Panel discussion: Ownership - presentation by National Union of Mine Workers Regional Co-ordinator Madoda Sambatha at the 2013 Mining Lekgotla. 28 August 2013

1. 2013 MINING LEKGOTLA
PANEL DISCUSSION: OWNERSHIP
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Presentation by Madoda Sambatha
Regional Co-ordinator
msambatha@num.org.za

2. PRESENTATION FOCUS:
HISTORICAL PERSPECTIVES
Extent of state participation in mining in a sample of
developing countries
LEGISLATIVE DEVELOPMENT
ANC LATEST DEVELOPMENT
WHERE ARE WE ON MINING OWNERSHIP, Despite
difference
NUM POSITION ON MINING OWNERSHIP
THE CASE OF SASOL
CONCLUSION
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3. HISTORICAL PERSPECTIVES
Freedom charter:
oAdopted in 1955, and stipulates the following:
The national wealth of the country, the heritage of
all South Africans, shall be restored to the people;
The Mineral wealth beneath the soil, the banks and
monopoly industries shall be transferred to the
ownership of the people as a whole,
All other trade and industry shall be controlled to
assist the well being of the people
AND
“Wealth of the nation shall be shared
amongst those who work it”.
Morogoro, ANC Strategy and
Tactics:
1969 Morogoro S&T says:
‘In our country - more than in any
other part of the oppressed world - it
is inconceivable for liberation to
have meaning without a return of the
wealth of the land to the people as a
whole. It is therefore a fundamental
feature of our strategy that victory
must embrace more than formal
political democracy”.
Further says “To allow the existing
economic forces to retain their
interests intact is to feed the root of
racial supremacy and does not
represent even the shadow of
liberation”.
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4. EXTENT OF STATE PARTICIPATION
IN MINING IN A SAMPLE OF
DEVELOPING COUNTRIES
Botswana
Diamonds negotiable
WI other minerals
Mongolia
10% local/50% Govt.
Chile
100%‐Owned SMC in copper
 Namibia
Diamonds – negotiable.
New SMC
DRC
5% F/negotiated equity
shares 15% ‐51%
Papua New Guinea
30%WI (not all mines)
Zimbabwe
Indigenization laws
51%
Ghana
10% F /20% WI
Sierra Leone
10% F/30% WI
Guinea
15%
South Africa
26% black ownership specified in legislation
SMC?
Kyrgyz Rep.
Variable WI 15%‐66%
Zambia
Minority interests
Liberia
15% F/Mittal only
Law specifies 10%
Source: McPherson, 2010. CI: carried
interest; WI: working or paying interest; F:
“free” equity.
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5. LEGISLATIVE DEVELOPMENT
MPRDA, 2002
Stipulates that:
o“Mineral and petroleum resources are
the common heritage of all the people of
South Africa and the State is the
custodian thereof for the benefit of all
South Africans”.
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6. ANC LATEST DEVELOPMENT
Proposals on Ownership and Control, SIMS document adopted by Mangaung 53rd National
Conference of the ANC- December 2012:
Nationalization of Mining Companies: Section 25 of our Constitution allows for nationalization
for a public purpose or in the public interest, but requires compensation for expropriation at
the market value of such property. It is estimated that the cost for the state to acquire 100% of
listed mining companies only would be just under one trillion Rand and including non‐listed
companies it would be well over R1 trillion (the cost to acquire a 51% controlling share of listed
companies would thus be around R500 billion). This exceeds the entire government budget,
which is expected to exceed R1 trillion rand for the first time in 2012/13.
Consequently, either complete nationalization or 51% would be totally unaffordable and
could put our country into a situation where we lose fiscal sovereignty and have to follow the
dictates of the Bretton Woods Institutions under a Structural
Adjustment Programme (SAP), which would be untenable. Nationalization without
compensation would require a Constitutional change and would result in a near collapse of
foreign investment and access to finance, as well as widespread litigation by foreign investors
domiciled in states that we have trade and investment (protection) agreements with, which
would ultimately likely result in the payment of compensation, all the same. This route would
clearly be an unmitigated economic disaster for our country and our people. This study
proposes that we rather investigate the desired outcomes of state control, in terms of rent
share, growth and development, and make targeted interventions to achieve such outcomes.
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7. WHERE ARE WE ON MINING OWNERSHIP,
RECOGNIZING DIFFERENCE
Latest DMR report on ownership stipulates that:
“ The underlying empowerment funding model has resulted in the actual ownership of the
mining assets intended for transformation purposes being tied in loan agreements.
Accordingly, the net value of large proportion of empowerment deals is negative, due to high
interest rates on the loan and moderate dividend flows, compounded by the recent implosion
of the global financial markets. The rapacious tendencies of the global financial markets have
consistently thwarted the intended progress towards attaining the goals of transformation, as
embedded in the Charter(DMR, 2009)
This report estimates that:
“The current asset value of the Industry at R2 trillion, indicating that 15% HDSA ownership at
current rates would be R300 billion represent only 5% of the current net value of the industry.
It claims that ownership at the present is no more than 9%, and by far the biggest bulk is
concentrated in the hands of anchor partners or special purpose vehicles(SPV’s)”.
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NUM AGREES WITH THIS REPORT
SAMDA AGREES WITH THIS REPORT, (Kio Advisory Services
research report is the most comprehensive report)
CHAMBER OF MINES DIFFERS WITH THIS REPORT

8. NUM POSITIONS ON MINING OWNERSHIP:
Nationalization of mines:
o Based on the SIMS research
document, NUM not in support
of wholesale nationalization:
In support of nationalization of
Strategic Minerals
In support of the call to consolidate
the State ownership, under the
“State Owned Mining Company”.
In support of Mineral Beneficiation
Strategy
In support of the suggested new
“Tax Regime”, based on SIMS report
Calling for new approach on ESOPs
1. NUM ON ESOPs:
NUM proposes that there must be a section in the
MPRDA and Mining Charter, dedicated to ESOPS,
the SIOC ESOP principles be adopted and used in
the suggested section. ESOPS should be compulsory
and mandatory linked to granting of a mining
license and failure to implement and comply should
jeopardize the status of the mining license. This
should be implemented and understood on the
basis of the Freedom Charter Clause on, “Wealth of
the nation shall be shared amongst those who work
it”.
A loan free scheme or employer funded ESOP
Importance of the value of the scheme or
percentage of ownership in the company
Returns profit sharing or dividends needs to be
paid out each time the company declares profit.
oKumba last year turned its 6 000 employees into
half-millionaires in a R2.7-billion payout.
Interesting support, in NUM’s argument:
o“Workers could and should be made part owners
of South Africa’s mines”, says scenario planning
consultant and former Anglo American executive
Clem Sunter .
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As the Union, we will argue
for these changes in the
MPRDA amendments

9. 2.State Owned Mining Company:
Interestingly, SIMS research reveal that:
oMost middle income developing countries such as
Brazil, China, Malaysia and Chile, have state mining
vehicles, but in general they are mineral specific
(state copper mining companies, iron mining
companies, etc.)
In support of the call to establish a State Owned
Mining Company, NUM argued that:
oConsolidation of all current state assets in the
mining industry
oMajority ownership in the strategic minerals:
As NUM we refer to- coal, platinum, chrome,
manganese and iron ore
oSOMCO, based on Parliament legislation
oSOMCO, model similar to CODELCO Chile, and may
consider JV’s and partnerships in operational model
3. Community Trusts and “Worker co-
operatives”:
Based on current mismanagement of the
community trust funds, and the current situation in
NW with Bapo ba Mogale Community Trust;
oCall on DMR and COGTA to develop a new
legislation on Mining Community Trusts, and
approach on “Traditional Authority Ownership”.
oThis legislation must include a necessary shift from
empowering individuals through BEE, and
incorporate a new shift on empowering both
communities through community trusts or
traditional authority ownership, and “worker co-
operatives”.
4. 26 % BEE EMPOWERMENT:
Concentrated in the hands of anchor partners
or special purpose vehicles(SPV’s).
Necessity to have this 26% as unencumbered
cash/ investment, between 2014 and 2019
Open a debate to increase the BEE share of the
Mining charter(26%) to at least 35 % from 2019.
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As the Union, we will argue
for these changes in the
MPRDA amendments

10. THE CASE OF SASOL
Created in 1950 as public entity,
privatized from 1979, shares sold at
discount to established white monopoly
capital
Now supplies 35% of our petrol needs,
but global price of oil now well above
$100/barrel, and SASOL sells at the pump
at import parity price- we are subsidizing
super profits for SASOL.
2013, SASOL announced that R200bn will
be invested in gas of liquid plant in
Louisiana(USA).
“Born courtesy of taxpayers….South
Africa’s biggest company and world leader
in various critical energy technologies is
investing ever more deeply in the US than
it is here. This may be right thing for the
company, but is it right for the country”,
David Gleason, Business Day.
What should be done?
oMedium term:
State must impose a
“Windfall Tax” to SASOL
In 2007 a task established by
the then Minister of Finance,
recommended the need for
Windfall Tax
Instead Treasury agreed on
another project for SASOL
oLong Term:
SASOL should be re-
nationalized
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As the Union, we will argue
for these changes in the
MPRDA amendments

11. CONCLUSION
 The principle stipulated in the Mining
Charter, “Effective ownership is a requisite
instrument to effect meaningful
integration of HDSA into the mainstream
economy”.
 NUM believes on the necessity to
transform ownership of the mining
industry, we believe this is possible
without invoking any anarchic tendency,
we firmly believe in combination of
Growth and Redistribution.
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THANK U,
SIYABULELA