South African Miners Win Court Fight on Black Ownership Rule

JOHANNESBURG (Capital Markets in Africa) – South African mining companies won court backing on a crucial black-ownership principle that’s likely to have implications for ongoing negotiations with President Cyril Ramaphosa’s government.

Producers don’t need to top up black-shareholding levels in perpetuity if they previously met the minimum 26 percent requirement, the High Court in Pretoria said on Wednesday. The judgment boosts certainty for investors in the world’s top platinum producer and gives mining companies extra muscle in talks with Mineral Resources Minister Gwede Mantashe on changes to the Mining Charter, a set of rules aimed at distributing the wealth of the industry more widely.

“This is a very significant judgment for the mining industry, it clearly gives the chamber a great advantage in the negotiations for a new charter,” said Peter Leon, the Africa co-chair at law firm Herbert Smith Freehills LLP. “The certainty is extremely important for confidence building in the sector.”

Wednesday’s decision follows a tumultuous year for South African mining, after then-Minister Mosebenzi Zwane in June published a new charter that was furiously opposed by the industry, with one top chief executive officer saying it made South Africa “uninvestable.”

Tensions have eased since Ramaphosa, who appointed Mantashe in February, said he wants to resolve the impasse over the charter and convinced the Chamber of Mines lobby group to suspend its legal challenge to Zwane’s document.

Wednesday’s ruling was on a separate case revived last year by the chamber, seeking a declaratory order on the so-called “once empowered, always empowered” principle. The group argued that companies can count previous sales to black investors to reach the black-ownership requirements, even if those investors later sold their shares to whites or foreigners.

While it wasn’t clear whether the principle applied to the first two versions of the Mining Charter, Zwane indicated last year that he intended to apply it to last year’s draft.

The court’s decision is positive for companies including Sibanye Gold Ltd. and Impala Platinum Holdings Ltd., as their earlier black-ownership structures have been unwound to varying degrees, analysts at Morgan Stanley wrote in an emailed note.

“This is an important step toward greater regulatory certainty in the South African mining sector,” they said.

South Africa has the world’s biggest reserves of platinum and manganese, and its mineral deposits also include gold, iron-ore, coal, chrome and zinc. Anglo American Plc, Glencore Plc and South32 Ltd. are among companies operating in the country.

The mineral resources department “has noted the judgement, and will study it before making any pronouncements thereon,” a spokeswoman said Thursday.

Source: Bloomberg Business News