Mining`s Ten Point Plan Flatters to Deceive.

If the intention of the Mining Industry Growth and Development Task Team was to save jobs, or heaven forbid, create jobs, then the Tripartite Agreement reached between the exclusive club of the Chamber of Mines, Government and NUM has failed on all accounts.

A couple of weeks ago I warned that the current “crises” imposed on us, while certainly part of the global cyclical downturn, will more likely be used as leverage to further protect the profits of shareholders while transferring the social costs to the South African public.

The Ten Point Plan has certainly not produced any evidence to suggest that this analysis is unwarranted. In fact it confirms that the measures introduced with much fanfare, and trumpeted in the Media as a “welcome” attempt to “save” the industry, is little less than an expensive effort to hoodwink the public.

Despite a few contrarian views, most economists, based on the Keynesian models of full employment, will agree that the path to job creation within a capitalist economy requires particular types of interventions in order to move the economy towards full employment. These are, Investment Spending by either the private sector or by government.  The basic assumption is that Investment Spending will spur further multiplier effects in the economy that will spur further consumption and consumption will in turn lead to higher demand, perpetuating the cycle.

However a closer look at the Ten Point Plan reveals that only one item in the Plan speaks to developing a comprehensive Investment Strategy that can utilise South Africa`s monopoly of the Platinum Industry.  Even then it`s rather short on ambition. The other 9 points are remedial and designed to alleviate the social fallout and to protect and support mining companies.

The manner in which the Ten Point Plan places government and labour on the back foot, compels government to take an increasing responsibility for the externalised costs of mining and starts to deplete funds which were meant for grander socio economic objectives, is indicative of the history of mining in this country. Mining has always managed to create small pockets of enormous wealth while passing the social costs on to society.

The mining sector constituted 21% of GDP in 1970, today it accounts for less than 8%, while the number of people employed directly has fallen from 660,000 in 1970 to about 440,000 in 2004, even though it has climbed back up to 510 000 by 2014.

Worse, the shorter-term trends are negative, too. During the commodity boom from 2001 to 2008, the mining industry shrank by 1% a year, compared to growth of 5% a year among the world’s 20 mining exporting countries. This is despite the gold price, for example, going from about $400 an ounce in 1994 to $1,800 /oz. Thus the current arguments of the cyclical downturn should be read with some circumspect.

Despite this grim picture, the mining sector is an enormously profitable one, even if the narrative from the mining houses would have us believe that they are in fact paupers, barely scraping by in the tough global market place.

South Africa’s total reserves remain some of the world’s most valuable, with an estimated worth of R20.3-trillion ($2.5-trillion) according to a City Bank report. Overall, the country is estimated to have the world’s fifth-largest mining sector in terms of GDP value.

The Price Waterhouse Coopers (PWC) 2012 report for trends in the mining industry, in which it tracks the financial results of 39 mining companies with a primary listing on the Johannesburg Stock Exchange (JSE), as well as those with a secondary listing whose main operations are in Africa, and which  included companies with a market capitalization of more than R200 million at the end of June 2012, claims that mining operations in these companies achieved an increased Net Profit of 25% over 2011, totaling R65 Billion for the period. It is important to note that BHP Billition and Anglo American (the 2 biggest mining operators) results were excluded from this report due to its “international operations and the difficulty in separating the South African contributions”. 

These 39 Companies increased shareholder dividends from 12% of value created in 2011 to 18% in 2012. The distribution to shareholders more than doubled from the prior year. From 17 billion in 2011 to 36 billion in 2012 or by 116% in Rand terms, while employee share of the value created by the companies decreased from 29% in 2011 to 28% in 2012.

Solvency and liquidity ratios remained strong in the sector during this period, meaning no companies went bankrupt and with enough reserves to ensure a sustainable future. Borrowings in the mining sector remained at virtually zero up to 2012 while extraction-related industries are a key driver of the Johannesburg Stock Exchange, representing 42%, or R1.9-trillion.

Then to top off this picture of a profitable industry, we should remind ourselves that Lonmin was fingered in an AIDC report which found that significant profit shifting had likely occurred which further underplays the extent of the profit reported in the industry.

The PWC 2014 report states that; “the South African mining industry is less geared and less levered than the trends seen globally. This financial strength provides the industry with flexibility to operate and, where necessary, invest for the future.”

This is why this Ten Point Plan should be of concern to all right thinking citizens. Much of the Plan seeks to access funds that were meant for socio-economic development and to utilise it towards this short term alleviation project. The mining companies, who not so long ago were the beneficiaries of billions of Rands of profits, are now wrapped in cotton wool and absolved of their socio-economic responsibilities.

The most disturbing aspect of the Ten Point Plan for me though, was the cavalier manner in which it was announced that funds, such as those from the highly secretive Social Labour Plans, which were meant for community development, would be plundered.

All this while communities across the country are exploding in anger and rage at their continued dispossession and exclusion. While the announcement of the plan received widespread coverage, the uprising in the community of Mapela, just outside Mokopane who are affected by AngloPlats Mogalakwena mine, went completely unreported. 

Not one Media house reported how an entire community blocked access to the mines and burnt down the building that houses the Tribal Authority, whom the community accuses of collusion with the mining company to keep them impoverished. It not having been reported does not mean that the anger and social unrest is not real.

While the efforts of the Minister must be commended, it is time for citizens to start asking in whose interest are these agreements. There are no guarantees of jobs and Government has agreed to plunder community funds to bail out mining companies while communities are left out of the decisions that directly affect them.

Creating a conducive investment environment is important, but not at any cost, and certainly not only to attract foreign investment. Mobilising local resources is a key element of the African Union Agenda 2063. Government has been leading Investment Spending since before the 2008 debt crises and its build programme has kept the economy floating while the rest of the world faltered.

The tragedy has been that the build project was chiefly directed at creating a conducive environment for Large Scale Corporates. With the corporate sector not conceding a reciprocal investment strategy and with government’s fiscal limitations in stark relief, it is time for Government to diversify its strategy.

Yes we need to rehabilitate the 6000 disused mines in South Africa, and yes me must turn it into a massive job creation vehicle. And Yes Mines must pay, concurrently and until the job is done. It seems to me that this opportunity of crises presents an opportune time, to look towards solutions that include people, create jobs and self-esteem and builds community.

But it cannot be done if communities are left to struggle in silence. Let`s talk.