Asking if the mining sector can survive another five years of Gwede Mantashe is like asking if someone can live five more years with pancreatic cancer, says veteran mining analyst and director of mining at Modern Corporate Solutions, Peter Major.
“The thing is, pancreatic cancer is bad. Mantashe as the minister of mining is bad. I don’t see how [President Cyril Ramaphosa] could have found a worse guy to be mining minister. He’s had sufficient time to prove that nobody is blocking any kind of positive advancement in mining more than him.”
Appointing a competent, fit-for-purpose minister of mineral resources could have been a game changer for the mining industry which, thanks largely to Mantashe, is struggling to survive, and for South Africa, because it is so key to the country’s economic growth, Major says.
“They’re clearly terrified at the thought of the DA or anybody who might use institutionalised oversight, rule of law, transparency to hold the mining ministry to account and force it to do its job of enabling the mining industry to make money, grow the economy and create jobs.”
Mining is more important for South Africa’s economic recovery than ever because of the failure of other industries, with the possible exception of tourism, to grow as fast as the population or as government spending, he says.
“But South African mining is a dying industry. We were bigger than Australia in the 1980s, now their coal sector is probably four to five times bigger than our total mining sector. In spite of the fact we probably have more known minerals than Russia and the US put together.”
A measure of how devastating the regulatory and policy regime has been for South African mining is that “we’ve been in a commodity price super-cycle since 2003 and yet our mining index is where it was 18 years ago”, Major says. “We’ve closed many more mines every year than we’ve opened.”
Under Mantashe’s watch investment in mining has fallen to levels last seen in 1960, and South Africa is now rated among the 10 worst mining destinations in the world.
“We need big changes starting from the top if we’re going to reverse this disinvesting trend.”
Yet while other countries around the world, including in Africa, are begging investors to come, Mantashe has been chasing them away, says Major. Disinvestment from South African mining under his watch has been in the hundreds of billions of rands, and to turn this around investors need to see swift action, he says.
“They want physical, tangible results. Money goes where money’s wanted. Investors want to see the minister removing the requirement that you have to have a 30% local partner, and that you have to buy 70% from BEE suppliers who are often fronts for mafia syndicates and foreign suppliers.”
We thought this was another one of his jokes but it was the truth. He’s chosen three very diverse companies to design and build a cadastre system and says it’s going to take a year
Instead, investors see the requirements rise all the time. Mantashe’s 2018 mining charter — which he pushed through against strong opposition from the industry, which accurately warned it would take a toll on investment, growth and jobs — raised the compulsory BEE shareholding from 26% to 30%.
Major doubts the industry can be revived without abolishing these BEE requirements, which many investors regard as legalised extortion.
When he became minister in February 2018, Mantashe promised a modern cadastre system to record all mining and prospecting licences “like almost every other mining country”, Major says.
“I don’t know why anyone would invest here with BEE. But say a guy says, ‘If everything else changes, I’ll come in with BEE.’ Then he wants to know there is no corruption, no construction mafia, action against illegal mining. He wants to know he can get his licence in weeks or months with a transparent, rule-of-law process.
“He needs to know there’s a cadastre that keeps track of all these properties, so he doesn’t keep getting funny, contradictory documents, or one guy signs off and the other guy says, ‘Oh, it’s not quite ready yet.’
“We thought it wouldn’t take too long because the best cadastre system we know in the world is manufactured in Cape Town and has been used in most African mining countries for 20 years.”
Instead, in January this year the minister announced “we were going to make our own cadastre system and would be hiring three different parties to do it. We thought this was another one of his jokes but it was the truth. He’s chosen three very diverse companies to design and build a cadastre system and says it’s going to take a year.”
Major thinks this is highly optimistic.
Due to the absence of a modern cadastre, corruption and incompetence, the backlog for mine permits and rights hit 5,326 in 2021. Applications for prospecting dried up, as did South Africa’s share of global exploration spend. Due to the absence of a modern cadastre, corruption and incompetence, the backlog for mine permits and rights hit 5,326 in 2021. Applications for prospecting dried up as did South Africa’s share of global exploration spend.
When he became minister, Mantashe forecast that South Africa’s share of global exploration spend would be 5% within four years, but by the end of his term it was less than 0.8%.
“It’s all just talk, talk, talk with Mantashe. He’s a talking master, he spends all his energy on talk.”
Major estimates Mantashe’s failure to meet his 5% target has cost the industry about $3.5bn (about R65bn). He says the only plausible explanation for Mantashe’s refusal to go for the quickest, off-the-shelf cadastre option given the urgency is that there are syndicates or special interest groups involved.
“There’s no government on the planet that acts like this without special interest groups or syndicates being behind it.”
Given Mantashe’s record, the country should not expect any “dramatic change” in his modus operandi in the next five years, and not much investment. “No fund manager is going to get money from a savvy investor by saying, ‘I think Gwede’s going to change, I think he’s reached the bottom’.”
In the US from the 2000s investors have been giving mandates to fund managers that preclude them from buying South African mining shares because of the country’s antimining environment, and he doesn’t see this changing while Mantashe remains in charge.
“I don’t think we can over-emphasise how unattractive investing in South African mining is. A lot of the world has corruption and incompetence, especially in Africa, but they don’t legislate it in place and enforce it in place officially and unofficially.”
Mantashe’s reappointment is “a mortal blow” but not entirely unexpected, he says.
“The government is so used to demonising the mining industry it’s no surprise one of the worst-performing ministers has been kept in charge of its fate.”
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