BREAKINGVIEWS / 02 NOVEMBER 2018 -13.13 / ED COPLEY
It’s a long time since South African miners had anything to celebrate. Ironically, the struggling sector has come in the form of a 52-page set of social regulations. By watering down threats to make the mines pay more for their historical role in apartheid, President Cyril Ramaphosa is breaking with less amenable predecessor Jacob Zuma. And while a share-price dive by gold miner Sibanye on Nov. 1 shows ongoing difficulties, the reforms may sow the seeds of recovery.
That the charter was delivered by Minister of Mineral Resources Gwede Mantashe, former head of the local Communist party, reflects the spirit of compromise replacing the stasis under Zuma, who was ousted in February. Majors such as Anglo American are relieved.
Proposals from 2017 to give mines a year to raise black ownership from 26 percent to 30 percent are gone. The new rules also settle the vexed question of “once empowered, always empowered?”: a firm that has reached 26 percent black ownership, or “empowerment”, retains that status even if some black shareholders sell out. The Johannesburg Stock Exchange’s mining index rose 5 percent in the week after the charter’s release.
The industry, which accounts for 7 percent of the economy, didn’t get it all its own way. Companies must still bring in more black investors when they renew their mining rights. This imposes a cost on existing owners, although in most cases this is a couple of decades away.
And new ventures must have 30 percent black ownership. However, in a nod to common sense, chunks will go to workers and communities, hopefully meaning fewer strikes and less vandalism.
The catch for the sector is that the government is also rightly pushing hard on safety after cutting deaths from around 600 a year at the end of apartheid to 88 last year. Sibanye shares fell 10 percent this week after the miner said regulatory stoppages following a wave of fatal accidents had hit core earnings.
On the plus side, the government removed a mooted 51 percent affirmative action requirement for prospecting, the dirty but potentially lucrative business of digging holes looking for promising seams of rock. According to S&P analysts, South Africa’s share of global exploration finance was just 2 percent last year, against 14 percent each for Canada and Australia. For a country that has produced nearly half the world’s gold and is home to its deepest mines, that’s embarrassing.
Getting back to the 1980s, when South Africa’s mines employed 750,000 people, 50 percent more than now, is a long way off. But even the deepest hole often starts with a single shovel.
LINK : https://www.breakingviews.com/considered-view/south-african-boring-is-once-again-interesting/
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