South Africa's Mining Charter III Puts Survival of Junior Miners at Risk

Mining and Exploration
05/02/2019 12:51

South Africa's Mining Charter III "heaps more pain on South Africa’s alluvial diamond producers who already face enormous cost burdens and high risks," writes Gert van Niekerk, Chairman of the South African Diamond Producer’s Organisation in a recent opinion peice in Mining Review Africa. He argues that Mining Charter III (short for the Broad-Based Black Economic Empowerment (BEE) Charter for the South African Mining and Minerals Industry, adopted in late September 2018), severely undermines the ability of junior diamond miners to maintain a viable business by taking a 'one-size-fits-all' approach to minerals policy by regulators. Without changes to the policy, the very survival of the remaining small and Junior diamond miners is at risk.

What remains of that sector is but a shadow of its former scale, but is still a crucial sector. "It is the primary employer in remote rural areas in which alluvial diamond mining is conducted, and where existing unemployment levels are estimated to be as high as 80%," Niekerk explains. However, "The alluvial diamond mining industry has experienced steady decline since 2004 when the Mineral and Petroleum Resources Development Act (MPRDA) was implemented. At the time of the implementation of the MRDPA, there were 2,000 diamond miners employing some 25,000 people. Today that figure has plummeted to 180 small mining operators and a massacre of employment numbers to around 5,000." Prospecting right applications, largely made by entrepreneurs, local private operators and farmers, in the Northern Cape where the bulk of alluvial diamond mining takes place have fallen by 61% since 2013, leading to the growth of illegal operations. "Much of this on the back of ill-considered policy."

Mining Charter III, he writes, will precipitate further drastic decline of South Africa’s entrepreneurial miners and job losses in vulnerable rural communities. The policy overlooks the cost constraints and economic plight of junior diamond operators that cannot cover the additional burden of costly BEE deals, more onerous compliance requirements, unrealistic procurement obligations, enterprise development and employment equity by simply raising selling prices. He says the requirements of Mining Charter III and the recently tabled Implementation Guidelines (Dec 2018), aside from being impractical from a situational perspective, will further increase operating costs of mining operations, unsustainably so for junior operations. 

"The inevitable outcome will be the shutdown of operations and retrenchments in rural areas where there simply are no other prospects of decent employment. The downstream impact," he adds, "will also be significant – diamond traders, cutting and polishing industries, jewellery manufacturing and retail sales into global markets will be severely impacted. The collapse of entrepreneurial businesses that have been shut out of the large mining industry will be disastrous."

Niekerk concludes that the alluvial diamond industry "stands ready to be a driver of transformation and an incubator of black-owned and operated entrepreneurial mining businesses – but only if Mining Charter III policy makers recognise the fatal pitfalls of applying a ‘one-size fits all’ approach designed for a handful of large publicly-owned companies, to an industry dominated by small, privately-funded, entrepreneurial mining businesses. There is an urgent need for consultation between Government and the Junior mining industry to agree on amendments to Mining Charter III that will enhance and promote transformation and empowerment in the industry, and at the same time ensure that the Junior sector is able to survive and continue to play the vital role in SA’s broader minerals industry."