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‘Govt must consider increasing shareholding in mining companies’

Bereng Mpaki

THE government has several options that it can employ to enhance the country’s earnings from its natural resources, former Mining minister Lebohang Thotanyana, has said.

Among these, the government must consider increasing its stake in the diamond mines.

Mr Thotanyana said this in response to Deputy Prime Minister Mathibeli Mokhothu’s recent assertions that the government must review its natural resources policy to derive maximum benefit.

Mr Mokhothu, who is also the leader of the Democratic Congress (DC), made the remark following the recovery of a 442- carat diamond by Letšeng Diamond Mine last Wednesday.

The gem, which is the mine’s sixth largest recovery to date, has an estimated market value of US$18 million.

Mr Mokhothu wrote on his Twitter account on Sunday that the country would not benefit much out of the sale of the 442-carat diamond unless the government changes its natural resources management.

“We need to work on our natural resources policies so that they can benefit our country,” Mr Mokhothu said.

“We are not going to benefit a lot out of (the estimated) $18 million that the diamond can possibly attract. My heart is bleeding.”

Letšeng Mine is 70 percent owned by the London Stock Exchange-listed Gem Diamonds, with the government holding the remaining 30 percent shares.

It is a similar case with the rest of local diamond mining operations where the government holds a minority stake while the majority is owned by private investors.

And Mr Thotanyana said the government has an options that include increasing its stake in mining companies to enhance its earnings.

“If the government wants to improve its benefit from its natural resources, it can consider increasing its stake in such operations. However, it must be in a position to contribute financially to acquire more shares.

“The government’s current stake is free carry, which means the government has not contributed any capital into mining operations to own those shares.

“This is a nice debate to bring up but the important debate should be whether or not the government is capable and willing to invest capital into mining operations for it to increase its stake. We are yet to have a situation where the government has contributed capital and therefore, we are yet to establish whether this would be feasible.”

He said diamond exploration is an expensive and risky venture that needs careful consideration before diving into.

For instance, an investor spent around M380 million for diamond prospecting at Mothae mine only to walk away empty handed in the end, he said.

“So, if the government can raise the necessary financial resources, I think it should go for more stakes in the mining operations.”

Alternatively, he said, the government can consider adding value to their minerals before selling them. He said mineral beneficiation was part of the government’s existing 2015 Minerals and Mines Policy.

He however, said for mineral beneficiation to happen, the trading of minerals must be done locally as opposed to the current system where diamonds are sold in foreign auctions.

This way, the government would be able to generate more jobs from the mining industry thereby increasing the benefit of the country’s natural resources.

“The government can derive more benefit from its natural resources through mineral beneficiation where downstream value chains of the diamond sector are established. We will need to localise trading of our minerals for this to happen.”

He said the combined values of processed diamonds dwarf that of rough diamonds.

 

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