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Mining minister to challenge South Africa's ruling on black ownership
April 24, 2018

South Africa’s Department of Mineral Resources (DMR) said that the mines minister will appeal a court ruling from early April that favored the once empowered, always empowered principle that entitles a company to keep its black empowerment status even if a black partner exits its stake in the mining firm.

Reuters reported that the appeal is likely to add a layer of uncertainty to a sector battered for years by depressed prices, soaring costs and opaque policies, and which had hoped that new mines minister Gwede Mantashe would quickly act to improve the investment climate.

The Chamber of Mines challenged the government’s draft mining charter which specifies that a black ownership target of 26 percent must be maintained throughout the life of the mine. In early April, a high court ruled in favor of a Chamber of Mines. The ruling, in the form of a declaratory order, means mining companies in the world’s top platinum producer need only to make the 26 percent threshold once, and do not need to replenish it if black shareholders decide to sell their stake.

The industry has said it cannot afford to continually replenish is black ownership levels as such shares are often offered at a discount in complicated and costly transactions. Mining accounts for about 8 percent of South Africa’s GDP and is an important source of export revenue. 

In a statement, the mines department said the judgment would hurt the policy of “economic transformation” - changing the ownership structure of the economy that was controlled by the white minority under apartheid.

It is a thorny topic in South Africa where wealth inequality remains high and ownership still largely concentrated in white hands more than two decades since apartheid ended.

The department said it had already approached the Supreme Court of Appeal (SCA).

“The judgment has dire implications for the economic transformation imperatives of the Constitution, the mining sector and South Africa at large. It further has the potential of extending regulatory and policy uncertainty,” the department said.

The Chamber of Mines said it respected the government’s right to appeal the ruling and that it would continue to negotiate outside of court with the mines department.

The industry and the government have been negotiating the terms of a third version of a “Mining Charter,” which spells out various targets including black ownership requirements which companies must meet to maintain or secure mining licences.
 

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