An explosive fuse is lit

The Minerals and Petroleum Resources Development Bill is arguably the most fiercely contested measure to have been initiated by the African National Congress since it came to power in 1994. It is more than that, however. It is probably the most important law to have been passed by Parliament in the post-apartheid era, with the exception of the Republic of South Africa Constitution Act of 1996 that serves as the legal foundation of the new order.

A law that seeks to "transform" the mining industry, as the minerals bill does, will inevitably be controversial. The mining industry is disputed terrain in South African history on which much blood has been spilt. The burden of the past rests heavily on the shoulders of the main actors in the present situation. All feel its weight: the Minister of Minerals and Energy, the handful of white-led mining corporations that bestride the mining industry like colossi, the thrusting black entrepreneurs who aspire to a major share of control, and, of course, the black miners, represented pre-eminently by the National Union of Mineworkers (NUM).

Formal signing of the bill into law - anticipated to occur before the end of the year - will be an event of profound significance for the same historical reasons. Mining has been of central importance to the economic development of South Africa since the discovery of diamonds and gold in large quantities in the second half of the 19th century. It still is, though less so than in the past.

The Chamber of Mines has sought to remind the ANC government of the industry's continuing economic contribution to South Africa and of the danger of disrupting that by proceeding too rapidly - or too recklessly - with "transformation" of the industry. The chamber notes that 5 million South Africans (one in every eight) receive "their primary income" from the mining industry. Beyond that, the chamber adds, the mining industry continues to generate jobs in an economy that has singularly failed to do so in the past decade. The mining industry provides 40 per cent of South Africa's exports directly and is currently committed to investment of billions of rands on capital expenditure to expand production.

Neither the government nor the NUM dispute the economic importance of the mining industry. The NUM endorses the point in its presentation to the parliamentary portfolio committee. It observes that, according to the Department of Minerals and Energy, mining remains an important sector of the economy, accounting for 7,5 per cent of the gross domestic product, the livelihoods of 2,6 per cent of the economically active population and 41 per cent of the foreign exchange. But, judging from their official statements, the continuation of the mining industry's economic importance makes the task of transforming no less urgent, a process to be expedited rather than delayed.

The risk of seeking to "transform" the industry too hastily is clear for all to see, however. The initial reaction of the market to a leaked draft of the black economic empowerment charter - which is provided for in the bill - should be etched on the minds of all stakeholders in the industry: the shares of SA gold and platinum mining companies plunged precipitously and R45.1bn was wiped off the FTSE/JSE African Resources index.

The market has since regained much of what was lost, thanks largely to hasty assurances from government and the mining corporations that the charter was a first draft that would be refined after negotiations. The broad objective of the "first draft" of the charter are worth recording: the transfer of 51 per cent of the mining industry to "historically disadvantaged South Africans within the next ten 10 years". It serves as a warning that reiteration of a similar target, without major qualification, could send the market into an even more disastrous tailspin, the historical injustices of the past notwithstanding.

Looking back at the history of mining in South Africa helps explain the intensity with which the minerals bill has been debated. It serves, too, to contextualise and thus to elucidate the points of departure of the main protagonists.

The Rand Revolt of 1922 was a critical event in the history of the mining industry. A fall in the price of gold was the immediate cause of a strike by white mine workers, though an earlier strike in 1913, in which at least 21 people were killed, had already identified white mine workers and white mine owners as potential class enemies. Faced with declining profits the mine owners, through their organisation, the Chamber of Mines, cast about for ways to cut the costs of production. Apart from planning to reduce the wages of the highest paid white miners and, it was reported, to retrench at least 2 000 white miners, the chamber announced its intention of reorganising underground work. The purpose of the last move was to enable black miners to do semi-skilled work previously done by white miners but at lower wages.

Within a matter of days, a strike to thwart the chamber's proposed cost-cutting exercise had started. Led by coal miners, it was soon reinforced by their comrades in the gold mines. Attempts to negotiate a settlement failed. Militants, some of them communists, hoisted a banner that read: "Workers of the world fight and unite for a white South Africa". The prime minister, JC Smuts, believing that law and order was threatened, abandoned his commitment to "draw a ring round both parties and let them fight it out". He intervened, instead, declaring martial law and calling out the army. The strike-cum-revolt was crushed at the cost of 210 dead (129 soldiers and policemen and 81 civilians, 39 of whom were identified as "revolutionaries"). About 5 000 white workers were arrested. Four were eventually hanged.

Smuts had shown that he would back the mine owners against their workers when the chips were down. He was to confirm that reputation in a slightly different context in 1946.

Black miners helped to exploit South Africa's rich but deep reefs of gold from the discovery of gold in Johannesburg in 1884 onwards. Low wages and appalling living conditions led to reoccurring strikes by black miners. The first took place in 1896. In what was to become a standard pattern, it was crushed by armed force. The Second World War (1939 - 1945) and the intensifying rate of industrialisation fostered increased militancy among black workers generally. Black miners were no exception. The African Mine Workers' Union, formed in 1941, mobilised more than 60 000 black miners for strike action on 19 mines in 1946. The strike, launched on 12 August, was for a wage of 10 shillings a day and for family housing (under the prevailing migrant labour system workers were accommodated in single-sex compounds). Smuts was in power again. The police were sent in to break up the strike. Twelve miners were killed. Smuts had again intervened on the side of the mine owners against their workers. It was 1922 all over again, except that the striking workers were black. With minor exceptions, white miners, having made a deal with the mining houses that gave them a privileged status over their black fellow workers, had no sympathy for the striking black miners.

New threats to the established white (and predominantly English) mining corporations were looming on the horizon, however. The first came from resurgent Afrikaner nationalism, the second from increasingly militant African nationalism. Afrikaner nationalism triumphed in 1948 when DF Malan's National Party defeated the United Party of Smuts.

The more radical Afrikaner nationalists, infected by Adolf Hitler's doctrine of National Socialism and filled with loathing for the "Anglo-Jewish" capitalists whom they caricatured as "Hoggenheimers", spoke of nationalising the mines in the name of die volk. But mainstream Afrikaner nationalisation discarded that option, concentrating, instead, on using state power to promote Afrikaner welfare through an undeclared form of affirmative action in the civil service and to erect apartheid as a shield against African nationalism. But Afrikaner hostility continued against the reorganiseerde geldmag. It surfaced sporadically. It did so in 1962 when the then Prime Minister, Hendrik Verwoerd, attacked the "monetary power of the Oppenheimer group", a reference to Harry Oppenheimer and to the powerful corporations that he presided over, Anglo American and De Beers. Oppenheimer's response was to recruit allies from within Afrikanerdom.

He helped the Afrikaner mining company Federale Mynbou gain control of the General Mining and Finance Corporation or Gencor. The deal ensured that Afrikaner as well as English voices would speak out for mining interests. The Afrikaners who benefited were grateful to Oppenheimer. Tom Muller, managing director of Federale Mynbou, expressed his gratitude unequivocally. "The takeover would not have come about but for the integrity and assistance of Mr Oppenheimer. He has … shown a genuine desire to assist in creating an opening for the Afrikaans business world to come into the world of mining and finance".
The threat to the small number of mining corporations that controlled the mining industry from Afrikaner nationalism abated with the admission to their ranks of an Afrikaner-controlled company. Relations between Oppenheimer and Verwoerd's successor, BJ Vorster, were hardly cordial, however. The Truth and Reconciliation Commission was told during its hearing on the role of business under apartheid that Oppenheimer did not have a single direct man-to-man conversation with Vorster, not even on the telephone. But Vorster, though resentful of Oppenheimer's support of the opposition Progressive Party and the parties that grew out of it, did not threaten to nationalise the mines.

But a new threat was emerging in the form of the African National Congress, two of whose most prominent leaders at the time, Nelson Mandela and Walter Sisulu, had both worked on the mines. The Freedom Charter, adopted by the ANC and its allies in the Congress Movement in 1955, declared: "The national wealth of our country, the heritage of all South Africans, shall be restored to the people. The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole".

The threat, still distant in the 1960s, became more tangible as time progressed. The 1970s witnessed the resurgence of worker militancy, symbolised by a spat of "spontaneous strikes" in 1973 and the later emergence of independent black trade unions (as well as, of course, the rise of the black consciousness movement and the student rebellion of 1976 - 77). The 1980s began with the spectacular attack on the Sasolburg oil refinery by ANC saboteurs. It ended with the release of Sisulu from prison and the open propagation of the Freedom Charter by the pro-ANC United Democratic Front.

The threat to the established mining industry loomed even larger with the formation in 1982 of the National Union of Mineworkers. Under the astute leadership of Cyril Ramaphosa the NUM became the biggest union in South Africa before the end of the decade. One of the last messages sent out of Victor Verster Prison by Mandela before his release in February 1990 was a statement that concentrated the collective mind of the mining magnates (as well as their rich confreres in different sectors of the economy). "The nationalisation of the mines, banks and monopoly industry is the policy of the ANC and a change or modification of our views … is inconceivable," Mandela declared in a message smuggled out of prison.

But within two years of winning the watershed 1994 election and assuming office the ANC undertook a major shift in economic policy. Its adoption in 1996 of the investor-friendly and market-driven macro-economic policy, Growth, Employment and Development (Gear), marked a decisive shift away from its dalliance with socialism. The ideological re-orientation reflected and reinforced a sharp diminution of the influence of the SA Communist Party on the ANC. While socialism was no longer the dominant ideological thread in its policy, the ANC, however, retained a strong insistence on affirmation action and/or "demographic proportionality" in the post-apartheid South Africa. These policies - which permeate the minerals law - were justified as a means of rectifying the historical injustices suffered by black people during decades of white political ascendancy. It was in that context that the proposed minerals law was tabled in Parliament.

The law has two major objectives. They are, firstly, for the state to take custodianship of South Africa's mineral rights (thereby ending private ownership of them, now and in the future), and, secondly, to transform the mining industry by opening it up to the emerging class of black entrepreneurs. Tokyo Sexwale, chairperson of Mvelaphanda Holdings and former Gauteng premier and Robben Island prisoner, exemplifies the potential entrepreneurial beneficiary. A corollary to the law's primary objectives is the break-up of the near concentration of control over the industry by a few white-led mining corporations. Anglo American comes to mind. It typifies these hugely influential corporations. The emphasis on the control exercised by the white-led corporations in the 2002 budget speech of Minerals and Energy Minister, Phumzile Mlambo-Ngcuka, is no coincidence. In her speech she describes South Africa's mining industry as "(racially) exclusive in terms of ownership and equity". The point is developed in her speech. One "white company" holds 63 per cent of South Africa's platinum reserves, she observes, adding that two "white companies" hold 51 per cent of the gold reserves while one "white company" controls 95 per cent of the national diamond production. If the white moguls are fearful of unfair dispossession, Mlambo-Ngcuka's speech offers a counter-view: black business is concerned that it "will be given areas of inferior mineral potential".

The law is not merely concerned with giving black businessmen opportunities to win fortunes in mining. It is designed to help the black miners who, for decades, have risked their lives at the rock face deep beneath the earth's surface. With only a little imagination it is possible to hear the voices of miners who have lost their lives in mining accidents and those who earned meagre wages for grinding and perilous work. They are crying out for redress. On the first point, the NUM notes in its submission to the parliamentary portfolio on minerals and energy: "For every ton of gold mined over the last century a worker has died underground and over a million have been injured or maimed during the same period". Even today, in an era of heightened consciousness on mine safety and fewer accidents and fatalities, the Department of Minerals and Energy, extrapolating from the 150 miners who lost their lives in the first five months of 2002, warns that the total may more than double before the year ends. On wages there is the damning calculation by Francis Wilson, of the University of Cape Town, in his definitive study of remuneration of black miners in South Africa's gold mines: between 1911 and 1969 their wages did not rise in real terms. As startling is Wilson's related finding: during the same period the wage gap between white and black miners widened from 11:1 to 20:1. For that reason the law contains provisions obliging mining companies to submit black economic empowerment plans when applying for mining or prospecting rights under the new order.

In its presentation to the parliamentary portfolio committee, the Chamber of Mines, which represents all the major corporations, defines itself as a firm supporter of the key objectives of the minerals law. It identifies these as "satisfying the aspirations of those who were previously denied any ambitions at all", as "opening the industry to new, mainly black, miners", and as "rapidly extending our democracy from parliament to the very heart of our economy".

Anticipating objections that it cannot be sincere because of "the history of the mining industry in South Africa", the chamber hastens to explain. It is because of that history that it is "so strongly supportive of the government's efforts to transform the economy". The chamber then states that the mining industry has led the way in promoting black economic empowerment in South Africa. "The reality is that since 1997 over R8,4 billion in real empowerment deals at ownership level have been concluded. Currently about 10 per cent of gold mines and 8,5 per cent of (coal) collieries are owned by blacks".

But the chamber's endorsement of the transformation objectives of the law is qualified by a major proviso. It is that the opening of the industry to black miners should occur "without undermining existing rights". Whether that is possible is a moot point, bearing in mind that the existing predominantly white stakeholders control so huge a proportion of the industry. As already noted, black entrepreneurs are already fearful of receiving inferior left-over mining territory. If that happens, it would not compensate for decades of exclusion. Leaving the chamber's problematic proviso aside, the established mining corporations have further concerns about the law. They relate principally to two interrelated issues: the law's failure - in their view - to provide mining corporations with adequate security of tenure and the wide range of matters where the final decision rests on "ministerial discretion".

On the security of tenure issue a briefing paper by a major mining corporation notes that, firstly, "South Africa has many world class deposits" and, secondly, that "mining of world class deposits takes place over long periods of time (ie 100 years)". The briefing note records that a corporation may be actively mining in one area at any point in time but not in an adjacent area, though it is committed to doing so in terms of its authorised long-term mining plan and for which it has invested billions of rands. The briefing missive adds that these concerns were addressed and resolved in terms of the "biltong principle" at the mid-2001 Mbulwa lekgotla between the mining corporations and the government. The principle states, "As long as you are busy eating at one end of your piece of biltong, the rest of your piece of biltong will be secure".

The holders of rights under the old order that pertained before the new minerals law have, however, to convert them into new order rights by reapplying for mining and prospecting licenses. The memorandum of understanding reached at the lekgota states: "The new order right will be granted exclusively to the holder of the old order rights, for the period required in terms of the holder's long term business plan". But, according to the briefing memo, the law does not provide security of mineral rights for more than 30 years. Nor, the memo adds, does the law allow for the "reservation of adjacent areas for subsequent extension of mining operations beyond the initial 30 years".

These anxieties of established mining corporations are reinforced by concern that the law has left too many decisions to ministerial discretion. They include the power to impose "corrective measures" on mining corporations deemed not be "mining optimally" and to apply for the corporation to be placed under judicial management if it fails to take the corrective measures. A related concern is the failure of the law to provide for the right of appeal against a ministerial decision, as agreed in the memorandum of understanding. While an aggrieved corporation has the right - in terms of the minerals law - to ask for a judicial review, the chamber feels that is not enough. A judicial review assesses if the administrative process in reaching the decision is fair. It does not assess the fairness or legality of the decision itself. While not objecting to a judicial review per se the chamber wants the right to appeal to be explicitly stipulated in the law.

Even within the narrower legal parameters of new order rights, there are elements in the law that arouse corporate anxiety. One is that the conversion of old order to new order rights is not automatic. It is dependent on the holders of old order rights filing labour and social plans to enhance the security and welfare of miners, acceptance of which is a ministerial prerogative. The minister, moreover, is obliged under the law to refuse an application which emanates from a company that has an undue "concentration of mineral resources" or which could lead to unfair competition or block entry to the mining industry by historically disadvantaged newcomers. Over and above that the minister is authorised to issue a black economic empowerment charter by administrative decree. The purpose of the charter is to assist those who were deprived of equal opportunities under the old order.

Though the mining corporations have not specifically said so, they must be aware that the incumbent minister is on record as urging the emerging black elite not to be bashful about aspiring to become "filthy rich". Her lack of circumlocution is perhaps praiseworthy. But her forthright language in setting the status of being "filthy rich" as a goal for the black elite to aspire towards raises questions about how she will apply her mind when it comes to the exercise of the ministerial prerogative entrusted to her office.

One course open to the mining corporations to allay their fear and pre-empt hostile government action against them is the "Oppenheimer option" of co-opting aspirant or budding black mining moguls onto their side. Another - which should perhaps be seen as complementary to the co-option response - is to engage in more friendly public dialogue with government. Judging by a press article on the law written by Bobby Godsell, chairperson of Anglo-Gold, and a later agreement between Mlambo-Ngcuka and AngloPlatinum, that tack is being pursued. These strategies may help. The emerging black mining magnates will have to be persuaded, however, that their quest to amass fortunes equal to those of the white Randlords of yesterday, and their successors, will depend on attracting a steady flow of foreign investment. All of which means the necessity of hastening slowly in the transformation of the mining industry in the interests of the industry as a whole.

The NUM, however, is likely to resist any move that smacks of co-option or elitism. As it notes in its submission to the parliamentary portfolio committee on minerals: "Genuine black economic empowerment does not mean the enrichment of a few but, rather, the opening up of economic opportunities and improvement in the living and working conditions for blacks as a whole". An observation a few sentences later is hardly likely to appeal to the emerging black elite: "The surplus (profits) from mining activity, rather than being privately accrued, could be used by the state to fund development, public infrastructure, service delivery and so on".

So far only a few black entrepreneurs have emerged as the beneficiaries of changing times in the mining industry, mainly by skilfully exploiting the willingness of the established corporations to enter into partnership deals with black empowerment consortia.

One is Mzi Khumalo, who has made and lost at least one fortune. Another is Patrice Motsepe, chairperson of African Rainbow Minerals, and a man with a stake in the lucrative platinum mining industry. A third is Bridgette Radebe, chairperson of Mmakau Mining (and wife of Public Enterprises Minister Jeff Radebe and sister of Patrice Motsepe). A fourth is the ubiquitous Sexwale, the chairperson of Mvelaphanda Holdings, who recently struck a partnership deal with Goldfields.

If transformation of the mining industry leads to further enrichment of the emerging black mining moguls at the expense of lesser entrepreneurs and to the exclusion of those who toil underground, the suspicion will be that the new law has led to "crony capitalism", tinged with co-option. The black moguls will find themselves under the spotlight by mining industry observers checking to see whether black workers are faring any better in their employ than their brethren in the established corporations. If they fail to live up the spirit of the Freedom Charter, they may find themselves blown aloft by the petard fashioned by an earlier generation of ANC leaders at Kliptown in 1955.