'TAKING A SLEDGE HAMMER TO THE INDUSTRY' - Mining Charter

'TAKING A SLEDGE HAMMER TO THE INDUSTRY' - Mining Charter

NotOurCharter MINING CHARTER IMPACT ASSESSMENT INFOGRAPHIC: ‘TAKING A SLEDGE HAMMER TO THE INDUSTRY’ “The DMR’s charter would do serious damage to mi...

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NotOurCharter MINING CHARTER IMPACT ASSESSMENT INFOGRAPHIC:

‘TAKING A SLEDGE HAMMER TO THE INDUSTRY’ “The DMR’s charter would do serious damage to mining and the economy.” Roger Baxter, CEO, Chamber of Mines The DMR’s charter in its current form will destroy the South African mining industry by imposing extra levies and other costs. And its new targets and processes will benefit only a small minority of South Africans.

WHAT ARE THESE NEW LEVIES? THE 1% PAYOUT

CONFISCATION OF TRAINING FUNDS

1% LEVY ON FOREIGN SUPPLIERS

Holders of new mining rights will have to pay 1% of turnover, as a kind of special dividend, to the 30% BEE shareholders. It is fair to ensure that BEE shareholders receive a dividend stream – as the industry agreed in the 2010 charter. But, using as an example national 2016 data, the total dividends paid by mining companies to shareholders was R6bn. One percent of revenues was R5.7bn. Once the R5.7bn is paid preferentially to the 30% BEE holders, it would leave almost nothing for the remaining shareholders. And more than a quarter of that, R1.5bn, would go to the MTDA*.

Education and skills development is a powerful transformation tool. In 2016 the mining industry spent R6bn (5% of payroll) on empowering employees through education and training. Under the DMR’s charter, the majority of these funds would be redirected to tertiary institutions – to which the mining industry contributed R1.6bn over the past 5 years – and another R2.4bn to the MTDA*, leaving insufficient funds for workers’ training.

Foreign suppliers will have to pay 1% of the value of their sales to the MTDA*.

2016 industry returns according to DMR’s charter

The original idea was that this levy be used for mine community development. But this amount will also be directed to the MTDA*, for no clear purpose yet clarified. The foreign suppliers will simply increase their prices to compensate for their losses. This will make mining inputs more expensive and make our industry less competitive globally.

2016 skills development spending according to DMR’s charter 20%

5% 40% 95% 40% MTDA Tertiary institutions Funds remaining for skills and education

Dividends to 70% of shareholders Dividends paid to 30% of shareholders Source: Stats SA

This will cost the industry approximately another

R700 million PER ANNUM

based on 2016 data

Source: Stats SA

SO WHAT DOES THE DMR’s CHARTER MEAN FOR NEW MINES?

WHERE WILL ALL THESE NEW LEVIES GO?

WHAT DOES ALL THIS MEAN FOR THE INDUSTRY?

Investment in new mining rights will stop. No one other that BEE shareholders (who would include naturalised citizens) would have any reason to invest in new mines.

As we see, most of this money will be redirected to the MTDA*, a fund to be established by the Minister that has no clear function or governance structure.

All these new levies, and there are others, would be tough enough for a booming industry. For the struggling mining industry they are unfordable.

*Mining Transformation and Development Agency

1% levy requirement from foreign suppliers

1% increase in supplier prices

Skills training compromised

For more information visit: miningcharter.chamberofmines.org.za

A less competitive industry that investors won’t want to support

NotOurCharter MINING CHARTER IMPACT ASSESSMENT INFOGRAPHIC:

‘TAKING A SLEDGE HAMMER TO THE INDUSTRY’ “The DMR’s charter would do serious damage to mining and the economy.” Roger Baxter, CEO, Chamber of Mines

THE CURRENT STATE OF SA MINING The South African mining industry is in crisis. The sector has been in drastic decline over the last 5 years: Number of people employed in the industry declined by

70,000

(14%)

Mining’s contribution to GDP declined by

0.2%

per annum

Domestic input costs continue to rise • Energy • Labour • Transport • Steel

Industry profits before tax declined by

48%

Dividends paid to investors declined by

52%

ECONOMIC IMPACT OF THE DMR’S CHARTER Downgrade of mining companies by ratings agencies Investment hurdle rates

IMMEDIATE IMPACT FOLLOWING THE ANNOUNCEMENT OF THE DMR’S CHARTER

R51 billion VALUE LOST

Number and amount of new investment Output = – impact on exports, GDP and jobs Without new investment and given the weak state of the mining industry, the industry will shed:

on 15 June by listed SA mining companies

50, 000 – 100,000 mining jobs and

R2.7 billion

100,000 – 200,000 mining related (or indirect) jobs are at risk

VALUE LOST

on 15 June in pension funds

60%

OF MINING SHAREHOLDERS

are SA citizens, as part of their pension funds, and have been severely impacted

For more information visit: miningcharter.chamberofmines.org.za

Contribution to fiscus Shrinking pie = Bad for transformation Bad for the country Bad for savings Bad for communities Bad for all citizens