The new Mining Charter will be one of the most revolutionary tools
South Africa has ever seen, Mineral Resources Minister Mosebenzi said
on 17 May ahead of his budget speech in Parliament.
Minister Zwane has proposed raising the mandatory black ownership
of mining assets to 30% from 26%, drawing opposition from some
who fear it will deter investment.
Zwane wants 30% minimum black mine ownership
Kevin Crowley and Paul Burkhardt, Bloomberg News
Fin24 and Bloomberg News
Mining companies in South Africa have been frozen out of consultation over regulatory changes that could dilute shareholders, raise costs and impose new levies to fund community development.
Cabinet last week approved a new draft of the Mining Charter and Mining Minister Mosebenzi Zwane has promised it will be gazetted within weeks. Yet while labour leaders have been consulted on the long-delayed new rules, the Chamber of Mines, which represents producers, says it “does not have any insight” into the latest version and hasn’t met government officials on the subject since March.
The looming dispute threatens to prolong uncertainty and further slow spending in South Africa’s biggest export industry. Fixed investment in mining dropped in each of the past two years and companies including Sibanye Gold have warned that any new investment will be a tough sell in the current environment.
“The government and the Chamber of Mines haven’t really sat down on this issue, and much of the public discourse has been posturing by both sides,” said John Meyer, a London-based analyst at SP Angel Corporate Finance. The industry may head to court if government imposes harmful changes, the Chamber said this month.
South Africa holds the biggest reserves of platinum, chrome and manganese. In 2010, Citigroup valued the mineral wealth at $2.5 trillion, the most of any nation. Mining companies including Anglo American, Glencore and AngloGold Ashanti operate in the nation.
The industry will be particularly concerned about changes to black ownership requirements. Zwane shocked the sector last year with a draft charter that would require much of the industry to sell additional shares to maintain ownership levels after earlier investors sold their stakes.
He has now also proposed raising the minimum to 30% from 26%, two people familiar with the situation said last week. It’s unclear whether the Cabinet approved Zwane’s proposal, or if the new draft includes the provision allowing miners to claim credits for past deals where they have sold stakes or assets to black investors, even if the ownership has since changed.
Ayanda Shezi, a spokesperson for the Department of Mineral Resources, didn’t immediately reply to an email request for comment.
“We’re not shy if we need to engage government in court processes,” Roger Baxter, the Chamber’s chief executive officer, told reporters on May 24. “Government has the same route if they want to follow it.”
South Africa’s push for increased black ownership of the mining industry is part of an effort to address the legacy of apartheid that locked the black majority out of key sectors. Yet critics say many deals have benefited the politically-connected elite and deter foreign investors in the country.
While the industry remains in the dark, the National Union of Mineworkers, the largest labour group in the sector, has had “in-depth stakeholder engagement” with Zwane’s department, according to Luthando Brukwe, the union’s head of transformation.
The NUM has asked government to require at least 10% of mining companies to be owned by employees, he said in an interview. It should also be mandatory for producers to take steps to help employees own their homes, he said.
The union is opposed to the idea that mining companies get credit for sales to black investors who later dispose of the assets.
Us versus Them
Zwane, who was appointed minister in 2015, has clashed repeatedly with the industry over issues that also included enforced safety stoppages. The revised mine-ownership rules will be published whether the industry agrees with them or not, he told reporters in February.
“The style of engagement is totally us-versus-them,” Peter Major, head of mining at Cadiz Corporate Solutions, said by phone. “When I talk to anyone involved in mining they say it has never been more polarised.”