South Africa Wants Past Black Mine-Stake Deals Tested on Merits

JOHANNESBURG (Capital Markets in Africa) – South African Mineral Resources Minister Gwede Mantashe said he’s open to discussions with mining companies about a crucial black-ownership principle, but they might not be pleased with what he has to say.

The Chamber of Mines lobby group, which represents most producers, last week won court backing for its argument that companies could count previous sales to black investors to reach the black-ownership requirements, even if those investors later sold their shares to whites or foreigners. The so-called “once empowered, always empowered” principle was a key point of dispute between the industry and Mantashe’s predecessor, Mosebenzi Zwane.

“We are not in support of a blanket recognition of past deals,” Mantashe’s Department of Mineral Resources said on Twitter Tuesday, citing the minister. “Each case must be assessed on its own merits.”

The ruling by the High Court in Pretoria applied to the first two versions of the Mining Charter, a set of rules aimed at distributing the wealth of the industry more widely. The industry is currently negotiating with Mantashe on a new draft, after a third version published by Zwane last year was suspended amid a court challenge brought by the chamber.

The court’s decision was positive for companies including Sibanye Gold Ltd. and Impala Platinum Holdings Ltd., as their earlier black-ownership structures had been unwound to varying degrees, analysts at Morgan Stanley said last week.

 “The court ruling leveled the playing field for government and mining companies,” said Ross Harvey, an analyst at South African Institute of International Affairs. “But now they need to agree on a clear criteria to determine whether companies have reached the targets as basis for the new negotiations.”

Mantashe’s department won’t appeal the ruling on past ownership deals and will focus on talks with the industry to come up with a solution that suits everyone, the minister said on Twitter.

While that decision is positive for the industry, Mantashe’s comments about assessing compliance on merit sends mixed signals, said Peter Leon, the Africa co-chair at law firm Herbert Smith Freehills LLP.

Source: Bloomberg Business News