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State failure: Rio declares force majeure at RBM in fac...

Business Maverick

Business Maverick

State failure: Rio declares force majeure at RBM in face of violence

Richards Bay Minerals . (Photo: Supplied)
By Ed Stoddard
30 Jun 2021 25

Global mining giant Rio Tinto has declared force majeure on customer contracts at Richards Bay Minerals and pulled the plug on the biggest contributor to the KwaZulu-Natal economy. This is in response to the volatile security situation in the wake of the assassination of general manager Nico Swart in May. This is the cost of state failure.

Rio Tinto said in a statement that the decision stemmed from the “escalation in the security situation at the operations” and that all mining and smelting operations have been ceased “until the safety and security position improves”. 

In a separate statement, Richards Bay Minerals said that its operations – which mostly produce titanium dioxide slag, used in the production of a range of industrial items from paint to toothpaste – had basically been terrorised by criminals. Think protection racket or something along those sordid lines, except in this case it is not some poor greengrocer on the corner getting muscled by the local mob but a major global and publicly listed company with shareholders that would include pension funds.  

“Following the tragic death of our colleague, Nico Swart, RBM has faced serious challenges in recent weeks, with business disruptions orchestrated by criminals which have put its people at risk and resulted in the costly destruction and theft of property. This follows in the footsteps of previous violent incidents,” RBM said. 

The police clearly cannot do their job properly there and the cost of state failure in this case will be very high. RBM said its direct contribution to the South African economy in 2020 was R8-billion, including wages and salaries to more than 5,000 employees. 

“In addition, RBM procured goods and services to the value of R5.5-billion in 2020, of which R1.5-billion was spent on local municipal businesses and over R500-million in its communities, expanding business opportunities, bolstering economic development and helping local communities become more resilient and self-reliant over the longer term,” it said. 

It makes the biggest private-sector contribution to the KwaZulu-Natal economy – at least it did. Eskom is likely to have a bit of spare capacity as a result. Rio had already halted a planned $460-million expansion project to RBM two years ago because of violence and protests. That is foreign direct investment which would have created jobs and business opportunities and generated tax revenue. Attracting that kind of investment is at the top of President Cyril Ramaphosa’s economic agenda, which is crumbling like a sand castle on a KZN beach when the spring tide comes in.  

South Africa’s mining sector gets battered by periodic waves of social and labour unrest, much of it rooted in the inequities of the apartheid past. But in recent years, outright criminality has also become a major threat, with the emergence of a “procurement mafia” literally gunning for a slice of the lucrative action. The rebooting Blyvoor gold mine west of Johannesburg was recently shut for several weeks in the face of intimidation after one of its directors and the leader of its in-house union was shot dead. The police also mostly failed to do their job in that case. 

And a company like Rio is increasingly mindful of ESGs – environmental, social and governance concerns. In 2020, Rio destroyed two 46,000-year-old Aboriginal rock shelter sites in Australia, a bone-headed act of sheer stupidity that cost the CEO his job. In this day and age, the company is hardly going to put its employees’ lives and limbs at risk from criminal attack. But that means 5,000 direct livelihoods will suffer. 

All because the South African Police Service demonstrably cannot do its job. 

After a victory for the rule of law on Tuesday with former president Jacob Zuma convicted of contempt and sentenced to 15 months in prison by the apex court, this is a salient reminder that the rule of lawlessness is the norm on the ground in South Africa.  

Further up the tropical Indian Ocean coast, French oil major Total has done the same thing in the face of a violent Islamic insurgency that threatens gas projects worth tens of billions of dollars.  

This is all unfolding against the backdrop of a global commodities boom which is one of the few bright spots in the South African economy. This is another stark example of how that boom is going to bust on South Africa’s shores. DM/BM

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All Comments 25

  • Ed, it would be useful to know what the SAPS and municipalities have to say about this. Useless people all around, and taxpayers footing the bill for them to be useless.

    • Right. SAPS are next to useless. Time to clean up the top echelons of the SAPS they seem to be at each others throats a lot lately! Minister of police is just another useless hat.

    • I agree, it will also be useful to get some insight from the local community / workers regarding their views on the violence and lack of handling by SAPS and the government.

      Of course let’s not forget that resorting to violence and murder is the accepted means to deal with unwanted competition in the taxi industry, for instance. I guess it’s quicker and easier than approaching the competition commission with your complaints but still unacceptable. Unfortunately, our government has created the climate as it turns a blind eye to endless and ongoing violence, rape, murder, corruption, etc. This has also attracted criminals from beyond our shores, not really the sort of “investment” we should be seeking but nonetheless a cozy place to carry out your illegal activity, often hand-in-hand with government as billions have disappeared into the hands of the Gupta’s, being just one example.

      I guess the potential answer is how do we encourage our fellow citizens to use their vote to change a useless government as often as needed in much the same way as the Americans and UK citizens do. It’s such a powerful tool.

  • Mr. MBA, Gwede Mantashe recently visited the site and addressed the crowds shortly after the CEO of this mining operation was killed. Chances are that he was window-dressing by pretending government is doing something to resolve the issue in Richards Bay.
    Clearly, there were no guarantees given for law and order in an already lawless part of South Africa, otherwise Rio Tinto would not have declared force majeure.
    Now what Mr. MBA? Another massive failure against you. Why don’t you just call it a day and leave your cosy position and give someone with insight and will the opportunity to try and save what is still left of the mining industry?

  • Sadly this issue places the cost of State capture in perspective. just look at the loss SA and KZN will lose never mind the loss of salaries to 5000 employees.
    The SAPs must hang their collective heads in shame including the Minister/Portfolio Committee. Perhaps we need the defence force in and they can bash a few heads as this is where we are heading – a state of emergency.

  • Ed look past your bottom line sometime. The wishes of the local people were completely ignored until typical violence and murder Zulu style were the dominant factors.

  • There is a misconceptuon here that SAPS is able to control violence and murder. The real failing is the collapse of Crime Intelligence because forewarned is forearmed. Now put Zuma and Mdluli in charge of CI and you have the current SAPS: always reacting never proactive because of corruption. I pity ordinary SAPS members- their brass are selling the murderers better weapons and traing than the members have and no rules to obey either. Die in jail Zuma

    • Crime intelligence is the key to understanding the undercover actors. These things are not anonymous, people know who does these things! SAPS just does not know or is complicit, equally damming!

  • If only nattering away in well modulated tones would fix the problem. Gwede Mantashe speaks so well. The joke is that there will now be many more poor people who cannot feed themselves, or their children and the power of the criminals will grow. The SAPS, those poor saps, will be able to drive around in police vans looking important, but will be wholly irrelevant. Let’s go topple a Rhodes statue..

  • “Procurement mafia”. The same strategy is evident in the building industry where by local ‘business forums’ , establish by local and regional political leaders , provide ‘protection’ to construction sites. It is alleged , huge amounts of money are extorted by such forums , mostly for the benefit of said political elite.

  • Just another brick out of the wall! No rule of law – mob violence and stupid legislation will lead to more foreign disinvestments.

  • There are several shocking aspects to this epic tragedy. First this is not a sudden and unexpected development but one that has evolved over some years. Neither is it small or trivial. So South Africa loses both the existing operation and the expansion project and the State has been unable to prevent it. Failed State, indeed! RBM was created in the 60’s and 70’s by SA innovation and engineering and was backed by the IDC/taxpayer. The operation took nearly a decade to stabilise and become viable and then became a global success for decades. Destroyed!

  • The government would do well to understand just how small, operations such as this are in the bottom line of global corporations. I recall in the 80’s when the Unions at East London were paralysing the Mercedes Benz factory that after about 12 weeks of striking, a message came from Germany that the SA operation comprised around 3% of Daimler Benz global operations and that if the strike didn’t come to an end, they would close the factory and leave SA. Work resumed the next week. It’s all very well to bash foreigners but the consequences of doing so may be more expensive than the temporary pleasure derived with sweeping and grand declarations about colonialists on the floor of parliament – to much applause from the ruling party benches. More topically, the reason for this closure is directly related to the inability of the police to manage law and order. Instead of pursuing lawful private firearm owners, perhaps Minister Cele would do better to allocate resources, including his own focus to dealing with violent crime. Criminal gangs and practices are multiplying and presenting a significant threat to the business community, while the resourcing and ability of the SAPS to address this is being eroded by a lack of management and infighting at senior level. Operational resources are eroded by budget cuts, morale is low and spend on VIP protection is up. One wonders how long the NEC will permit Minister Cele to singlehandedly decide what happens in SAPS.

  • The assassination of Nico Swart was the final straw. These “ people” were always around, but before uMhlatuze (Richards Bay) was taken over by the ANC, Local Government worked with all major investors, and had a good relationship with the Captains of Industry.
    Security was paramount and we knew who the trouble makers were. These “community leaders” needed to be controlled and RBM contributed much through generous donations to the community.
    However, giving doesn’t stop the insatiable greed of the idle, much like our politicians and unstoppable corruption.
    With so much at stake, strong leadership was essential. We in LG did what was required, fully aware that SA needs FDI, and existing industry the confidence to invest.
    Will we get investment now? Certainly much less, and the President should move his attention to stopping lawlessness and corruption before drumming up farcical investment numbers.
    What a joke!
    As a person deeply involved in the development of the City’s economy for many years I feel that those who believed in us, have been let down.
    But the ignorant people who have caused this situation will blame RBM. Politicians will not have the guts to get to work.
    The repercussions of this situation will have a severe effect on the economy.
    Africa’s biggest harbour surrounded by a needy labour force and many small entrepreneurs has been severely damaged.
    Denny Moffatt.

  • This is tragic, but the violence is symptomatic of our collapsing economy and value systems. We URGENTLY need competent, ethical leadership. SAPS is a mess due to the incompetence of successive ministers and commissioners, but they wouldn’t have to control this type of criminality if our economy was growing, people had jobs, good schools for their children and an effective healthcare system. Until the ANC changes course, creating legal and political certainty investment will decline, poverty and crime will rise and tax revenues shrink, rendering the state increasingly less able to fulfil its mandate. A downward spiral.

  • It’s not all doom and gloom…the cavalry’s coming to Natal in the shape of Clover…driven out of Lichtenburg, also due to state failure. (Apologies for my pathetic attempt at gallows humor.)

  • Cabinet reshuffle please more than needed now before the next crisis. Cele and Mantasha to be replaced with people who want South Africa to succeed.

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