Lonmin Mining Rights: Department interference and legislation cause uncertainty
The Democratic Alliance (DA) will be calling for a debate in Parliament on the Mineral Resources and Petroleum Development Act, the provisions of which are being used in a manner impeding foreign investment in the country. The Department of Mineral Resources has sought to prevent Lonmin, an international platinum and associated metals mining company, from selling by-products of their platinum production such as nickel, copper and chrome on the tenuous basis that Lonmin had not converted its mineral rights in terms of the Act.
We must immediately ask why the ANC government would take the dramatic step of interfering in the interests of an international company, the repercussions of which have already threatened other international investors.
Even if the government has some basis for halting production in terms of the Act, surely in our current economic climate where we are desperately seeking to encourage foreign investment and hence create jobs, we should be reviewing any legislation that can arbitrarily be used as an economic hindrance, not facilitator? However, media reports indicate that our mining sector has in fact been threatened by an action that would ostensibly benefit ANC comrades.
Lonmin received the letter from the Department's North West provincial manager, Aaron Khavile, which in effect halted their operations in associated metals, which they had invested in as part of their core business.
Disturbingly, according to recent media reports, the company that is set to directly benefit from Lonmin halting sales of the above mentioned metals is Keysha Investments 220, a company allegedly led by two women with strong links to the Intelligence Services Council, a division of the Department of State Security.
The interference by the Department fuels the perception that the ANC government is entertaining moves towards nationalisation as it is cronies and people with links to the state and the ruling party who are increasingly receiving exclusive access to mining deals. In the case of Lonmin, and indeed other examples such as the ArcelorMittal SA and Imperial Crown Trading debacle, the ANC may be seen as exploiting grey areas in the Mineral Resources and Petroleum Development Act of 2002, as the legislation does not make clear provisions for mining groups to sell their associated metals for their own profit.
The DA believes this has seen Lonmin's rights in effect being cancelled to ensure that their mining interests are re-routed through a company allegedly linked to ANC comrades. This has created uncertainty in mining sector investment; as previous mining legislation afforded mining groups the ability to sell their associated metals production as a right.
The current legislation in effect increases the risks associated with investing in the South African mining sector, as foreign mining companies have to have their extraction rights approved by bureaucrats with no mining experience. It is this bureaucratic web and the ANC's exploitation of grey areas in the legislation, that in effect reduced Lonmin's ability to extract value out of their investment, and more importantly has placed jobs they created in their operations at risk.
It is this very confusion that places major future mining investment and nearly half-a-million jobs, in a sector that is already seeing tens of thousands of job losses every year, at risk.
Statement issued by Adv. Hendrik Schmidt, MP, Democratic Alliance Shadow Minister of Mining, August 11 2010
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