining sector.
For example, the government is considering raising taxes, perhaps by implementing a “supertax” on ex-ceptionally high company profits similar to the new Australian tax,27
the Bojanala District of the North West Province (Johannesburg, 2012), http://www.bench-marks.org.za/research/rustenburg_
review_policy_gap_final_aug_2012.pdf (accessed October 9,
review_policy_gap_final_aug_2012.pdf (accessed October 9,