New regulations in South Africa will require all local mines to be 30 percent black owned, sending a wave of concern through the South African mining sector.
Minister Mosebenzi Zwane released the government’s revised Mining Charter on June 15, raising the minimum threshold for black ownership of mining companies to 30 percent from 26 percent, and giving resource companies 12 months to meet the target among a raft of other regulations that hit mining stocks.
Reuters reported that the Chamber of Mines, which represents mining firms, said it would challenge the new rules in court, arguing that there had been insufficient consultation in drawing up the charter – which is designed to widen ownership of Africa’s most industrialized economy.
“The lack of meaningful engagement with the industry, and collective engagement with all stakeholders, has been most disappointing,” chamber president Mxolisi Mgojo said in a statement. He added that the charter contained a string of “red flashing lights” that would have “unintended consequences that go far beyond the mining sector.”
Zwane defended the new regulations, calling them a “win-win” for all involved.
“We have given due consideration to the submissions made and we will not be held ransom to those views that seek to derail transformation in the minerals sector,” Zwane said an an opinion piece in the Sunday Times newspaper.
Most mining companies reached the 26 percent level under previous versions of the charter but many of the black investors have since sold out. The Chamber of Mines, says the new rules would kill investment in the industry.
Glencore, Impala Platinum Holdings, South32. and Kumba Iron Ore, which is majority, owned by Anglo, would need to sell the biggest stakes if the new charter fails to give credit for previous deals, Avior Capital Markets. said June 1. AngloGold Ashanti. And Sibanye Gold, the country’s two biggest gold miners, may also be affected by the new rules.
The original charter was introduced in 2002 in the world’s top platinum producer to increase black ownership in the mining sector, which accounts for roughly 7 percent of South Africa’s economic output.
The new rules include a requirement for miners to pay 1 percent of annual revenue to communities and give control to black owners of new prospecting rights.
Companies will also have to guarantee that at least 80 percent of their total spending goes to local firms, including a minimum of 65 percent of spending of services to black-owned suppliers.