SPEECH BY MINERAL RESOURCES MINISTER SUSAN SHABANGU ON THE OCCASION OF THE LAUNCH OF THE MINING CHARTER REVIEW AND SCORECARD

13 September 2010

Pretoria, South Africa

South Africa has made great strides in fundamentally shifting the socio-economic and political paradigm since the historical transition in 1994. Whilst making this transition, the country stabilised the inherited unsustainable fiscal and monetary environment through prudent macroeconomic policies, gradually integrated the economy into the global economy through trade and capital control liberalization. Our policies remained focused on strengthening the institutions that support democracy. At the same time, the State embarked on a considerable programme to rewrite and modernise the country's policies and laws to normalize the socio-economic environment and integrate the previously excluded majority into the mainstream economy through a multi-pronged process of transformation.

Despite a significant progress made since 1994, South Africa's economy achieved a modest average annual growth rate of 3.3 percent per annum over the period. The necessary reforms to the country's macroeconomic policies allowed the economy to benefit from the rising tide of global economic growth, but the growth was not enough to address the disparities inherited from the apartheid regime. In fact, a combination of historic structural imbalances together with the dynamics growth exacerbated the In 2009, South Africa is reported to have become the most unequal country in the world. The gross disparities happen at the time when the economy and GOP per capita are growing modestly, suggestive of fundamental economic structural challenges.

The mining industry has been and remains a critical sector in our economy. Its transformation therefore is vital for our national socio-political objectives. The development of the Mining Charter of 2002 was informed by transformation considerations, consistent with the evolution of the political landscape. The sterling work of stakeholders in reaching a consensus on attributes of transformation of the mining sector, whilst none other sector charter had been developed must be applauded. In terms of the implementation of the socio-economic transformation of the mining industry, we have reached a critical period of assessing the extent to which the objectives have been achieved. To this extent, the observations are that the growth of the industry has left much to be desired and that transformation within the sector has been disappointingly slow.

My department concluded a detailed assessment of the progress on the industry's transformation against the Mining Charter objectives as adopted in 2002. The executive summary of this review work is available on the departmental website. In the main, very little has been achieved on the transformation of the sector. The gender and racial distribution of the workforce in the sector is hardly reflective of the workforce diversification we had envisaged.

The recent findings of the Commission for Employment Equity confirm that after 10 years of affirmative action being adopted as policy, progress on diversification of management and core-skilled workers remains minimal. White men and women continue to dominate top management and technical positions in the mining industry and earn much more than their black counterparts, regardless of skill and experience. The DMR report further illuminates lack of investment in the development of core and critical skills it requires to underpin its competitiveness and sustainability, while the bulk of mining companies continue to harbour illiterate workers.

As it well know, mining activities are largely located in remote and under-developed areas of the country. The need for a harmonious coexistence of mining and prosperous communities cannot be overstated. The emerging tensions between communities and mining companies must be resolved as a matter of top priority, with full consideration for the welfare of the communities and workers.

The racial ownership pattern of mining assets has remained largely unchanged, with only 8.9% BEE ownership attained by 2009 against a target of 15%. As I indicated at the signing ceremony of the declaration of the 30th June 2010, all stakeholders agree on the imperative to transform the economy and to ensure that the economy is more inclusive, in line with the ethos of the Freedom Charter, the Constitution and the transformational framework of government.

The executive summary of the impact assessment mentioned earlier further indicates that there is nothing wrong with the substance of our transformation policy as articulated in the Mining Charter, but the challenge is centered on the provisions of the charter, which allow for multiple interpretations. Accordingly, the scorecard needed more work to enable proper reporting and quantification of progress hereto.

It is increasingly the case that globally there is a tension between growth and socioeconomic development on the one hand and the environment on the other. We in South Africa grapple with the same challenge, as espoused in the sustainable development framework. The recent closure of a coal mine in Limpopo, which resulted in loss of employment of more than 500 people in one of the poverty nodes amplifies the quantum of the challenge that lies ahead. I am also mindful that the greatest threat to the mining industry today is the green revolution, if we it is taken simplistically.

I therefore strongly believe that this necessitates appropriate action to be taken by the industry collective to ensure that this industry is well positioned to deal with the concerns raised, and opportunities offered, by the green revolution.

In this context, I am pleased to note that one of the differentiating attributes of the South African mining industry is the unique ability of all stakeholders to tackle current and impending challenges as a collective. Our track record on collaborative work dates back to the 1 990s at the time of the gold crisis, during which we established a working group to develop mechanisms that will mitigate against the impact of the crisis.

We also worked together as stakeholders to develop the Mining Charter in 2002, which became a precedent for all other sector charters in the country to effect the notion of transformation. The latest collaborative effort is the formation and work of MIGDETT, which was established at the outset of the global financial crisis and has yielded positive results over the past two years.

I must emphasise that today's launch of the reviewed mining charter represents yet another collaborative work among stakeholders, under the auspices of MIGDETT. This work flows from the summit at the end of March this year, followed by the signing of the declaration among stakeholders on the 30111 June 2010 and the collaborative conclusion of the mining charter review today.

We have agreed among stakeholders that competitiveness and transformation are mutually reinforcing and that they underpin the sustainability of the mining industry in our country. In this light, we have developed a strategy for sustainable growth and meaningful transformation of the mining industry, which seeks to position the country's industry along a maximum growth path. For this reason, this mining charter is integral to the aforesaid strategy.

We have improved on the construct of the Charter to remove any potential ambiguities that create room for multiple interpretations. The vision of this charter aptly captures the essence of our intent, namely "To facilitate sustainable transformation, growth and development of the mining industry' We have also strengthened the scorecard to obviate any prospects of confusion and to enable proper quantification of progress against our objectives as a collective.

I am pleased that stakeholders have agreed on complete elimination of hostels by 2014. This is an important achievement which demonstrates the industry's commitment to enhancing the living conditions of the workforce. I believe this will significantly improve productivity of our mines.

We have introduced a weighting mechanism on the scorecard and have assigned a significant part of this weighting to the human resources development element of the charter. This seeks to contribute towards the creation of a critical mass of skills that will underpin our envisaged growth of the sector in a medium to long term.

Accordingly, we recognise that the development of the country's mineral complex presents opportunities to expand related industries that supply material/services for mining to be effective. To this extent, we have strengthened the notion of local content to support local industries, consistent with the government's drive for local industrialisation, creation of decent jobs and poverty alleviation.

We have also introduced a sustainable element in this charter, which is premised on the understanding that the social license to operate includes the environment, health and safety performance.

Today marks the beginning of an auspicious moment in South African history. As peoples of South Africa, we remain indebted to the pioneering work by those who conceived of the first Mining Charter document - for without their considerable input we could not have been able to begin talk of having reviewed this critical Mining Charter document.

Having said that, it would be remiss of me if I did not commend the remarkable achievement through a collaborative effort between my officials and industry stakeholders. A great deal of hard work and detailed negotiations have gone to making this review process possible.

It is our common understanding that the Mining Charter document of 2004 should be reviewed within a period of five years. Hence, today I am tabling before you the
reviewed Mining Charter.

I thank you.

Issued by the Department of Mineral Resources, Republic of South Africa, September 13 2010. (Transcribed from PDF - Please check against original.)

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