Zwane tries to turn a public good into a private one - Business Day, 22 February 2017

By David Christianson 

There can be no starker contrast than that between the seamless performance of "Team SA", led by Deputy President Cyril Ramaphosa, at the World Economic Forum (WEF) in Davos in January on the one hand, and the barely concealed antagonisms that crackled around Mineral Resources Minister Mosebenzi Zwane’s appearance at the Cape Town Mining Indaba the following month.

Ramaphosa took a large team of government ministers and corporate barons to Davos. The whole team, resolutely — in most cases; a few kept quiet — backed his assertion that SA was "open for business" and that the headwinds of 2015-16 had actually created a better enabling environment.

They repeatedly referred to the continuing corporatist engagement, initiated after President Jacob Zuma’s disastrous nonperformance at the same event in 2016, where potential investors waited in vain for an explanation of the sacking of Nhlanhla Nene as finance minister and the three-day tenure of David van Rooyen.

SA shone at Davos 2017 because representatives of government and business were "on message". They were in agreement and well rehearsed.

By contrast, the messages coming out of the Mining Indaba were chaotic. But this is simply a reflection of the abysmal relationship between government and business in this sector.

Zwane insisted that his ministry was "determined to reach [its] objectives", the immediate goal being the publication of the third mining charter, which Zwane promised would be gazetted in March.

The industry has any number of problems with the draft, and especially the unilateral changes Zwane unexpectedly sprang on it late last year, but the biggest is with its insistence that a permanent 25% black ownership level be maintained, even where black beneficiaries have cashed out. The Chamber of Mines has gone to the courts to get a declaratory order on the issue.

Zwane asserted at the indaba: "We’re here to govern and we’ll do exactly that." But "governing" in this sense means the dictatorial imposition of regulations the industry opposes, played no role in formulating and which, as the industry says, sets targets (for ownership) that cannot be achieved.

Zwane simply dismissed all of this. He insisted that the Chamber of Mines was only one voice among many and that he had consulted 60 other stakeholders, all of whom approve of his draft charter. Quite who these interest groupings are is unclear. The Department of Mineral Resources says it received 60 submissions on the charter and the people behind these are probably the allies Zwane is claiming. But the fact is — which he deliberately ignores in his attempt to pre-empt opposition — the chamber represents 90% of the country’s mineral production by value. To all intents and purposes, it speaks for the mining industry.

The truth is that the mining industry does not and cannot trust Zwane. He has shown himself to be secretive, prickly and given to misleading statements.

When Anglo American CEO Mark Cutifani defended the industry’s track record in transformation, complaining that it was not given enough credit for what it had achieved and observing that "one has to ask what [the] personal motives [of the industry’s critics] are", Zwane responded that he was "out of order". But it was Zwane who had already invoked his 60 allies who, he says, approve of the charter. There is every reason to ask who they are and to question their bona fides.

Zwane’s animus towards the industry was visible, both in interviews on the sidelines of the main event and in his speech. He even managed to trot out the recent shibboleth that "illicit financial flows" are a "menace" that "undermine trust between stakeholders". That claim is based on a UN Conference on Trade and Development (Unctad) report on transfer pricing that appeared last year and has subsequently been demolished for its reliance on the incorrect baseline data drawn from Unctad’s database, as well as its complete ignorance of the more accurate numbers released by Statistics SA and the South African Revenue Service.

Good governance and its corollary, impartial and clear regulation, are public goods. Public goods are provided to all members of society in the sense that everyone can use them if they choose to and have the ability to do so. They are also good for the public in the other obvious sense — they allow businesses to transact and thus make everyone better off through job creation and contributions to the fiscus.

It is well known what Zwane is trying to do is turn a public good into a private one where mining opportunities are controlled by a gatekeeper state. His support of "junior miners" — meaning emerging (domestic, black-owned) firms — is a further signal of this intention.

In an SAfm interview conducted at the indaba, he argued that "all big mining companies were once juniors". There might be some truth in this statement, but Zwane’s following sentence was nonsense: "[They grew because] all had assistance from government". This is an articulation of his own agenda, not a historical analysis of the development of mining industries.

Ramaphosa’s team impressed at Davos because it understood and articulated the sense in which a functioning investment framework is a desirable public good. Zwane, despite the fact that he was addressing an investment conference, showed no similar inclination. The commitment in his speech to "ensuring an enabling environment for mining in SA", was repeatedly contradicted by other things he said. His department’s action, both around the mining charter and in operational matters such as section 54 safety stoppages and threats to withdraw licences (Optimum Coal), also point in the opposite direction.

Any potential international investor attending the 2017 Mining Indaba is likely to have taken one look at the minister and chosen to visit the beach or a game reserve rather than look for deals. More than his snappishness, it is his open but private agenda that is so repulsive. Far from advancing the public good, what Zwane did at the indaba parallels the nonperformance of his patron, Zuma, at Davos last year. Quite simply, it harmed us.

*Christianson is a policy fellow at the Institute of Race Relations, a think-tank that promotes political and economic freedom.

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