SOUTH AFRICA SPLITS ITS MINING AND ENERGY

C O N F I D E N T I A L SECTION 01 OF 03 PRETORIA 000993 SENSITIVE BUT UNCLASSIFIED SIPDIS AF/S PLEASE PASS TO A/S CARSON E.O. 12958: DECL: 05/13/2019 TAGS: EMIN ENRG EPET EFIN PGOV SENV SF SUBJECT: SOUTH AFRICA SPLITS ITS MINING AND ENERGY MINISTRIES REF: A. PRETORIA 941 ¶B. PRETORIA 393 Classified By: Economic Counselor Perry Ball for reasons 1.5 (B) and (D ) ¶1. (SBU) SUMMARY: The South African government announced the long-anticipated split of the Ministry of Minerals and Energy into two separate ministries to aim for greater focus on these key sectors. Industry is cautiously open-minded about the new appointments. Minister of Mining Susan Shabangu served 1996-2004 as Deputy Minister of Minerals and Energy. Minister of Energy Elizabeth Dipuo Peters has limited energy background. Managing the transition to two ministries and grappling with licensing and power challenges will require coordination in the new cabinet. End Summary. -------------- Cleaving Minerals and Energy -------------- ¶2. (SBU) New South African President Jacob Zuma split the minerals and energy portfolios as part of his cabinet expansion and restructuring and named Susan Shabangu, a former Deputy Minister of Minerals and Energy, as Minister of Mining. Zuma's appointment of the relatively unknown and inexperienced Elizabeth Dipuo Peters has raised concern among analysts about how this may affect needed expansion of power generation. Former Minister Buyelwa Sonjica announced the likely split in February "to allow the government to focus on and improve performance in these two complex and important sectors" (Ref B). The new Mining Ministry will have more time and resources to assure expedited licensing and more transformation to black control according to the Mining Charter to be reviewed. The Energy Ministry will be responsible for implementing a clear energy strategy. -------------- -------------- Some Praise, Some Doubts for the New Minister of Mining -------------- -------------- ¶3. (SBU) New Minister of Mining Susan Shabangu served as Deputy Minister of Mining and Energy from 1996 to 2004. She served afterwards as Deputy Minister for Safety and Security, where she came to prominence one year ago when she urged police to shoot criminals to curb the nation's high incidence of crime. Shabangu has a stronWd%Hi>/zer first assignment would be overseeing the first major review of the Mining Charter, a five-year-old agreement meant to bring more black ownership in mining. "We also want to review how mining companies have fared in terms of their social responsibilities to communities," she added. Shabangu said she would work with stakeholders to save jobs in the threatened mining sector and review mining applications that were taking too long to process, possibly because of skills shortages at her department. Finally, she supported investigating setting up a competitive state mining firm, not dependent on state funds for its survival. She also emphasized that nationalizing mineral assets was not on the agenda. ¶5. (SBU) South Africa's Chamber of Mines publicly noted the appropriateness of allowing a former Deputy Minerals and Energy Minister to graduate to full Mining Minister status, a PRETORIA 00000993 002 OF 003 rare occurrence in the history of South African cabinet appointments, which generally pay scant recognition to the migration of experience and generally shunt members across a spectrum of widely differing disciplines. The Chamber noted that Shabangu was well acquainted with all the issues and challenges and pledged to do its utmost to work constructively with the new Minister. The Chamber's release saved its mention of the new Minister of Mines to its fourth paragraph, first praising the new Ministers of Higher and Basic Education and the need to address serious skills shortages. The Chamber also praised the experience and expertise of new Minister of Planning Trevor Manuel and new Minister of Finance Pravin Gordhan, as well as the appointment of former Minister of Minerals and Energy Buyelwa Sonjica to Minister of Environment and Water Affairs. Sonjica's appointment to the Ministry of Environment and Water Affairs was praised because of her familiarity with the needs of the mining sector and the fact that water is a key issue for the mining sector in a relatively arid country like South Africa. (Note: In the Chamber's public statement, there was no mention of the new Minister of Economic Development Ebrahim Patel, who comes from a communist labor background.) ¶6. (C) Shabangu has not been universally praised. National Union Of Mineworkers (NUM) publicly welcomed her appointment, saying the former unionist was "action-oriented." However, an unnamed NUM official was quoted as saying, "This is a weak appointment; we are very disappointed." A prominent mining consultant told Minerals Officer that he "did not have an overly warm feeling about her performance as deputy." He said he was willing to give her the benefit of the doubt, and "wait and see." ¶7. (C) Chamber of Mines Economist Roger Baxter told Energy Officer that Shabangu has experience, but he criticized the old Department of Mineral and Energy's performance, noting that its policies and slow bureaucracy allowed South Africa to miss out on much of the global commodity boom -- before the current bust. Baxter was worried about the ability of the cabinet to manage economic policy with four different economic ministers, noting that the new Minister of Economic Development Ebrahim Patel has pushed an unvaryingly leftist-unionist agenda over many years. Baxter was also skeptical about the ability of the Departments of Public Enterprise and Energy to work together on managing state power utility Eskom and the power supply crisis. Finally, he also pointed out that former Minister of Minerals and Energy Sonjica was perceived as an "under-performer" since the power crisis erupted on her watch, so he did not share in the Chamber's public praise for shift to Water Affairs. -------------- Questions about New Minister of Energy -------------- ¶8. (SBU) New Minister of Energy Elizabeth Dipuo Peters has limited energy background. She served as Premier of the Northern Cape Province since April 2004. Peters is a long-time ANC activist and politician, but most of her experience is on the provincial level. She obtained a Bachelor of Arts degree in Social Work from the University of the North in 1987. Qthe North in 1987. ¶9. (C) Some industry analysts saw Peters' elevation to the national cabinet from her role as provincial Premier as a disappointment, driven by political reasons. "Her qualification is in social work and now she will head the Energy Ministry. It appears this is South Africa's tradition to appoint a minister who has no technical qualifications whatsoever," said an independent energy analyst. Another analyst pointed out that Peters' biggest task would be sorting out the country's energy policy and attracting private investment in new power generation. He noted, "The biggest criticism I have is the new Minister's lack of experience. There seems to be not that much known about her, but if she surrounds herself with the right people, she will be able to cope with the challenges." A former mining executive who dealt with her in the Northern Cape told Energy Officer that Peters was principled and competent in a provincial context, but he opined that the Northern Cape is less complex than the national arena. A U.S. oil firm PRETORIA 00000993 003 OF 003 official told Energy Officer that his dealings with her were always positive, but he said that it was not clear how oil and gas exploration/production permitting will be transitioned from the former DME. He was hopeful that it would be expedited, but worried that it would be delayed. ¶10. (C) The Westinghouse rep told Energy Officer that the long-expected split of Minerals and Energy might delay the government's plans for building new nuclear power stations (Ref A). She said the new Minister of Energy did not have any energy background, so she appears to have been chosen as a loyal ANC cadre, who will rely on staff in decision-making. Moreover, the SAG decision on new nuclear build will be made at the highest levels, and will be deeply influenced by Finance and other Economic Ministries. THe Westinghouse rep said she will meet with the SAG nuclear task force on May 25 and promised a read-out to the Embassy. ¶11. (C) Comment: The transition to two new ministries may cause delays in licensing permits and expanding power generation. Coordination within Zuma's expanded cabinet will be an issue. The new planning and monitoring functions will be critical. Moreover, expansion of power generation to ameliorate state power utility Eskom's electricity shortages will require close coordination between the Ministries of Energy, Planning, Finance, and Public Enterprises. It appears the latter will have the primary responsibility for Eskom as a parastatal. The new Minister of Public Enterprises Barbara Hogan brings significant financial and managerial expertise. She was perceived as highly successful in her brief tenure at Health, despite lacking health experience. LA LIME