Nationalisation campaign has soiled necessary debate

Attempts to reform the mining industry have been an ongoing global phenomenon for a number of years and the debate of late in South Africa is far from unique. What is unique is the extent to which a campaign for  nationalisation has soiled the debate and overshadowed the broader issues at stake.

The decision in late September by the ANC National General Council (NGC) to mandate its National Executive Committee  (NEC) to do further work on the question of nationalisation of mines and to take evidence from all over the world to give the ANC policy conference in 2012 a sense of what works and what doesn't was probably a wise one.

The fact is that mining reform has been the subject of debate and legislative efforts over  a number of years in jurisdictions across the globe, from attempts in the US to reform their 138-year-old mining law to activity in several Central and South American countries, Canada and India.

Arguments being advanced that the uncertainties created by the NGC decision to postpone policy decisions to 2012 would cause potential investors to take their investments elsewhere are probably also overstated. It is a fact that there are few places on the globe where there is absolute long-term certainty about  either the regulatory or the licence/exploration environment in mining.

At the same time there is such a strong worldwide drive for access to basic resources and minerals that it is unlikely that serious investors will give up easily on any potential opportunity.

The main concerns being targeted to varying degrees in various countries by the drive for mining reform are:

• The impact on the environment and other critical natural resources such as water quality;
• The rights of and benefits to local communities;
• Fair tax and/or royalty income from mining activities; and
• Competitiveness in the investor market.

In the US for example there are concerns that their Treasury loses an estimated $100 million annually because the metal-mining industry, unlike coal, oil and gas, can extract resources from public land essentially for free. Taxpayers also pick up the cost, estimated at $50 billion, of cleaning up toxic pollution.

While mining companies acquire land at dirt-low prices for mining purposes, it can  be sold off or developed later ­– typically after mining activities have  ceased – as commercial or residential land. A similar situation developed in South Africa when, not too many years ago, some mining houses became huge owners of commercial and residential development land on the Witwatersrand and elsewhere.

A report last year on the background to mining reform efforts in the US stated: “Worse yet, a new rush is on in the West. Over the past five years mining claims for uranium, gold and other metals on public land have increased almost 50%. Many of these new claims – staked largely by foreign-owned companies – lie near national treasures such as the Grand Canyon as well as highly populated urban areas and tribal lands.”

In Brazil plans are afoot to reform the mining code, raise the royalties paid by mining companies and seek better protection for the interests of Latin America’s largest economy. Mining reform even became an issue in the elections that took place last Sunday – just as it did in  Australia where a proposed super tax became a major issue in the general election earlier this year.

Other countries wrestling with mining reform include Panama, Costa Rica, Guatemala, El Salvador and a large number of African states.

India’s parliament is expected to consider a new mining law next month aimed at opening the country’s resources to local and foreign private investment. It will also seek to increase the benefits from mining to local communities.

In Canada the government of  Saskatchewan province recently expressed concern that the possible takeover of their fertilizer giant Potash Corporation could cut into corporate tax revenues and mining royalties.

At the same time there is a drive  in Canada to try to enforce more-ethical mining investment by huge Canadian corporations across the globe,

Some 60% of the world’s mining corporations are Canadian. Toronto Stock Exchange-listed corporations have 1 010 projects in South America, 578 in Mexico, 703 in Africa, 376 in Asia and 345 in Australia.

Legislation in process aims at creating ethical guidelines on the investment and promotion of mining, oil and gas projects in developing countries.

Some NGOs, however claim that the planned legislation will do little to address what they claim is the unjust global political and economic system which allows countries like Canada to exploit other nations, their people and their  resources with impunity.

It is clear that reform of the mining industry is going to be in the spotlight globally for some time to come. Under these circumstances a local debate and some study of what is happening internationally is both timely and necessary, provided it does not get hijacked by sectional or ideological lobbies or pressure groups.