South Africa’s mining minster said bribery, deception and intimidation plague the mining sector, denting confidence in the economically vital industry. The ministry has imposed a six-month halt on new prospecting bids from the start of September as it overhauls mining laws, irons out irregularities in the way rights are awarded and audits existing exploration and drilling contracts.
Mining Minister Susan Shabangu said on Monday that some rights holders, especially black economic empowerment (BEE) companies, have resisted inspections at their sites or have tried to influence officials during the audits. “Some of the black economic empowerment partners who attend the site visit are clueless about the operations and are over-reliant on consultants — a clear case of fronting,” Shabangu told journalists.
South Africa is the world’s biggest producer of platinum and ferrochrome and a major gold miner. While the sector’s influence on the economy has declined since the end of apartheid in 1994, it is still one of the country’s top employers. South Africa has set a target of 26 percent black ownership of its mines by 2014, but the government has said that whites still dominate the industry and that changes to include more blacks were slow despite a decade of affirmative action.
“We want to make sure that when we reach those targets, that they are real … and it’s not just fronting,” Shabangu said. She said the government had audited 1,475 prospecting rights so far, while some 2,191 audits were still outstanding and were expected to be completed by February next year. Audits so far have revealed illegal drilling, rights sold without permission and companies with competing claims to the same plot.
Disputes over rights and transparency have added to the woes of companies already struggling with power shortages, rising power and wage costs, a strong rand and stricter safety rules. Shabangu said that while bribery and fronting were “not widespread”, a number of companies had failed to start prospecting as laid out in contracts. The ministry is streamlining the rights application system, hoping to halve the processing time to three months for a prospecting license and six months for a mining right.
Some people in the sector, however, are sceptical about the ministry’s ability to resolve the mess and are worried about a perceived lack of leadership from President Jacob Zuma. South Africa’s ruling African National Congress has also agreed to explore greater state control of the mining sector, raising concerns among investors. Its National Executive Committee said in a statement on Monday the ruling party would appoint two senior researchers to look at “successful models that could be considered on the role of the state in mining”.