Download South African Mining Development Association

South African Mining
Development Association
Submission to the Portfolio
Committee on Mineral Resources
20-August 2014
5/23/2017
1
South African Mining Development Association
•
The South African Mining Development Association was started in 2000 as the
Junior Mining Initiative by South African junior and black economic empowerment
(BEE) mining investors.
•
While the founders' initial impetus was to present a united response to
government on the Minerals Bill, the need for a strong, permanent lobby,
representative of the interests of junior mining companies on several fronts, soon
became apparent.
•
The need for and support of such a body was confirmed subsequently by research
conducted by the Minerals and Energy Policy Centre (MEPC).
•
In the research conducted by the MECP on the junior Mining sector the following
definition of junior mining companies was concluded. e.g
–
–
–
–
5/23/2017
Junior Miners are companies with an Asset base of R50 million to R7 billion.
Above R7 billion are the majors.
Below R50 million are Small Scale miners.
Below the small scale miners are the Artisanal miners.
2
South African Mining Development Association
Vision
SAMDA's vision is to be the vehicle for the development of a vibrant and sustainable junior mining sector which
contributes towards the growth and prosperity of the mining industry.
Mission
•
to create an enabling environment for raising finance;
•
developing technical and other skills;
•
practicing responsible environmental management and sustainable development; and
•
the maintenance of standards of good practice in the junior mining sector
To Lobby;
•
government;
•
organised labour; and
•
other stakeholders and institutions
•
to promote mutual understanding
•
to encourage local and international investment
•
to conduct research to understand the sectors needs
•
to promote beneficiation
•
to build African and global alliances
•
and to facilitate the transformation of the mining industry by promoting emerging junior mining operations and
those who are historically disadvantaged.
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3
ELEMENTS OF THE CHARTER - A TOOL TO REALIZE THE
NATIONAL DEVELOPMENT PLAN VISION FOR 2030
The Elements of the Mining Charter are some of the Mining Economy’s National Development Plan
tools in eliminating poverty and reducing inequality by 2030.
IN SECTION 100 (2)a OF THE MINERALS AND PETROLEUM RESOURCES DEVELOPMENT ACT, THE
MINING CHARTER WAS CREATED as a historic charter for the transformation of the mining sector that
would introduce elements of sustainable growth of the mining industry, with the intention to ensure
transformation of the mining industry.
Below are the elements of the Mining Charter:
•
Ownership - 26% equity participation by May 2014
•
Procurement and Enterprise Development
•
Beneficiation
•
Employment Equity - 40% black managers by May 2014
•
Human Resources Development – Skills Development Spend by May 2014 should be 5% of payroll
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ELEMENTS OF THE CHARTER - A TOOL TO REALIZE THE
NATIONAL DEVELOPMENT PLAN VISION FOR 2030
• Mine Community Development through Integrated Development
Plans and Social and Labour Plan
• Housing and Living Conditions Requirements:
- To attain the occupancy rate of one person per room by 2014;
- To upgrade or convert hostels into family units by 2014;
- To promote home ownership.
• Sustainable Development through:
- Environmental Management Plan
- Rehabilitation
- Waste Removal and Storage
- Improve Health and Safety Performance
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Ownership - 26% equity participation
by May 2014
•
The charter requires a minimum effective participation of 26% by HDSA by the 1st of May 2014
•
The current Ownership Structure is a neo-colonialist ownership model that perpetuates ownership of the country’s
resources and mines by foreign investor monopoly.
•
26% Broad Based Black Economic Empowerment Ownership through Unencumbered Net Value in the mining industry by
2014 has not been reached by the majority of the mining companies.
•
Many of The Broad Based Black Economic Empowerment investors that have not yet realized 26% unencumbered net
value by the 1 May 2014 as prescribed by the Mining Charter through section 100 (2) a of the MPRDA are the following:
–
–
–
–
–
–
–
•
Employee Ownership Schemes (ESOPs)
Community Trusts
Broad Based Business Trusts
BEE Technical Producers
Women In Mining
Youth In Mining
People living with Disabilities
Ownership is still unrealised in the majority of Broad Based Black Economic Empowerment transactions.
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Ownership - 26% equity participation
by May 2014
•
According to the research of the JSE Top 49 Mining Companies conducted by SAMDA In 2014
•
The market capitalisation of the Top 49 JSE-Resources companies is R2,574 trillion (100% of the resources sector’s value on
the JSE main board).
•
The charter requires a minimum effective participation of 26% by HDSA in each of the 49 listed companies
•
If all the Top 49 Listed Mining Companies had 26% HDSA ownership of R2,574 trillion the value would have been R669
billion HDSA participation in 2014.
•
The majority of black producers do not own mines because the shareholding has not been paid up due to Transfer Pricing
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7
WHAT IS TRANSFER PRICING
•
The term ‘transfer pricing’ is used to describe arrangements involving the transfer of goods or services, at
an artificial price, in order to transfer income or expenses from one enterprise to an associated enterprise
in a different tax jurisdiction.
•
These companies sell the companies commodities to its marketing divisions at lower than market related
prices.
•
This results in the exportation of profits to the tax heaven off shore accounts and the declaration of low
profits and the payment of low tax in the country where the commodity is being produced and exported
from.
•
The mining houses fails to be charter compliant because of the limited or no profit declared thus resulting
to the Balance Sheet reflecting insufficient funds to pursue the elements of the charter.
BBBEE partners to mining companies are robbed of profits and no dividends are paid.
•
•
Lack of Dividend payments in some companies results in BBBEE partners being unable to fund their
shares, while the non-BBBEE partner enjoys marketing fees and management fees in the absence of
dividend payments.
•
Below is the list of some of the companies that practice transfer pricing and are non charter compliant.
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8
The Majority Of The JSE Top 49 Mining Companies Has A
Charter Non-Compliant Ownership Profile (2013/2014)
Number
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
Afri ca n Ra i nbow Mi ne ra l s Ltd.
As s ore Ltd.
I mpa l a Pl a ti num Hol di ngs Ltd.
Roya l Ba foke ng Pl a ti num Ltd.
Atl a ts a Re s ource s Corpora ti on
Pa n Afri ca n Re s ource s PLC
Ha rmony Gol d Mi ni ng Compa ny Ltd.
Me ra fe Re s ource s Ltd.
Gol d Fi e l ds Ltd.
Si ba nye Gol d Ltd.
We s coa l Hol di ngs Ltd.
Vi l l a ge Ma i n Re e f Ltd.
Fi re s tone Ene rgy Ltd.
I nfra s ors Hol di ngs Ltd.
Wi twa te rs ra nd Cons ol i da te d Gol d Re s ource s Ltd.
Exxa ro Re s ource s Ltd.
Northa m Pl a ti num Ltd.
Pa l a bora Mi ni ng Compa ny Ltd.
Angl oGol d As ha nti Ltd.
Angl o Ame ri ca n Pl a ti num Ltd.
Aqua ri us Pl a ti num Ltd.
Pe tmi n Ltd.
Coa l of Afri ca Ltd.
Tra ns He x Group Ltd.
We s i zwe Pl a ti num Ltd.
Se ntul a Mi ni ng Ltd.
Bui l dma x Ltd.
Gl e ncore Xs tra ta pl c
BHP Bi l l i ton Pl c
Angl o Ame ri ca n pl c
Kumba I ron Ore Ltd.
Lonmi n pl c
Arce l orMi tta l South Afri ca Ltd.
DRDGOLD Ltd.
Evra z Hi ghve l d Ste e l a nd Va na di um Ltd.
Re s ource Ge ne ra ti on Ltd.
Ea s te rn Pl a ti num Ltd.
Ke a ton Ene rgy Hol di ngs Ltd.
Ta wa na Re s ource s NL
Gol i a th Gol d Mi ni ng Ltd.
South Afri ca n Coa l Mi ni ng Hol di ngs Ltd.
The Wa te rbe rg Coa l Compa ny Ltd.
Rockwe l l Di a monds I nc.
Fe rrum Cre s ce nt Ltd.
Ra ndgol d & Expl ora ti on Co Ltd.
Forbe s & Ma nha tta n Coa l Corp
Mi ra nda Mi ne ra l Hol di ngs Ltd.
Ba uba Pl a ti num Ltd.
Sa bl e Pl a ti num Ltd.
Tota l
Market Cap (Rm)
47
55
72
10
2
4
14
2
30
11
53
16
5
65
119
3
1
1
1
783
700
364
144
32
17
1
1
1
2 574
5/23/2017
310
642
983
380
601
880
191
469
243
644
422
406
248
204
366
667
559
544
534
391
428
137
153
444
270
194
453
691
947
817
501
084
005
684
676
279
826
540
429
317
267
225
193
167
154
126
114
102
100
007
HDSA
Gross HDSA
Yes / No
Interest %
Value (Rm)
55.00%
26 021 Ye s
26.10%
14 523 Ye s
14.60%
10 656 Ye s
57.13%
5 930 Ye s
55.00%
1 431 Ye s
26.00%
1 269 Ye s
14.74%
2 092 Ye s
29.00%
716 Ye s
2.30%
696 Ye s
2.30%
268 Ye s
34.40%
145 Ye s
23.00%
93 Ye s
25.70%
64 Ye s
28.40%
58 Ye s
9.86%
36 Ye s
34.40%
18 461 No
26.60%
4 405 No
26.00%
1 441 No
1.90%
1 245 No
1.00%
1 194 No
15.20%
521 No
24.00%
273 No
10.58%
122 No
20.40%
91 No
6.00%
76 No
17.00%
33 No
6.75%
31 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
0.00%
0 No
3.57%
91 888
Ne t Va l ue
Net Value
Value (Rm) of Market
26 021
14 523
10 656
5 930
1 431
1 269
2 092
716
696
268
145
93
64
58
36
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
63 995
as %
Cap
1.01%
0.56%
0.41%
0.23%
0.06%
0.05%
0.08%
0.03%
0.03%
0.01%
0.01%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
2.49%
9
Alignment of the Mining Charter with
DTI’s B-BBEE Codes of Good Practice
• The alignment of the Mining Charter with
DTI’s B-BBEE Codes of Good Practice has not
been made despite the fact that the Mining
Charter has a 2014 deadline to comply with.
• We suggest that the immediate alignment of
the Mining Charter with DTI’s B-BBEE Codes
of Good Practice must be done as it is long
overdue
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10
Procurement and Enterprise
Development
•
PROCUREMENT AND ENTERPRISE DEVELOPMENT OF THE CHARTER BY 2014, CONTRIBUTES
TOWARDS THE ACHIEVEMENT OF THE NDP WITH THE AIM OF CREATING SUSTAINABLE
BUSINESSES THROUGH THE MINING ECONOMY BY 2030.
•
The following graphs demonstrate how the mining industry is able to develop BEE mining
support industries through Preferential Procurement from 2006, 2008 to 2013.
•
Kindly note that this research does not include all the mining companies in South Africa.
•
This research demonstrates that a mining industry that is procurement driven does generate
economic growth and job creation and by so doing contributes towards the aspirations of the
NDP.
•
It is unfortunate that many of the mining companies procure goods manufactured off shore,
eg. China,etc or bigger cities in South Africa instead of promoting goods manufactured in
South Africa or in mining towns to contribute towards Local Economic Development .
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Procurement The Leading Force Behind Enterprise
Development
• Develop BEE mining support industries
41 000
suppliers
(2500 Narrow Based
HDSAs
Total annual
procurement
budget – estimated
at
2
$6 billion
500 BBEE)
3
1
33 mining
houses;
Source:
SAMPPF - 2006
5/23/2017
15 venues;
6 provincial
governments
4
Approximately
$600 million
to HDSA
500 Buyers
12
Procurement an Engine for Economic Growth
• Develop BEE mining support industries
65 000
suppliers
(4500 Narrow Based
HDSAs
Total annual
procurement
budget – estimated
at
2
$8.5 billion
12000 BBEE)
3
1
66 mining
houses;
Source: DECTI
- 2008
5/23/2017
15 venues;
6 provincial
governments
4
Approximately
$950 million
to HDSA
600 Buyers
13
BENEFICIATION
• Mining companies must facilitate local beneficiation of mineral
resources of mineral commodities by adhering to the provision of
section 26 of the MPRDA and the mineral beneficiation
strategy.(Mining Charter, Pg 2)
• It is unfortunate that a majority of the companies import finished
(manufactured) goods from off shore instead of manufacturing
goods locally .
• By complying to the mining charter through Beneficiating minerals,
small and medium enterprises and manufacturing industries will be
promoted and thus stimulating job creation and economic
development.
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14
STRATEGIC MINERALS
The State has adopted a Strategic Minerals Investment Policy in the following
Minerals:
Rank
Commodity
Needs of the Country and the Value Chain
1
Coal
Energy supply risk
2
Gold
Job creation potential-jewellery beneficiation
3
Iron Ore
Infrastructure and job creation prerogative
4
Manganese
Infrastructure and job creation prerogative
5
Diamonds
Job creation potential-jewellery beneficiation
6
PGM
SA’s international dominance; job creation– energy supply
7
Chrome
SA’s international dominance
8
Vanadium
SA’s international dominance
9
Titanium
High technology industries
10
Nickel
Niche steel products
11
Uranium
Clean Energy
SAMDA proposes that the State include the following commodities to be Additional Strategic Minerals:
12
Phosphate
food security and fertilizer supply
13
Limestone
Required for cement manufacture and construction projects
14
Shale Gas
Energy supply risk and Job Creation through industrialization
15
Oil (Petroleum)
Energy supply risk and Job Creation through industrialization
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BENEFICIATION ENGINE FOR ECONOMIC GROWTH IN
THE PARADIGM SHIFT
FOOD SECURITY THROUGH
ROBUST AGRICULTURE
Phosphate
INFRASTRUCTURE DEVELOPMENT
Limestone
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STEEL VALUE CHAIN (IRON ORE, MANGANESE, NICKEL, VANADIUM & CHROME
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ENERGY COMMODITIES (COAL, URANIUM AND THORIUM)
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18
JOB CREATION AND ECONOMIC GROWTH THROUGH BENEFICIATION OF
GOLD, DIAMONDS, COPPER AND PHOSPHATE
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19
EMPLOYMENT EQUITY & HUMAN RESOURCES
DEVELOPMENT
• The mining industry is behind in producing active HDSA
executives compared to State Owned Companies, eg: Chief
Executive Officers, Chief Operating Officers ,Managing
Directors, Finance Directors, etc.
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MINE COMMUNITY DEVELOPMENT through Social and
Labour Plans
• The lack of effective investment in community development
through Social and Labour Plans as well as the lack of charter
compliance have contributed to community unrest through service
delivery protests especially in the mining towns and villages. Eg:
Marikana, Bekkersdal, etc.
• The majority of the mines are developed in underdeveloped rural
areas where communities continue to be poor while their mineral
wealth is being explored, exploited and exported.
• Communities continue to demand that the mineral wealth should
benefit all South Africans and resist exploitation.
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21
HOUSING AND LIVING CONDITIONS
• It is unacceptable that Hostels still exist in 20 years of our
democracy despite the housing and living conditions
standard requirements of the Mining Charter and Section
100 (1) of the MPRDA.
• Mining towns and villages are currently overburdened by
informal settlements instead of decent housing and living
units.
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22
MINING CONTRIBUTION TO THE SOUTH AFRICAN
ECONOMY
The mining industry has a Direct And Indirect contribution to the
whole economy as demonstrated in a few examples below:
• 17% of GDP (directly and indirectly)
• 38% of merchandise exports (primary and beneficiated mineral
exports)
• 19% of private sector investment
• 11.9% of total investment in the economy
• 50% of volume of Transnet’s rail and ports
• 16% of formal sector employment (directly and indirectly)
• 94% of electricity generation via coal power plants
• 40% of electricity demand.
• About 37% of the country’s liquid fuels via coal
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MINING CONTRIBUTION TO THE SOUTH AFRICAN
ECONOMY vs TRANSFER PRICING & IMPORT PARITY
PRICING
• This direct and indirect contribution gets negatively affected
through transfer pricing, because the true profits that are accrued
from the sales of the commodities remain in the offshore tax
heaven accounts and insufficient income is declared in South Africa
resulting in limited tax payments or no tax payments to the
Receiver of Revenue and other non-mining sectors of the economy
benefiting less.
• Import Parity Pricing Models of the mining industry allows the
South African producers to sell its commodities to the local market
at international prices even though the commodity is produced
from a South African Mine, e.g Iron Ore. This has a crippling effect
on the development of the Steel Beneficiation Value Chain and
making the production of an end product an expensive exercise and
the development of the manufacturing industry uncompetitive and
the creation of small and medium enterprises challenged.
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1st May 2014 CHARTER COMPLIANCE YEAR FOR ALL
MINING COMPANIES
•
1ST OF MAY 2014 ALL MINING COMPANIES SHOULD HAVE BEEN CHARTER
COMPLIANT
•
All mining stakeholders that adhere to Section 100 of the Mineral and Petroleum
Resources Development Act (MPRDA) and the Mining Charter will automatically be
contributing towards The National Development Plan and contributing towards
the sustainability and growth of the South African Economy.
•
By enforcing the Charter Compliancy Implementation from the 1st of May 2014,
the mining industry stakeholders and in particular the mining producers will be
embracing the National Development Plan’s Vision for 2030 from 2014.
•
The Department of Mineral Resources has all the powers to enforce the law by
using the clauses in the MPRDA that will penalize and address non compliance and
defaulters of the law.
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THE SOUTH AFRICA FIRST STRATEGY!!
•
•
All South Africans should be committed to a South Africa economic and
investment strategy and model. That will ensure the economic sustainability of
the country and the people of South Africa.
Canada provides an excellent example of the country first policies and
sentiments. E.g:
– The Canadian government blocked BHP Billiton's $39 billion bid for Potash Corp, the world's
biggest producer of a key crop nutrient, halting what had been the world's biggest takeover.
•
– Industry Minister Tony Clement said, "In Canada, our natural resources are an important
economic driver, ...I have come to the conclusion that BHP Billiton does not present a likely
net benefit to Canada.” (2011).
•
Like Canada, South Africans must adopt a ‘South Africa First!’ Strategy for the net
benefit to South Africa.
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Investors: Partner With Africa In The Long Walk To
Economic Freedom
I have walked that long road to freedom. I have
tried not to falter; I have made missteps along
the way. But I have discovered the secret that
after climbing a great hill one only finds that
there are many more hills to climb. I have taken a
moment here to rest, to steal a view of the
glorious vista that surrounds me, to look back on
the distance I have come, but I can rest only for a
moment, for with freedom comes responsibility,
and I dare not linger, for my LONG WALK HAS NOT
YET ENDED.
(Nelson Mandela)
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