FILE PHOTO: South Africa's Mineral Resources Minister Mosebenzi Zwane

JOHANNESBURG - If the two - day indaba held in Johannesburg last week demonstrated just how serious the troubles in the mining industry were, then the public spat between Mineral Resources Minister Mosebenzi Zwane and the Chamber of Mines showed just how deep they were. 

Newspaper headlines and social media went on overdrive as the chamber, which represents 90percent of the industry, launched unprecedented attacks on Zwane.

In a week of drama, an emboldened chamber snubbed Zwane and then boycotted a gala dinner at the indaba last week on Tuesday night, where he offered the industry an olive branch, saying that his door was open to talks over the charter.

Supporters of Zwane, a former MEC of agriculture in the Free State, believed his attendance of the dinner gave him the moral high ground.

This was despite questions by the industry on whether he is the right man for the job, following his role in the acquisition of Optimum Coal by Tegeta Exploration and Resources, a company linked to the Guptas.

The hostile relationship between the key stakeholders is damaging to the South African brand, and if anything, it only complicates matters for the ailing mining industry, which from an investor perspective is already a no-go zone. Sentiment for the mining industry has declined drastically, not only due to the volatile commodity cycles, but regulatory uncertainty and the violent labour unrest in mid-August 2012 remains fresh on the minds of investors.

File Photo: Mxolisi Mgojo, Chamber of Mines president, speaking during a media briefing in response to the gazetted Reviewed Mining Charter.

The gazetting of the charter in June was the final nail in the coffin in the relationship between the two,with the chamber saying its implementation would destroy the viability of the sector. In a hastily convened press conference at the indaba, Roger Baxter, chamber chief executive, stood by the chamber’s decision to miss the dinner saying it would have meant engaging on specific regulatory issues in circumstances that were simply not conducive to any constructive engagement other than through the courts.

“The last time the chamber shared a platform with the minister - in Perth, Australia - the outcome was not at all constructive,” said Baxter. In Perth, Baxter told investors at the annual Africa Down Under conference that the industry had lost faith in Zwane. Earlier, Zwane had told investors that the charter was law and that mining companies needed to implement it. The spat comes as the industry battles to remain competitive and to attract investment due to the volatility in the price of commodities.

Famous words

Peter Leon, Partner and Africa co-chairperson at Herbert Smith Freehills, said the famous words of Winston Churchill: “Jaw-jaw is better than war-war”, can best sum up what is needed to resolve the impasse between the chamber and Zwane.

Leon told Business Report on the sidelines of the event that it was not helpful for the chamber to attack Zwane nor for the chamber to boycott Zwane’s speech.

“I do not think it is helpful that they (Zwane and the chamber) are not talking. Many people do not think he (Zwane) will survive beyond the ANC conference in December, but the fact is that he is still the minister,” said Leon.

I personally believe that the voice of mining communities was conspicuous in its absence at the two-day indaba aimed at getting the industry talking.

In its fifth year, the indaba has a long way to bringing mining communities and mining executives under one roof to address some of the underlying issues that have led to a widening trust deficit between the two stakeholders. The industry is not trusted by communities who often blame it for societal ills. Protests for anything from housing to jobs at the gates of mining operations are common.

Jay Naidoo, the former Cosatu secretary-general and speaker at the indaba, put it succinctly, and described why during the event. “I think the mining sector’s decline was not because of the economy. Marikana and the decline of the mining industry happened as a result of complicity. Mining companies need to shut up, learn to listen, because communities know what they need.”

Mining communities are becoming hostile towards mining companies now more than ever, and blame some of them for selling fake dreams. Impala Platinum, the world’s second-biggest platinum producer, flagged that unrest and protest in Mpumalanga was threatening the viability of its Marula mine.

Even Lonmin, the world’s third-biggest platinum producer, was rocked by protests by the youth for jobs earlier this year. However Lonmin admitted that progress in uplifting the communities had been stifled by the collapse in prices, which had placed constraints on funding for social improvements.

Speakers at the indaba warned that regulation was also threatening the industry.Mark Bristow, the South African born chief executive of Randgold Resources, said the government was destroying the mining industry for short-term political gain.

“Mining on its own cannot save a country or built an economy, there needs to be the all-encompassing solution for growth,” he said. “The mining industry is unprofitable, yet everyone is hanging on it. There is no better example than South Africa. Mutually beneficial partnerships are needed,” said Bristow.

As the tensions between Zwane and the industry continues, the battlefield that bears much of the brunt is the country. Not only are investors watching in disbelief at the war of words, they are also withholding their monies in an industry that is already under strain. With such, more workers will be laid off and more families will become further entrenched in the vicious cycle of poverty.

And the fiscus will not only lose the much needed boost of increased spending in the economy, it will also suffer tax setbacks that could be used to improve the quality of life of the poorest of the poor. So at some point Zwane and the chamber will need to put aside their differences and address some of the persistent problems in the industry. The sooner they do that the better it will be for the country.

- BUSINESS REPORT