Mining Charter could hinder South Africa’s economic growth – Solidarity
MINING WEEKLY / 14 NOVEMBER 2017 - 16.00 / ANINE KILIAN
JOHANNESBURG (miningweekly.com) – Trade union Solidarity says that 25 177 jobs have been affected by retrenchments in the mining industry in 2017 and points to the much-talked-about contentious Mining Charter Three as a major contributing factor.
“The Mining Charter puts a damper on the industry and is conducive to mining companies withholding investment at a time when a favourable investment environment should rather be created,” states Solidarity research industry head Connie Mulder.
South African miners. Picture: AFP.
Speaking to Mining Weekly Online on Wednesday, he said that the charter would have a ripple effect that could sink the mining industry’s future.
“When companies are reluctant to embark on new development and exploration projects, existing jobs cannot be retained and new job opportunities are not created. The charter is a reckless document, drafted by a Minister who shows no regard for the sector,” Mulder cautioned.
He added that Solidarity in October filed papers to the court asking for the scrapping of the charter in its entirety.
“The provisions set out in the charter will hamper private mining. It has already scuppered several thousand jobs and we don’t think this is going to stop,” he said.
Mulder highlighted that the clauses regarding prospecting rights, which stipulate that companies need to be 51% black-owned, would hinder the industry and foreign investment into the country.
“Mines are long-term investments and it takes up to 17 years for them to become profitable. If you want to scare off foreign investors this is a good way to do it. There are not a lot of people who are willing to start a company where they do not have a lot of control over their own capital,” he said.
He pointed out that the mining sector was critical to South Africa’s growth, and that the people who would lose out if the charter was adopted were large pension funds and the Public Investment Corporation, which own up to 29% of large mining corporations.
“The charter is meant to improve black economic empowerment but it is going to basically destroy many poor black people’s pensions,” he said.
One of the extremely problematic clauses, Mulder noted, is the “once empowered, always empowered clause,” which, he said, has no regard for historic transactions.
He explained that, while most mining companies increased their black shareholding to comply with the previous charter, black shareholders decided to sell their shares and ownership levels decreased.
“The new charter stipulates that ownership needs to be increased to 30%, but it does not recognise previous black ownership. Those shares are now supposed to be re-bought,” he noted.
Moreover, Mulder added that this 30% shareholding is eligible for a special dividend of 1% of turnover.
“The Chamber of Mines (CoM) paid a total dividend of R6-billion in the previous financial year and 1% of turnover is R5.7-billion. You are saying that 30% of shareholding is getting 95% of turnover, which is problematic for other shareholders,” he said.
He further pointed out that Solidarity foresees that mines will find themselves in more debt if this is implemented.
“That would, in turn, have an influence on debt levels in South Africa, and on interest rates, which is not good.”
The CoM last week Friday advised that its application for a declaratory order on the principles applicable to the assessment of the ownership element of the Mining Charter, particularly in respect of the continuing consequences of previous black economic empowerment deals, was heard by a full bench in the High Court of South Africa on November 9 and 10. All parties presented their respective arguments over the two-day period and judgment has been reserved. “The CoM remains fully committed to the meaningful transformation of the South African industry and believes the continuous assessment of the progress made in this regard is vital,” the chamber said in a statement.
Solidarity will go to court on December 13 in a bid to scrap the charter.
LINK - http://www.miningweekly.com/article/mining-charter-could-hinder-south-africas-economic-growth-solidarity-2017-11-14
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