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South Africa: Crunch time for SA Mining Charter

South Africa: Crunch time for SA Mining Charter

The South African government is to publish its finalised Mining Charter in March.

The new regulations are designed to tackle racial inequality in the industry, by promoting ownership by black South Africans, while mining companies will also be required to finance social development projects in mining areas. Many in the industry vehemently oppose at least some parts of the Charter, which was originally passed in 2002 and revised in 2010.

Under the latest draft of the document, mining companies must maintain a minimum of 26% ownership by black South Africans even when the original investors sell their stakes. It is this last stipulation that concerns the Chamber of Mines.

If the original black investors in a company or project sell their shares to non-black interests, then the other investors must also sell equity to black majority interests to balance the figures. Pretoria will have the right to revoke mining licenses if companies don’t comply.

Some minerals will also be designated as being of strategic concern, giving the government the right to restrict their export in certain situations. Coal and uranium will certainly be on the list, plus also possibly platinum.

Mining companies want a policy of “once empowered, always empowered” and argue that they were not consulted over the most recent draft. Some mining sector interests are challenging the Charter as a whole, while the Chamber of Mines is taking a more nuanced approach. Roger Baxter, the chief executive of the Chamber of Mines, said: “We are fully supportive of the entire transformation journey, but we just need the rules to be absolutely clear to make sure we don’t end up making targets that are unobtainable but are pragmatic and realistic.”

Industry opposition may have been fuelled by the fact that discussion of the Mining Charter over the past 18 months has occurred at a time of depressed mining commodity prices. Yet similarly, tensions could ease as a result of the ongoing price recovery.

South Africa is an important coal, iron ore, manganese, platinum and gold exporter. Yet the mining sector’s share of GDP has fallen to 8% today from 20% 40 years ago. This fall could be a function of economic diversification but may also be a reflection of lower investment over many years.

Mark Cutifani, the chief executive of Anglo American, which is one of the biggest mining companies operating in South Africa, said: “We’ve had an industry that’s been shrinking for 20 years. If we are going to stop the rot, we need a document and a framework that encourages investment.”

He added: “If it doesn’t serve the long-term interest of the industry, it won’t serve the interest of the country. They have to be one and the same.”

Black empowerment

Yet it is entirely possible for the mining industry to be successful while at the same time reinforcing economic inequality. It could make a bigger contribution to bringing about positive change.

The question is whether the latest draft of the Mining Charter is the best way of achieving this. Black economic empowerment policies are designed to overcome the economic inequalities of the past, but 23 years after the end of Apartheid most assets are still owned by white South Africans, who make up just 8% of the population. There is no doubt that more needs to be done to tackle inequality now.

Relations between the mining companies and government are often strained. However, the Chamber has suspended its legal challenge to the 26% rule while it awaits the final draft of the Charter. Baxter commented: “Our prayer is an outcome that is mutually acceptable so that the court case can be withdrawn.”

Mineral Resources Minister Mosebenzi Zwane said: “We don’t want people to adhere to a norm where they take us to court if they don’t agree with us. We’re determined to reach our objectives. If we believe we’re correct no one should threaten us. We’re here to govern and we’ll do exactly that.”

Neil Ford

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