The Massacre of Our Illusions...and the Seeds of Something New

The story of Marikana runs much deeper than an inter-union spat. After the horror of watching people being massacred on television, Marikana now joins the ranks of the Bulhoek and Sharpeville massacres, and the images evoked by Hugh Masekela’s Stimela, in the odious history of a method of capital accumulation based on violence.

But this is not just a story of violence and grief. To speak in those terms only would be to add the same insult to the injury perpetrated by the police on the striking workers, as many commentators have done - seeing the striking miners as mere victims and not as agents of their own future and, more importantly, as the source of a new movement in the making.

The broader platinum belt has been home to new upsurges of struggle over the last five years. From the working class community activists of Merafong and Khutsong to the striking workers of Angloplat, Implat and now Lonmin, these struggles, including the nationwide “service delivery” revolts, are a sign that a new movement is being forged despite the state violence that killed Andries Tatane and massacred the Lonmin workers. Rather than just howl our outrage, it is time to take sides and offer our support.                      

After Marikana, things will never be the same again.   

Firstly, the killings mark the end of the illusion that the ANC has not been transformed into the party of big capital. For some while now the ANC could trade on its liberation credits in arguing that all criticism came from those trying to defend white privilege. The DA was perfect to be cast in this role because it always attacked the ANC for not being business-friendly enough.

But Marikana was an attack on workers in defence of white privilege, specifically the mining house, Lonmin. Lonmin epitomises the make-up of the new elite in South Africa: old white capital garnished with a sprinkling of politically connected Blacks.  

In this, the ANC steps squarely into the shoes of its predecessor, apartheid’s Nationalist Party, acting to secure the profits of mining capital through violence.
                                                   
Secondly, the strike and the massacre also mark a turning point in the liberation alliance around the ANC – particularly COSATU. Whereas the community and youth wings of what was called the Mass Democratic Movement became disgraced after 1994 by their association with corrupt councillors, and eclipsed by the service delivery revolts of today, COSATU’s moral authority was enhanced. Within what is called “civil society”, COSATU continued to be a moral voice. So anyone who had a campaign sought out COSATU as a partner. This moral authority came because COSATU was simply the most organised voice amongst the working class.   

Today COSATU’s links with the working class are only very tenuous.

It is almost intuitive that we consider the notion of a worker as someone working for a clear employer, on a full-time basis, in a large factory, supermarket or mine. Indeed classical industrial trade unions were forged by workers in large factories and industrial areas. This was the case in many countries where such unions won the right to organise and was also the case in South Africa, when a new wave of large industrial unions emerged after 1973’s Durban Strikes.

Going along with this structure were the residential spaces of townships. From the 1950s the apartheid regime increasingly came to accept the de facto existence of a settled urban proletariat and built the match-box brick houses in the townships of the apartheid era: the Sowetos, Kathlehongs, Tembisas.

So the working class was organised by capitalism into large industrial sites and brick houses in large sprawling townships.

Since the 1980s, the neo-liberal phase of capitalism has changed this.
 
Neo liberalism has not only been about privatisation and global speculation. It has also been about restructuring work and home. Today casualisation, outsourcing, work from home, labour brokers and other forms of informalisation have become the dominant form of work and shack dwelling the mode of existence of the working class. The latter is in direct proportion to the withdrawal of the state from providing housing and associated services.

Twenty years ago the underground workers of Lonmin would have lived in a compound policed by the company. Today the rock drill workers live in a shantytown near the mine.   

Also, mining itself has changed. Much of the hard work underground is now done by workers sourced from labour brokers. These are the most exploited workers, working the longest hours with the most flexible arrangements. Today it is even possible to own a mine and not work it yourself but to contract engineering firms like Murray and Roberts to do the mining for you. Into the mix can be added so-called “illegal miners” who literally mine with spades and their own dynamite and then sell on to middlemen with links to big businesses.

Lonmin has exploited these divisions – using the old mining industry strategy of recruiting along tribal divisions. The rock drill workers are Xhosas who are railed in from the Eastern Cape to heighten the exploitation at the coalface.

Add to this the toxic mix of mine security, barbed-wire enclosures and informal housing, as identified by the BenchMarks Foundation, and a picture of institutionalised violence emerges.      

By way of contrast the dominant trade unions in South Africa have largely moved up upscale towards white-collar workers and away from this majority. Today the large COSATU affiliates comprise of public sector white-collar workers, like the South African Democratic Teachers’ Union. The lower level blue-collar workers are now employed by labour brokers and are in services that have been outsourced, like cleaning, security and so on. They don’t fall within the bargaining units of the Public Sector Bargaining Council.

The Lonmin strike was the second in the last three months to hit the platinum sector. It was preceded by a strike at Implats. Both involved the Association of Mining and Construction Workers’ Union (AMCU) as workers sought an outlet for their frustrations.

The mining trade journal Miningmix published this story in 2009:

(A) gradual change had taken place in the profile of the NUM membership over the last 15 years; one that nobody had taken notice of. The NUM was originally borne out of the lowest job categories of South African mineworkers, mainly from gold mines. More than 60% of its members were foreigners, mostly illiterate migrant labourers.

Nowadays that number has dropped to below 40%. On the other hand, an increasing portion of the NUM’s membership comes from what can be described as white-collar mining staff, who had previously been represented exclusively by Solidarity and UASA. The local NUM structures in Rustenburg, like the branch office bearers and the shop stewards, are dominated by these skilled, higher level workers. They are literate, well spoken and wealthy compared to the general workers and machine operators underground.

So while the NUM remains the largest affiliate of COSATU, it is changing from a union of coalface workers to a union of above ground technicians. It is these developments that led to the formation of a breakaway union. Whatever the credentials of AMCU, its emergence is a direct challenge to the hegemony of NUM and of COSATU. As such, the federation has embarked on a disgraceful campaign of slandering the striking workers and their union.

In this they have been joined by the media.
        
With the notable exception of the Cape Times, the media’s culpability in demonising the striking workers has been reprehensible. In addition to only quoting NUM sources for information, or focusing on Malema, there have been no attempts to dig beneath the idea of manipulated workers and inter-union rivalry.

They all depicted the rock drillers as uneducated, Basotho or Eastern Cape Xhosas, whilst flogging the idea of an increase to R12 500 as “unreasonable”.

Then there is the notion that workers went to AMCU because they were promised R12 500. This fiction is repeated endlessly by the media. Journalists are of course happy to source this from “unnamed” NUM sources. The slander here is that workers are so open to manipulation that they will believe any empty promises. This plays to the prejudice repeated by Frans Baleni of NUM from his Nyala that rock drill workers are uneducated, and it bolsters the idea that AMCU is some kind of slick willy operation that must take responsibility for the massacre.

Anyone with any experience of organising knows that trade unions don’t come to workers like insurance salesman. In the main, workers form their own committees and then send a delegation to the union office demanding that an organiser come and sign them up. Or, they simply down tools forcing their employer to contact a union organiser.

Nor is any strike decision, let alone a strike such as this one - unprotected, under the umbrella of an unrecognised union, in a workplace with mine security and where the workers themselves are far from home in a strange region - ever taken lightly. Wildcat strikes are probably the most conscious act of sacrifice and courage that anyone can take, driven by anger and desperation and involving the full knowledge that you could lose your job and your family’s livelihood.

In normal times trade unions can be as much a huge bureaucratic machine as a corporation or a state department with negotiations conducted by small teams far from the thousands of rank-and-file members. Strikes change all that…suddenly unions are forced to be conduits of their members’ aspirations.

Whatever the merits of AMCU as a democratic union or as one with any vision of transformation; whatever the involvement of the Themba Godis, the workers of Marikana made their choice:  to become members of AMCU and risk everything, including their lives, for a better future.

For that we owe them more than just pious sympathy. There is a job of mobilisation and movement-building to be done.
                         
Almost 40 years ago, in 1973, workers from companies around Durban came out in a series of wildcat - then really illegal - strikes. Today this event is celebrated by everyone as part of the revival of the anti-apartheid movement and the birth of a new phase of radical trade unionism, culminating in the formation of COSATU.

But in 1973, the media highlighted the threat of violence and called for the restoration of law and order. The apartheid state could not respond with the kind of killings that happened at Marikana because the strikes were in industrial areas, but they invoked the same idea of ignorant misled workers (then they were seen as ignorant Zulus) and had homeland leader Mangosutho Buthelezi send his emissary, Barney Dladla, to talk to the workers.

While in exile, the SACP questioned the bona fides of the strikes, invoking the involvement of Buthelezi to perpetuate the fiction of “ignorant Zulus” because they were not called for by the liberation aligned union body, SACTU. Some in SACTU circles raised the spectre of liberals and CIA involvement in the new worker formations with an agenda to “sideline the liberation movement”. This separation of the ANC and its allies from the early labour movement was to lead to the divisions between the “workerist unions” and the “populist unions” in the labour movement and was to continue within COSATU.
                                              
How easily people forget this when workers forge new movements today.

For a long time now the ongoing service delivery revolts throughout the country have failed to register on the iPads and Blackberries of the chattering classes. This is because of the social distance of the middle classes to the new working classes.

Now the sight of the police shooting striking workers on TV has brought the real world of current struggles right into the lounges and bedrooms of public opinion.

So far the strikers have stood firm not only against the police and Lonmin, but also against the media labelling their strike “illegal”. Strikes are not illegal in South Africa; they are only protected or unprotected. Meanwhile NUM and COSATU are rallying behind their ally, the ANC, to stigmatise the strikers and their union as “paid by BHP Billiton and the Chamber of Mines”.   

In the midst of our outrage at this brutality let us acknowledge that a new movement is emerging. Such early signs do not as yet indicate something grand and well organised. Movements are notoriously messy and difficult to assign to some kind of predetermined ideological box. We do not know what ups and downs people will go through but when the seeds of a new movement are being planted it is time to ask what the rest of us can do to help it to grow.

Gentle is the director of the International Labour Research and Information Group (ILRIG), an NGO that produces educational materials for activists in social movements and trade unions.

Read more articles by Leonard Gentle. 

 

Source: SACSIS 

Feeding Frenzy: its a BEE feast for Zuma cronies

The controversies surrounding the Sishen and Lonrho mineral rights have raised old questions about black economic empowerment (BEE), including the undeserved enrichment of elite individuals. But now, under the Jacob Zuma regime, there is growing concern about cronyism, patronage, and the role of government officials.

This time the appearance of patronage can be traced to the top. Some individuals, including the president’s son, Duduzane Zuma, could be greatly enriched by gaining ownership of mineral rights in a questionable process. Unease about the process has become more widespread.

The National Union of Metal Workers (Numsa) has commented scathingly on what it calls “the ArcelorMittal and Imperial Crown Trading looting scheme”. Minerals & resources minister Susan Shabangu’s decision last week to place a moratorium on new awards of mineral rights demonstrates that even government has concerns.

These events raise important questions: how are BEE policies working, what are the achievements and weaknesses — and are the effects in line with government’s intentions?

In more than 16 years, BEE has achieved many successes and some failures. It started in the early 1990s with companies such as Thebe Investments, launched by senior ANC officials, and Nthato Motlana’s Corporate Africa, which gained control of New Africa Investments (Nail). Thebe remains a successful enterprise, and there are other enduring black-controlled businesses. Some have grown through strong share price gains, buoyant markets and productive investment.

Among these are Patrice Motsepe’s African Rainbow Minerals, with a R34bn market cap, and MTN (R225bn market cap) which is run by CE Phuthuma Nhleko. One of the most successful is the unlisted Royal Bafokeng Holdings, a community-based investment company . It started with royalties from Impala platinum mining . Under chairman Kgosi Leruo Molotlegi and CE Niall Carroll, a former investment banker, it has diversified into mining, financial and industrial investments. At its financial year-end last December, it had a R30bn investment portfolio and minimal debt.

Nail started as a 20% shareholder in Sanlam’s Metlife, then attempted to become a conglomerate but collapsed . Mvela Group gathered stakes in companies such as Absa and Life Healthcare, but is now being dismantled . Having made his fortune, founder Tokyo Sexwale has returned to politics as human settlements minister.

Throughout these years, there has been debate about how BEE can best be achieved, and it has worked — but also created risks and unease on many fronts. In an institutional or legal sense, rules of the game were set through the Broad- based Empowerment Act of 2003 and the publication of industry codes and charters over the next few years. These changed the way companies and other stakeholders think about the process.

In the 1990s it was mainly about deals and ownership. The codes and charters have formalised a broader approach. They use a balanced scorecard, giving only a 20% weighting to ownership. Companies also gain credit in other areas including preferential procurement, employment equity, skills development and enterprise development (see table). Management control, where influence over a business is large, gets only 10%.

However, ownership of equity in companies and access to other assets such as mineral rights still play a big role in the process. This is where some old themes and questions are constantly at play. Since the charters and new regulations came into effect , most big companies have done deals over the past few years.

In each case, there are familiar questions: how can the deal be funded when the BEE investors have limited or no capital? Should key individuals benefit from the deal, or should the shareholders be entirely broad-based? If lead individual investors are involved, what value will they add to the business? Will they assist in running the business , adding new perspectives on the board — or provide influence among cronies in high places?

The Sishen/ArcelorMittal case has attracted special attention, partly because valuable mineral rights are involved and there are individuals who have direct links to senior politicians. (See next story). In other large BEE deals announced recently, companies have opted for broad-based empowerment shareholders. That includes the Sasol, SABMiller and MTN deals.

Government and other stakeholders have backed the broad-based empowerment principle, which usually seems intuitively more beneficial. But there is still leeway for companies when designing BEE deals and choosing their partners.

The benefits of broad-based empowerment deals are not always achieved as hoped. Funding arrangements linked to the share price can unravel when product prices or financial markets weaken, as occurred two years ago. Sasol’s R30bn Inzalo deal — which gave 10% of the group’s share capital to the black public, broad-based BEE groups, trade unions, employees and the Sasol Inzalo Foundation — was announced in May 2008, when the share price rose to R490. It’s now R284. Other companies, such as Barloworld, have restructured BEE deals for similar reasons.

Jenny Cargill, founder of BEE consulting company BusinessMap, gives several examples of communities that have been disadvantaged by BEE ventures or decisions made by government officials . The Richtersveld community in the Northern Cape is one. Cargill describes the potentially negative effects on communities as BEE’s “powder keg”.

In planning BEE deals, dilemmas on issues such as funding and the shareholding structure can arise. As the Sishen/ArcelorMittal case has shown, the actual or perceived ability to influence decisions on access to those rights through special relationships can be a valuable card for black investors . For some investors, the special relationships may be their only currency .

When they do play that card, and stand to be greatly enriched , investors and other stakeholders are quick to link the decisions — by government and companies — to a culture of corruption and cronyism, though weak laws, poor transparency and inept officials may be part of the problem. That’s a risk that government cannot afford .

WHAT IT MEANS

The empowerment field is not level

ArcelorMittal deal is just plain rotten

Source: Financial Mail

Zuma meets Hu Jintao in Beijing

South African President Jacob Zuma met his Chinese counterpart Hu Jintao in Beijing on Tuesday for talks aimed at broadening the relationship between Beijing and Africa's biggest economy. The visit is seen as an opportunity for the two countries to explore ways of expanding their already sizeable trade ties -- and also a chance for two emerging powers to solidify their strategic partnership.

Zuma -- who visits Beijing and Shanghai during a three-day trip he has called "crucial" -- was welcomed by Hu at Beijing's Great Hall of the People before the two leaders went into talks. "The talks will surely take the relations between the two countries to greater heights," Zuma said in a speech to business leaders.

Among the agreements signed by the two sides was a deal to exempt diplomatic passport holders from visa requirements, China's Xinhua state news agency said. Chinese Foreign Minister Yang Jiechi said the move would enhance mutual understanding, and facilitate personnel exchanges, Xinhua reported. The two sides were also due to sign cooperation deals in the areas of mineral resources, transportation and environment management, according to Zuma's office.

China National Nuclear Corporation, which runs the nation's growing nuclear energy programme, also is in talks to build a nuclear power plant in South Africa, Dow Jones Newswires quoted a company official as saying Tuesday. China's Vice Commerce Minister Gao Hucheng said Beijing would encourage domestic companies to invest in South Africa's mining and resources sectors, the agency said. It also reported South Africa's Standard Bank Group and state-run China Railway Group were to sign a memorandum of cooperation in Beijing on investments in African rail projects.

Bilateral trade -- which has been expanding since the establishment of full diplomatic relations in 1998 -- last year totalled about $16-billion, according to figures from both countries. "Trade statistics with China continue to reflect the potential that still exists for expanding the commercial relationship," the South African foreign ministry said before the visit. Zuma said on Tuesday that the expansion of foreign trade was a way for his country to "improve the quality of life of all South Africans".

China, which last year overtook the United States to become South Africa's largest export destination, mainly imports raw materials such as iron ore, as well as iron and steel, to fuel its booming economy. Beijing also has unveiled a series of major investments since ploughing $5,5-billion into Standard Bank nearly three years ago. In May, Chinese companies reached deals to build a $217-million cement plant and invest $877-million to take control of a small South African mining company and build a new platinum mine.

South African Trade and Industry Minister Rob Davies on Tuesday told business leaders in Beijing that his country's exports were too dependent on primary goods and that he hoped Beijing could buy more "value-added" goods.

Zuma, who is accompanied by a number of key ministers and 350 business leaders, is due to meet Premier Wen Jiabao and other senior Chinese officials on Wednesday. He was due to visit the World Expo in Shanghai on Thursday.

Source: Mail & Guardian

Cosatu hits at 'elitist' BEE deals

COSATU has condemned what it terms "elitist" Black Economic Empowerment deals in the steel industry. In a statement Cosatu said ArcelorMittal SA (Amsa) had "decided to get new BEE partners with strong links to some in government in the form of the Ayigobi Consortium, which now has a 21 percent stake in Amsa".

The deal was reported to be worth R9,1billion. "Amsa went on to also acquire Imperial Crown Trading (ICT), which was awarded prospecting rights for the 21,4percent of Kumba's Sishen mine by the Department of Mineral Resources in March 2010." The 21,4percent prospecting right granted to ICT was the same right Amsa had allowed to lapse.

Both Kumba and ICT applied to the department for the right ceded by Amsa when it missed the renewal deadline. On Tuesday the department announced its decision to uphold the award of prospecting rights to ICT. Cosatu said it agreed with the National Union of Metalworkers of SA that the deal "clearly appears to be a get-rich-quick scheme involving a so-called BEE consortium, Imperial Crown Trading". Cosatu said it would be increasingly difficult to dispel the perception that through this deal Amsa was buying political clout. "This deal will entrench Amsa dominance in the steel industry to the detriment of the economy and job creation."

Cosatu said current BEE policy was based on the view that empowerment meant giving millions of rands worth of shares to a few individuals, while the overwhelming black majority was left as disempowered. "Instead of making a rich elite minority even richer, BEE should benefit the workers, including the unemployed and poor communities."

Cosatu supported Numsa's call on the ANC, and the government, "to mandate the cabinet to intervene to reverse these seriously embarrassing deals".

Source: The Sowetan

Mining shaky ground:"Shades of Zimbabwe"

South Africa might well have said goodbye to significant new foreign investment in its mining industry. Foreigners can be unforgiving when they see what they believe are attempts to grab their assets. Which is precisely what they believe is happening with the recent, though quickly rescinded, ban by the Department of Mineral Resources of normal by-product metals sales by London-registered platinum miner Lonmin.

Understandably, politically connected opportunists were seen as being actively helped by the department in their attempts to acquire mining assets cheaply and beyond the legal requirement that 25% ownership of mines be transferred to BEE interests by 2014.

"Shades of Zimbabwe," fund managers muttered. An earlier, similar stratagem directed at an Anglo American subsidiary, Kumba's Sishen Iron Ore, was initially largely overlooked as being an aberration. Now, the word "greenmail" is commonly heard in London. Kumba felt it had adhered strictly to the rules. When global steelmaker ArcelorMittal missed the April 2009 deadline to convert its prospecting rights - a preliminary to granting mining rights - over 21.4% of Sishen's Northern Cape mine, Kumba itself applied to the department for the rights.

Strangely, before it had considered Kumba's legitimate application, the department awarded the Sishen prospecting rights to the hitherto little-known Imperial Crown Trading - which is closely linked to the presidency and ANC top brass. That effectively sterilises part of Sishen, where mining goes back decades. Imperial has no mining skills, credentials or even visible cash - just political connections. Reportedly, it somehow got its hands on Kumba's application documentation and put in a later bid. The Department of Mineral Resources's first-come-first-served rule was ignored. When challenged earlier this year, mines minister Susan Shabangu blustered that she saw nothing sinister in granting rights to people with affiliations to the ruling party. That was just after she and Anglo CEO Cynthia Carroll had been cosying up to each other at a Cape Town mining conference at which all was sweetness and light. Shabangu was touting SA's mining investment merits and Carroll was making emollient statements about Anglo's commitment to South Africa.

Kumba is mounting a legal challenge to the Imperial award. But, in a new twist this past week, Imperial struck an R800-million deal to be taken over by ArcelorMittal, sweetened by a share in a R9-billion 26% stake in the steelmaker's South African mills - all provided that Imperial can deliver the Sishen rights to the steel company. Some favoured individuals are hoping to make quick fortunes, and they are not the ordinary South Africans BEE is supposed to benefit. Wheels within political wheels. If this deal goes through, a good part of the steel mill's stake will be owned by the Gupta Group, controlled by the Indian Gupta family, which finances the ANC and the party's new daily newspaper - set to hit the streets next month. Gupta has Jacob Zuma's son, Duduzane, on one of its boards. Neighbours say that Duduzane occupies a house provided by the Guptas in Saxonwold. How much closer can one get?

The Lonmin imbroglio was strikingly similar. The platinum miner's application to convert old-order to new-order mining rights has been grinding its way through the Department of Mineral Resources's sluggish approval process for months. But Lonmin had temporarily excluded from its application a tiny piece of ground over which rights were subject to negotiation. Prospecting rights on that area were rapidly granted by the department to the mysterious HolGoun group, controlled by Sivi Gounden. Gounden is reputedly a BEE-enriched individual believed to contribute anonymously to ANC coffers. He is, crucially, also a former director of Lonmin and a former director-general of public enterprises under the ANC government. In October, Gounden abruptly resigned his Lonmin directorship, citing pressure of other business. In Lonmin's last annual report he was dutifully praised by chairman Roger Phillimore for his insights. That sort of encomium is often par for the course, irrespective of the real reasons for a departure.

Lonmin is challenging the HolGoun claim. Lonmin might have preferred to keep the matter private while negotiating, but the department's ban would have had a potentially material effect on the company and it had to be disclosed in terms of stock exchange rules and corporate legislation. After one abortive start, Lonmin is now fully BEE-compliant, moored to Cyril Ramaphosa's unlisted Shanduka investment company, which holds indirect stakes in Lonmin's two mines and its smelter.

Why, fund managers ask, should there have been a total ban on established, normal by-product sales, particularly as HolGoun's prospecting claims cover only a tiny part of Lonmin's property? Was it "greenmail", or a crude attempt to induce Lonmin to transfer more to other BEE wannabes? Certainly, there is a lacuna in South Africa's current mining legislation. But Londoners, with Kumba in mind, believe the Lonmin ban represented another example of official processes being abused to enrich ruling-party stalwarts, or, at least, of incompetence in the Department of Mineral Resources. That might be insulting to the independence of our government departments but, unfortunately for us, the belief is a reality to fund managers, who are increasingly questioning this country's investment merits.

It is, perhaps, telling that the latest international investment climate rankings by Canada's authoritative Fraser Institute downgraded South Africa to a level below the Democratic Republic of the Congo. Miners must go where minerals - particularly the platinum mined by Lonmin and Anglo's Anglo Platinum - are found. Auto plants can be moved elsewhere, mines can't. Nonetheless, there are many new mining opportunities around the globe. It's all a deterrent to new investment crucial to the development of an emerging economy such as South Africa's. As one mining executive put it: "The ANC needs to wake up to reality."

Source: Times Live

South Africa's DRC moment?

The government risks giving South Africa the same reputation as the war-torn Democratic Republic of Congo (DRC) when it comes to mining investments, legal expert Peter Leon warned this week. Leon's comment followed the high-profile legal wrangling between the Department of Mineral Resources and two international companies that have had prospecting rights over their existing mining operations awarded to politically connected rivals.

The first is the case of Imperial Crown Trading, awarded prospecting rights -- the precursor to a mining right -- over an area that is already mined by the Sishen Iron Ore Company, a subsidiary of Kumba Iron Ore. The second concerns platinum miner Lonmin. Business Day reported last week that a company called Keysha Investments, a member of the HolGoun Group headed by former public servant Sivi Gounden and his wife Vanessa, had been awarded prospecting rights over Lonmin's platinum interests. Keysha was granted rights over associated minerals, including nickel, copper and chrome, which Lonmin mines as an ancillary operation.

According to the Department of Mineral Resources, the prospecting right was issued on the grounds that, when Lonmin converted its old-order mining rights to new-order mining rights under the Minerals and Petroleum Resources Development Act, it failed to include associated minerals. Lonmin only did this in December last year, long after the conversion of its mining rights to the platinum group metals two years ago. "At the time when Keysha lodged its prospecting application in respect of the so-called associated minerals, no other application existed," the Mineral Resources Department said this week. Lonmin announced on Thursday, however, that the department had rescinded the order to stop selling the associated minerals, and had processed all of its applications except the "small area which is subject to the prospecting right issued to Keysha".

Peter Leon, a partner at law firm Webber Wentzel, said "Section 16(2) of the Act prohibits the processing (and thus the grant) of a prospecting right application for the same mineral and land over which there is an existing mining right. "In my view, the department should never have accepted, let alone granted, a prospecting right for iron ore to Imperial Crown Trading over the Sishen iron ore mine," he said. However, the Lonmin case was different. "The grant of a prospecting right to Keysha Investments … over a small portion of Lonmin's property does not, on the face of it, appear to have been unlawful, as at the time in question Lonmin did not have the right to exploit the 'associated minerals'," said Leon.

But he said that in the Lonmin case, "it is troubling that the department did not engage more effectively with the company last week and only belatedly granted Lonmin's application after huge ructions in the market … a spate of negative media publicity and considerable collateral damage to South Africa's reputation as an investment destination. "This should not be allowed to happen again, as it risks putting South Africa in the same mining category as the DRC."

The department did not respond to the M&G's questions.

Source: Mail & Guardian

SA vows to crack down on illegal mining

South Africa has vowed to clamp down on illegal mining operations, which have increased on the back of higher metals prices and as Africa's biggest economy hit its first recession in 17 years. Mineral Resources Minister Susan Shabangu said late on Wednesday that illegal mining in the world's top platinum producer and number three producer of gold was valued at R5,6-billion.

She said the government would tighten up legislation to clamp down on illegal operations, as top police detectives investigate the organised crime. "Illegal mining is a huge, multibillion-rand criminal industry featuring national and international syndicates," Shabangu told Parliament. "These gold-smuggling syndicates are highly organised, dangerous and well-resourced," she said.

Shabangu said thousands of diggers, mainly from Lesotho, Mozambique, Zimbabwe and Botswana, risked their lives to share in the loot. The hidden world of illegal miners was recently thrust into the public spotlight when 91 people working in an abandoned mineshaft in Welkom died after a fire broke out.

Shabangu said illegal miners were no different from "ruthless criminals" and were openly carrying AK-47 assault rifles in the Barberton mining district in Mpumalanga, in the north of the country. She said heavily armed gangs were setting booby traps using explosives to protect their illegal mining operations from police and security personnel. "Legal mineworkers have been also abducted in Barberton and used as human shields in confrontations with the police," she said.

Source: Mail & Guardian

The ANC's Oilgate

A Mail & Guardian investigation into covert party funding has revealed how R11-million of public money was diverted to African National Congress coffers ahead of the 2004 elections. In what may be the biggest political funding scandal since 1994, the M&G has established that South Africa's state oil company, PetroSA, irregularly paid R15-million to Imvume Management -- a company closely tied to the ANC -- at a time when the party was desperate for funds to fight elections.

The M&G possesses bank statements and has seen other forensic evidence proving that Imvume transferred the lion's share of this to the ANC within days. PetroSA this week said it was unaware of this. The ANC denied impropriety and said it was not obliged to discuss its funders. The scheme unfolded in two stages. First, PetroSA management bent over backwards to pay Imvume the money as an advance for the procurement of oil condensate. Then, when Imvume diverted the funds to the ANC instead of paying its own foreign suppliers, PetroSA had to cover the shortfall by paying the same amount again.

A multimillion-rand hole remains in the parastatalis books. PetroSA has gone through the motions to recover the debt by suing Imvume -- but most of it remains outstanding. The effect of the entire transaction was that PetroSA, and ultimately the taxpayer, subsidised the ruling party's election campaign: a blatant abuse of public resources. Imvume's role as an ANC "front company" first emerged in February last year when the M&G exposed its oil dealings with Saddam Hussein's Iraq. Imvume principal Sandi Majali obtained lucrative crude oil allocations from that regime when he travelled to Iraq with top ANC officials between 2000 and 2002. More recently, Imvume described its boss as ANC secretary-general Kgalema Motlanthe's "economic adviser".

The transaction in a nutshell

But it was the diversion of the Petro-SA money four months ahead of the 2004 elections that is now lifting the lid on the funding scandal. The deal puts the spotlight on PetroSA's management, which approved the payment; Imvume boss Majali, who asked for the advance and then issued the cheques to the ANC; and Motlanthe, who was Majali's ANC patron. Imvume, now unable to pay its debts, was once the empowerment pin-up of the oil industry.

The contract that caused all the trouble was awarded by PetroSA to Imvume on October 15 2002 -- the day President Thabo Mbeki publicly launched PetroSA as the national oil company. Under the contract, Imvume -- with the backing of Swiss-based resource trader Glencore International -- was to supply PetroSA with regular cargoes of condensate, a feedstock for PetroSA's Mossel Bay gas-to-liquid fuels plant. A number of condensate cargoes were delivered to Mossel Bay during 2003. The standard contractual procedure was for PetroSA to pay Imvume the full cargo price no later than 30 days after the bill of lading date (the date the cargo was loaded for shipment to Mossel Bay).

Once it received payment from PetroSA, Imvume would immediately pay it on to Glencore, which sourced the cargo on international markets. Glencore paid Imvume a commission. But in December 2003 the pattern was broken, and PetroSA has confirmed that standard procedure was departed from. The bill of lading date for that cargo was December 6 2003, meaning PetroSA's payment for the cargo -- worth $10-million (about R65-million) -- was due on January 5 2004. But Imvume's Majali asked PetroSA for an advance of R15-million (just more than $2-million of the $10-million) which was paid even before the cargo was discharged on December 22. PetroSA paid the advance into a different account to that usually used by Imvume for the contract.

Evidence in the M&G's possession confirms that Imvume Management's corporate account was credited with R15-million a day later, on December 19. And the M&G has seen forensic proof that within the next four days, Imvume's Majali issued a series of four cheques to the ANC -- for R4-million, R3-million and R2-million (twice). These cheques, totalling R11-million, were all transacted on December 23. This week Majali and Imvume did not dispute that the money was paid to the ANC, but claimed their support for the party was a "private affair".

The transfers to the ANC came four months before the elections, held on April 14 2004. A number of sources have described the party's financial straits around that time, claiming it had a bank overdraft typically running at more than R100-million. When payment for the cargo became due to Glencore on January 5, Imvume failed to pay the company the R15-million advance -- and, effectively, also withheld another R3-million from the balance owed.

Glencore turned to PetroSA for what it was owed, eventually threatening in February not to offload the next cargo. PetroSA agreed to cover the shortfall of R18-million, for fear that the Mossel Bay plant would run out of feedstock, leading to greater losses. Effectively, PetroSA paid R18-million twice -- once to Imvume, and once to Imvume's supplier. PetroSA maintains that the special circumstances of the empowerment environment largely excuse the actions of its management. It also denies that there was pressure from either the Minerals and Energy Ministry or the ANC to approve the advance to Imvume.

Circumstances, however, suggest that empowerment is not a sufficient explanation and that Imvume's ANC links played a role. These links were no secret in oil trading circles. A businessman active in the sector told the M&G last year: "It was talked about when they got tenders ... that it was an ANC company ... I certainly understand that ANC fundraising has a keen interest."

The advance payment to Imvume was irregular in that it was a departure from standard procedures. PetroSA maintains procurement policy allows for advance payments, but admits it "should have checked" whether the money was going into the usual account. When the transaction with Imvume blew up in its face, PetroSA continued treating the company with kid gloves.

On February 23 last year, four days after PetroSA had been forced to settle Imvume's debt with Glencore, Majali signed an acknowledgement of debt to PetroSA, agreeing to repay the R18-million plus interest within 90 days. He also ceded his company's revenue stream as security. But Imvume paid nothing in terms of that agreement. Court records show more than a month passed after the expiry of the 90-day term before PetroSA issued a letter of demand. (See "PetroSA vs Imvume Management" download box on top right of this article for full documents).

PetroSA's choice of lawyer employed to pursue the demand raises further questions about PetroSA's seriousness of purpose. The lawyer, Leslie Mkhabela, was previously Imvume's own attorney and still has a business relationship with Majali via their common interest in Forever Resorts Aventura, the privatised state leisure company. This raises conflict-of-interest questions.

Mkhabela maintained this week that this was not a problem as he had disclosed his business relationship with Majali to PetroSA. The agreement signed between Mkhize and Majali was still not enforced. Instead new terms, much more favourable to Imvume, were agreed between PetroSA chief executive Sipho Mkhize and Majali in September last year.

Now PetroSA waived any claim to interest and agreed that Imvume could repay the capital amount in monthly instalments over four and a half years. But again, in February this year and after paying only R1,33-million, Imvume defaulted, court papers show.

PetroSA took off the kid gloves for a little while, filing an application for summary judgement in the Johannesburg High Court. But the matter was postponed twice, and on a third court date -- May 3 this year -- PetroSA removed the matter from the roll. PetroSA this week claimed that this was to allow Imvume to remain operational, which would give PetroSA a better chance eventually to recoup the debt.

The ANC this week threatened legal action against the M&G without confirming or denying the flow of money to it. Circumstantial evidence strongly suggests the ANC knew exactly where the funding was coming from. Between 2000 and 2002, when Majali was trading in oil allocations from Saddam Hussein's Iraq, the ANC's Motlanthe repeatedly accompanied him to that country. ANC treasurer general Mendi Msimang also went along on at least one occasion.

It is rumoured that the relationship between Majali and Motlanthe has cooled recently, but an Imvume brochure last year still described Majali as "economic adviser to the secretary general of the ANC". Describing the company's "winning formula", the brochure said Imvume had "access and influence on economic policy".

How they responded ...

PETROSA
The cornerstone of this deal is the policy adopted by PetroSA, which is a national initiative, black economic empowerment (BEE). PetroSA has a mandate to introduce hitherto disadvantaged South Africans into the oil and gas industry. PetroSA had a choice: to continue business as usual and exclude historically disadvantaged South Africans from the mainstream economy and prolong, if not propagate, the two-economies concept, or use our procurement muscle to bring fundamental change to the industry.

To procure a raw material referred to as condensate, the requirement was that the preferred supplier must have a South African partner who qualifies as a BEE candidate. This in effect introduced a major shift in the industry. We deliberately signed deals with the historically disadvantaged party to ensure that they were not "brought along" to the deal, but in fact they were the "principal partner" in the deal.

# On the [High Court] case PetroSA brought against Imvume PetroSA suspended the case due to the fact that if Imvume were liquidated, there would be very little proceeds flowing into PetroSA from that exercise. Imvume is much better off remaining operational for PetroSA to be able to recoup the total sum owed to PetroSA as well as interest and the legal costs.

# On Leslie Mkhabela [PetroSA's choice of lawyer to sue Imvume]
Mkhabela assured PetroSA of the following: he acted on behalf of Imvume during 2002/03. He later decided to resign from their business. While he acted for Imvume, he was invited into a consortium that submitted a bid for the Aventura Resort in exchange for his services. He retains no personal friendship with Imvume.

# On PetroSA's actions and internal inquiry
At the request of Imvume, PetroSA effected a pre-payment into an account different from the normal account. We changed the account without considering that there may be negative ramifications. PetroSA has since tightened the controls around channels of communication and instruction from vendors on payments. PetroSA in its enquiry has not found any wrongdoing by any individual or individuals within PetroSA or external to PetroSA with line of sight to PetroSA. All the procedures and processes were followed. PetroSA honoured the letter of the contract. At times we assist suppliers to better deliver to PetroSA where possible. The procurement policy at PetroSA allows for payments of this nature.

# On the double payment
Glencore held the product. Even though PetroSA did not have a contract with them, they had a ship in the harbour with our product. As we had already paid, PetroSA had to make a decision; to either pay them and deal with Imvume later -- this would cost us $2,8-million -- or refuse to pay and have our refinery cease operating for a minimum of 40 days, at the cost of $1-million daily. The PetroSA board ratified the decision.

# Conclusion
It is the intention of PetroSA to recoup all the funds involved in this dispute. A liquidated Imvume would not generate the required proceeds for PetroSA. This would lead to an outright loss. PetroSA needs Imvume to pay back the money owed to PetroSA.

BARRY AARON & ASSOCIATES (lawyers for Majali and Imvume):
Our clients have requested us to record that Imvume had legitimately withheld payment in the sum of $2,8-million from Glencore against receipt of the expected commission on the profit-sharing arrangement in relation to Imvume's contract with PetroSA.

The withholding of this payment was not contested by Glencore until immediately prior to delivery of the next shipment, which it then refused to offload until such time as the shortfall (as Glencore perceived it) on the previous shipment had been paid. This resulted in PetroSA effecting payment of the shortfall and Imvume executing the acknowledgement [of debt] in favour of PetroSA.

The issue of commission from Glencore remains unresolved. Imvume expected to repay PetroSA from anticipated funds and separately resolve the issue with Glencore. Unfortunately, the anticipated funds did not materialise. Imvume has concluded arrangements with PetroSA for repayment. Imvume intends honouring its obligations to PetroSA. Our clients have no objection to fair investigative journalism and comment. [The M&G] however continues to harass our clients in an ongoing witch-hunt. [The M&G] appears to have accessed Imvume's private and confidential records, including (in particular) its banking records, constituting an invasion of our clients' rights to privacy, conduct way beyond the norms of responsible or acceptable investigative journalism. Our clients are a private businessman and a private company respectively, engaging in the legitimate pursuit of their activities. Their business activities and support for the ANC are their private affair. [The M&G] is sabotaging and subverting a legitimate black empowerment initiative.

MNMR Attorneys (for the ANC and Kgalema Motlanthe)
The short time period provided for comment demonstrates that the M&G will not give proper consideration to our clients' submissions. We wish to note that following the recent decision of the Cape high court in the Idasa matter, our clients are not obliged to discuss donations received by it from any person. Even if it were so, our clients would have no obligation and would not always have the ability or means to verify the identity of the sources of all donations made to it. We record, however, that our clients deny any insinuation that they acted in any corrupt, illegal or improper manner. Our clients will not hesitate to protect their rights should the M&G publish the defamatory material contemplated in [your] e-mail.

Source: Mail & Guardian