Department of Mineral Resources plays Russian roulette with economy – Solidarity
21 June 2017
The Solidarity Research Institute (SRI) today expressed huge concern about the 2017 Mining Charter published in the Government Gazette this month.
According to SRI Head Connie Mulder, the charter is a recipe for an economic disaster in the mining industry. The importance of mining as an industry that is central to the South African economy cannot be underestimated. With this charter that is in essence significantly worse than the already worrying 2016 draft charter that has come in for heavy criticism from local and international experts, the Department of Mineral Resources is, as it were, playing Russian roulette with the South African economy,” Mulder said.
According to Mulder, it is obvious that the charter’s conceivable economic consequences have not been given any reasonable consideration at all, are underestimated or, at worse it is indeed so by design.
“More than before the current 2017 charter is in direct conflict with any reasonable views on freedom of economic affairs, such as ownership, shareholding and entrepreneurship. In essence, it even constitutes a break with the moderate provisions for a so-called “mixed economy”. It is a policy markedly designed by ANC government officials and, owing to socialist and racially-based policies coming from above, it unashamedly flies in the face of market freedom,” Mulder cautioned.
According to Mulder, the conceivable consequences of this charter, should it survive most likely litigation against it, include: a decline in mining investment; severe discounting of mining assets; the demise of mining operations that simply cannot afford the cumbersome and inefficient procurement and localisation requirements; and advancing the interests of hidden beneficiaries who will directly derive unlawful benefits in terms of the charter. “In the short run it will bring the mining sector in South Africa under more pressure and it will deter any potential investor. Moreover, numerical racial targets are made the main criterion for appointments in mining companies to the exclusion of all other factors,” Mulder added.
Mulder also said that the Charter’s language is strongly reminiscent of apartheid legislation. The provision that mining companies have to pay a 1% dividend, linked to gross income, but subject to liquidity and solvency provisions, to black shareholders is a particularly worrisome policy change. “The expectation is that such a dividend would be payable purely based on skin colour,” Mulder said.
On the whole, it is inconceivable that a fully functional and flourishing mining industry would be able to lawfully survive in such a policy environment. The damage this unnecessary sabotage of the mining industry could cause on a broader scale to the rand, industries linked to mining and ultimately to economic growth prospects on the whole give rise to grave concern,” Mulder said.
Issued by Connie Mulder, Head: Solidarity Research Institute, 21 June 2017