AMN - Miners fight new South African laws - comment by Yolanda Torrisi

South Africa’s mining industry has vowed to fight the revised Mining Charter introduced by the government this month, saying that it will make the country’s mining industry ‘uninvestable’ and serve as a nail in the coffin for an industry that is already struggling.

Leading the charge is the Chamber of Mines, which has applied to the High Court Gauteng Division for an urgent interdict to prevent implementation of the reviewed charter. The Chamber also says that an application to have it reviewed in terms of the Promotion of Administrative Justice Act (PAJA) will follow in due course.

Under the revised charter, which was eventually released after more than a year since amendments were first announced, companies must ensure their South African assets are 30 per cent black owned to be shared among employees, communities and black entrepreneurs within 12 months, up from a previous 26 per cent. Those applying for prospecting rights will be required to have a minimum of 50 per cent plus one black person shareholding.

The Chamber lodged its High Court application after saying that Mineral Resources Minister Mosebenzi Zwane had not consulted with them before publishing the charter. It said that it was opposed to the Department of Mineral Resources’ Mining Charter as it "attempts to subvert those objectives by the unlawful publication of instruments which purport to give effect to such objectives but in fact undermine them".

Reacting to the Chamber’s actions, Minister Zwane said in a statement that he respected the decision, but did not support it as the charter sought to achieve redress and transformation. "It is our view that those who support this Mining Charter support our quest for transformation, and those who are in opposition are in fact opposing the transformation objectives of Government, and we stand ready to defend the interests of South Africans in this regard.

"It is unfortunate that the Chamber of Mines has chosen to take this route, but their decision is respected, and the democracy we fought for allows all of us to exercise our rights in this manner. We have confidence in the courts' ability to act with diligence on this matter," he added.

If upheld, several of the country’s biggest mining companies will have to sell new stakes, raising the risk of dilution for existing investors. Another issue is that a number of companies that had exceeded the 26 per cent BEE ownership are now under that level owing to previous empowerment shareholders selling their stakes to non-BEE shareholders. It has been estimated that there will need to be almost R50 billion in BEE mining deals over the next year.

This puts shareholder value at great risk and makes the South African mining industry less attractive, meaning that it may miss the investment injections it needs to keep going, thus putting a great number of jobs at risk.

Along with the Chamber of Mines, others involved in the country’s mining industry have expressed their concerns. "I think these new amendments are unworkable, unfeasible and undemocratic. There is nothing in here about job creation or profitability. Companies are going to struggle to comply with a quarter of these new regulations," said Peter Major, a mining analyst with Cadiz Corporate Solutions and former African Mining network guest speaker.

Other analysts have warned that it adds up to more costs for South African miners at a time when the country, after two quarters of negative growth, is in a technical recession. Ratings agency Moody's say it is credit negative for South African mining companies as the requirements will add to the cost of operating mines, reducing free cash flow generation while Fitch Ratings agency said the regulations would deter investment.

Even the ANC has reportedly expressed concern about the impact in terms of employment, given that the mining sector lost 60,000 jobs over the last five years.

Eyewitness News reports that the Chamber of Mines says it wants to help transform the industry but that this new charter will inflict vast and systemic damage on mining industry investors and the country itself. It says that the only way to stop this damage is for a court to issue an urgent order preventing the charter from being implemented.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com