Zuma chooses inexperienced party ally to cure South Africa’s distressed mining sector

By bne IntelliNews September 23, 2015

South Africa’s President Jacob Zuma announced late on September 22 a stunning cabinet reshuffle, replacing mineral resources minister Ngoako Ramatlhodi with a little-known, yet controversial, provincial politician with no mining experience, who should inspire confidence in the distressed sector.

Mosebenzi Joseph Zwane, who has previously served as Member of the Executive Council (MEC) in the portfolios of Agriculture and Rural Development as well as Economic Development, Tourism and Environmental Affairs in the Free State provincial government, will be sworn in in the afternoon of September 23, the Presidency said in a statement. Zwane has been Member of Parliament (MEP) since earlier this month.

South Africa’s mining industry directly accounts for about 6% of the country's GDP and for some 18% indirectly. It is also responsible for more than 50% of the country’s export revenues and employs about 440,000 people. The sector, which has been beleaguered by continuous strikes for higher pay, low global commodity prices, and increasing input costs amid weakening local currency and electricity constraints, has a significant impact over other parts of the economy and its performance is a major indicator of economic growth prospects.

The appointment of a markedly inexperienced provincial politician comes at a time, when trade unions are pushing for higher wages, while miners, in a dire need to cut costs and improve profitability to please shareholders, are fighting with the state and unions to implement restructuring plans that include thousands of job cuts in a country with a 25% unemployment rate.

The reshuffle comes also shortly before the start of the mining Phakisa, a vital meeting between the mining industry’s many stakeholders, designed to find ways to heal South Africa’s ailing mining industry. Last week, the Chamber of Mines of South Africa stressed that collaboration is much needed to address the widening of the historical ‘trust deficit’ between the public and private sectors in mining.

So, the appointment raised a lot of eyebrows as well as allegations of cronyism. James Lorimer, the opposition Democratic Alliance’s shadow mineral resources minister, wondered on the party’s website:

“What can Zwane deliver that could not be delivered by other ANC heavyweights who know something about mining? Deputy Minister Godfrey Oliphant comes to mind.”

“At least the new mining minister appears well versed in the current government policy of cronyism,” Lorimer tweeted.

On the union’s side, Joseph Mathunjwa, President of the Association of Mineworkers and Construction Union (AMCU), also wondered whether the change was political, according to EyeWitness news.

“He has only been on a provincial platform. Mining is another terrain, it needs a person with a thick skin,” Mathunjwa told Bloomberg.

Who is Mosebenzi Zwane

While Zwane is a stranger to the mining industry, he appeared in the media some two years ago, when a controversial ZAR570mn ($) Free State dairy project hit the headlines. Later, a treasury investigation found that the project was riddled with irregularities, designed to milk provincial government coffers, with Zwane taking an active role as an agriculture MEC during the time. The probe also flagged allegations of the influential Gupta family’s proximity to the project and several of the role players, including Zwane, according to the Mail&Guardian. That project continues to run at a loss and has cost the Free State some ZAR190mn, according to Lorimer.

“The Gupta family is involved in coal and uranium mining and have attracted allegations that their companies have flouted regulations. Zwane’s appointment will throw a spotlight on his relationship with them,” Lorimer noted.

In 2013, a private jet carrying Indian guests to a Gupta wedding landed illegally at a South African military air force base in Pretoria, sparking a major political scandal and drawing international attention to the Indian family that moved to South Africa in 1993 and developed a large business empire, allegedly with the personal blessing of Zuma. The family business, which started with a small hardware distribution firm, Sahara Computers, now spans over computers, mining, air travel, energy, technology, and media.

As regards to minerals, the Gupta family runs the companies Tegeta Exploration and Resources and Shiva Uranium. Tegeta is involved in green field and brown field mining projects for minerals like coal, manganese, iron ore, chrome, etc. It has one operating mine, the Brakfontein colliery in Mpumalanga province, which signed in March a ZAR4bn 10-year deal to supply coal to the state-owned power utility Eskom, after failing four quality tests and passing the fifth one with a dubious result.

Shiva Uranium’s gold and uranium complex in the North West province, one of the largest in the world, also has been involved in a scandal, regarding carrying out work that was outside what was allowed in the environmental plans.

Meanwhile, Ramatlhodi, who has failed to bring stability to the jittery mining sector, will take the post of Public Service and Administration Minister, which has been vacant since the passing of the former minister, Collins Chabane, in March.

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