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Solidarity calls for Mining Charter to be set aside


PRETORIA (miningweekly.com) – Trade Union Solidarity on Wednesday disclosed the contents of documents it has submitted as part of a court case to have the third iteration of the Mining Charter set aside.

Speaking at a media briefing, in Pretoria, Solidarity research industry head Connie Mulder said the trade union would act as a friend of the court in support of the Chamber of Mines’ (CoM’s) court application to have the charter set aside.

Mineral Resources Minister Mosebenzi Zwane. Image-Web

The Reviewed Mining Charter was introduced by Mineral Resources Minister Mosebenzi Zwane in June 2017 and has been strongly criticised by the mining industry.

The CoM has applied for a judicial review of the document, arguing that the Minister overstepped his powers and ignored the mining industry’s objections to the new charter, which has been suspended pending the outcome of the judicial review later this month

“The charter contains several clauses that raise concerns, such as the clause regarding prospecting rights, which stipulates that companies need to be 51% black-owned. This would hinder the industry and foreign investment into the country,” Mulder said.

He added that mines were long-term investments and it could take 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.

Mulder 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 owns 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 argued.

He added that the ownership requirements meant that many local mining companies would be forced to restructure, or “top up”, their black ownership to comply with the charter.

“This raises the question how the new black shareholding requirements, which include rigid requirements for black female and black youth-owned companies, will be funded.”

Mulder further stated that credit rating agencies Moody’s and Fitch have already voiced concern over added debt being used to fund these shareholdings in mining companies and regard this as “credit negative”.

Should mining debt be increased artificially, he said, it could lead to other negative outcomes, namely higher interest rates, a deterioration in the quality of mining credit and even systemic risk to the financial system.

He pointed out that, in 2016, the mining sector’s total dividends amounted to R6-billion, and 1% of the turnover amounted to R5.7-billion.

“This implies that 95% of the dividend value would have to be paid to the 30% of black economic empowerment shareholders. The impact on the other shareholders’ share value will be far-reaching.”

Also speaking on Wednesday, Solidarity labour practices head Anton van der Bijl said the consequences and impact of the charter on the South African economy and the mining industry in particular were counterproductive.

“Acceptance of the charter would be irrational,” he said.

A report by the Solidarity Research Institute, in which the charter’s negative impact on an industry that is already ailing and on the economy are discussed, was also released on Wednesday.

According to the report, the Mining Charter would seriously harm the South African mining sector.

“The way in which investors have reacted to the charter has already created uncertainty which has put a damper on mining activities,” Van der Bijl said.


LINK : http://www.miningweekly.com/article/solidarity-calls-for-mining-charter-to-be-set-aside-2018-02-14/rep_id:3650

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