South African court backs mining industry on black ownership rule
The South African High Court ruled in favor of the once empowered, always empowered principle which entitles a company to keep its black empowerment status even if a black partner exits its stake in the mining firm, Reuters reported.
South Africa’s leading mining industry group, the Chamber of Mines, welcomed the ruling, stating that, “This new Charter needs to help the mining sector to achieve stability, competitiveness, transformation and growth, and to ultimately enable the sector to realize its true economic and transformational potential.”
Previous, the Mining Charter had created uncertainty and about ownership levels which deterred investment in a sector that accounts for 8 percent of the country’s economic output.
The charter aims to widen ownership in the economy, which has yet to shake off the legacy of white rule more than two decades after the end of apartheid.
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.
The order allows mining firms ownership transactions to be recognized even where the black partner has sold or transferred part or all of its equity.
“The statutory condition cannot be extricated from the mining right. It must be held throughout the life of the mining right,” the court said.
In June Moody’s said the new rules risked deterring investment, and would likely raise costs and diminish cashflow generation.
The new mining minister Gwede Mantashe has set a three month deadline to finalize the latest version of an industry charter which lays out requirements for black ownership levels and other targets.