South Africa’s Chamber of Mines has threatened legal action against the government over the new mining charter. The new conditions of the charter, the chamber says, will deter much-needed foreign investment and have been drafted with little consultation from the industry.
A shake-up to the mining code in South Africa could have a far-reaching impact on miners listed in the UK, amid fears the government there will try to impose onerous new requirements around company ownership.
A new version of the mining charter is expected to propose raising the mandatory black ownership of mining assets from 26 per cent to 30 per cent under the government’s Black Economic Empowerment (BEE) initiative. But the mining industry is particularly worried about a second proposal, which would require miners to maintain 30pc black ownership even when the original BEE holders have sold their stake.
Since 2002, South Africa has required that mining companies allow black investors to own 26 per cent of their assets in the country. Under the original charter, mandated in 2004, miners only need “empower” their assets once.
Under planned changes to industry rules known as the mining charter, the government wants the new 30 per cent ownership threshold to apply to assets even where black investors have sold down their stakes over the past 15 years. The proposed 30 per cent threshold on black ownership of South African mining assets is supposed to be achieved within one year of the new charter taking effect.
The new charter – which is months overdue and has been the subject of disagreement within the ruling ANC party – was approved by the cabinet in draft last week and is expected to be made public in a matter of weeks.
Mining contributed SAR286bn (£17bn) to the South African economy, or 7.1pc of its GDP, in 2015. London-listed companies Anglo American, Lonmin, Glencore and Petra all operate in South Africa. News about the new mining charter coming into effect has pulled Anglo American’s stock price down substantially.
Miners who rely on international supply chains to operate in South Africa may be hard hit by rules that require companies to procure 80 per cent of services and 70 per cent of goods from black-owned local suppliers. In addition, the holder of a South African mining right will be forced to pay 1 per cent of its annual turnover to communities.
Industry executives fear this requirement may force them to continually sell stock and dilute existing shareholders to maintain a fixed level of black ownership.
Rising costs, red tape and political uncertainty have made mining groups increasingly wary of investing in South Africa, in spite of the country hosting the world’s largest platinum reserves and significant deposits of coal, gold and iron ore.