A decision by the South African Government to boost the black ownership requirement for mining companies from 26% to 30% has been met with fierce criticism.
SA mining minister Mosebenzie Zwane announced the 2017 Mining Charter last week, which will require mining rights holders who had previously complied to the 26% quota, to boost that to 30% by this time next year.
Share prices dropped for many South African mining companies upon the news, with many investors fearing the dilution that will occur if new stakes are created to help meet the quota of black shareholders in each mining company.
The situation is worsened for many companies who met the initial 26% quota once, but have since had black investors sell out, so will have a long way to go to meet a 30% mark by June 2018.
The South African Chamber of Mines, which represents the companies, has said it plans to challenge the Government’s decision in court.
But the African National Congress – the party in charge in South Africa – is said to be fully prepared to face the challenge.
“Given the fact that the mining industry has shed about 60,000 jobs in the last five years, we don’t want legislation that will add to that bloodbath,” ANC party spokesperson Zizi Kodwa was quoted as saying by Bloomberg.
Speaking to the South African Broadcasting Corporation, Minister Zwane also defended the announcement this week.
“Well, the courts of South Africa do not belong to any one party,” he said. “We are happy to go and explain the processes to anybody who wants to understand the processes, but our take is that we should not treat legislative issues in South Africa and take them to judiciary system. We are [the] legislative part and we need to be respected for that.”
James Lorimer, an MP for South Africa’s second-largest party, the Democratic Alliance, reportedly said Zwane was opening the doors to “more ANC crony enrichment”.
“The DA supports share schemes for miners when they are structured to benefit the workers and are economically viable” he was quoted as saying by Independent Online. “One way of diversifying the mining sector would be to bring mine workers into mining schemes. It’s pointless to try and diversify if it leads to the collapse of companies.
“One wonders if Zwane actually believes his statements about this charter, which he says will ‘catapult South Africa’s economy forward’. The only place the industry will be catapulted is over a cliff.”
Meanwhile, BHP spinoff and major South Australian operator South32 believes it can navigate the change, with a previous 26% ownership potentially recognised as part of its future 30% quota, even after some owners have sold out.
“It is too early to comment on the specifics of Mining Charter III and, understandably, differing interpretations of the impact to industry have been published,” the company reportedly said in a statement.
“Our initial analysis indicates that our historical transactions will continue to be recognised.”