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The new mining charter is populism on steroids

We saw this coming …

The fractures and fissures between the Department of Mineral Resources and the mining industry, as represented by the Chamber of Mines, will become a grand canyon with the release of the new Mining Charter.

The chamber had long ago expressed its dissatisfaction with the process that was employed in designing the charter, and ahead of its release, declined to attend a meeting convened under the  Mining Industry Growth Development and Employment Task Team (MIGDETT) umbrella for fear of appearing to grant the charter legitimacy.

Whether the charter even classifies as legislation is disputed. In the past, it was a compact thrashed out and ultimately agreed to between industry and government that set the target for socio-economic transformation. It had to have the buy-in from industry as it is they who must implement it. But, as the chamber has so stridently argued, the same process employed in previous iterations of the charter was not followed in this version.

Minister Mosebenzi Zwane, in presenting the charter, said they did listen to all the people of South Africa (including the industry) and the time had come to act. He believes the certainty provided by the charter outweighs any disagreements over its content.

Read: SA raises mining sector black ownership requirement to 30%

So to it then. On the first point of whether past empowerment would be recognised, the new charter says no. All holders of a mining licence will have 12 months in which to get black shareholding to a minimum 30% level. For those that are currently empowered at the 26% level – which is a large swathe of the industry – this will require another 4% increase.

The composition of the shareholding needs to change too. Eight percent of the total shareholding must be held by employees of the company, and 8% by the mine communities themselves. Another 14% must be held by black entrepreneurs. To possess a prospecting licence, an operator must be 50% plus one share black-owned.

Employment equity is equally prescriptive. Little thought or acknowledgement of the current demographic composition of the skills pool in the industry was made, never mind utilising scientific means to conduct a skills audit. Companies must just meet the following requirements: 

Employment equity:

 

Board level

50% black, 25% women.

Executive/top management

50% black, 25% women.

Senior management

60% black, 30% women

Middle management

75% black, 38% women

Junior management

88% black, 44% women

Source: DMR

 

But it becomes even more stringent with procurement:

Procurement

70% of all mining goods from BEE entities

80% of all services from BEE entities

100% of mineral samples to be analysed by SA firms

Foreign suppliers to pay 1% of annual turnover to Mining Transformation and Development Agency

Source: DMR

For procurement, there will be a transitional period of three years to reach these targets. If foreign suppliers are used, 1% of their annual turnover must be paid to the newly-created Mining Transformation and Development Agency (MTDA).

This ability to create and impose levies is a feature of the charter that will inevitably be challenged in court. It crosses into the domain of National Treasury, which is the department that has powers to impose taxes and levies. The MTDA will get a further 2% of the 5% mining companies pay towards the skills development levy.

Also, and out of the blue, comes the requirement for the holder of a mining right to pay 1% of its annual turnover to the 30% black person’s shareholding prior to, and before, any distributions are made to shareholders. “This 1% payment is meant to ensure real economic value in the hands of black persons, but it is always subject to the solvency and liquidity test as provided for in the Companies Act,” Zwane said.

Of course, it is easy to see why we have a charter as ill-conceived and prescriptive as this, given the minister’s short tenure in the industry and highly compromised position as a result of his links to the Guptas. The current political environment also plays a role, and was described by Patrice Motsepe as being “one ripe for populism”.

The president and aligned factions have launched Radical Economic Transformation to position themselves as the champion of the people and deflect attention away from the poor performance of government under the Zuma administration.

There is also the small matter of the ANC elective conference in December and the general elections around the corner in 2019. Zwane is a Zuma man through and through. He cares little for the long-term health of the industry, because if he did, the idea of being globally competitive would have resulted in some very different policy choices in my opinion. And resources are as global as they get – you don’t choose your selling price, the only thing you have control over are your costs. You are also competing with every other producer the world over. If the minister believes this charter is going to spur investment, economic growth and job creation, he is sadly mistaken. All this document will do is lead to more stagnation and withdrawal by the large mining companies that have the skills and wallets to undertake big projects at a time we could use all the investment we can get.

Unsurprisingly, the Chamber of Mines will launch an urgent interdict to challenge the charter.

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COMMENTS   26

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This was always quite predictable. In an environment where one group is unable to create meaningful wealth for themselves, the next best thing is to confiscate the wealth others have created. This is accomplished by the ANC using the ballot box, legislation and threat of force. Aren’t they lovely people?

The African populist experience invariably follows the same path. Firstly wealth is confiscated by taxation. When the milch cows are milked dry (or alternatively have fled to greener pastures) the means of production is confiscated. This is what we are currently witnessing: a forced sale of equity with no buyers at market value only fire sale prices to the ANC chosenites. The net result will be capital and skills flight, decreased output, no foreign investment, exchange controls, culminating in Zimbabwe style economic collapse. Whites unable to earn a living in SA will leave and create wealth for the countries that will have them. Of course, the international hypocrites who screamed long and hard about apartheid will remain silent in the face of this evil.

When the ANC notes what destruction they have wrought will they stop? of course not – miffed by the collapse of tax revenues they will seek scapegoats for their actions- as they do. Then they will steal the value of the currency by debasing it out of existence.

The big question is can and will South Africa stop the monster.

i have no issues with this – except it seems that these moneys will be heading to people who already have money! there needs to be a process where the landless masses see and can feel things changing for them – which at the moment just isn’t happening. I am really beginning to think that the EFF idea of ALL land being owned by the state could be the way to go. clearly the haves (mainly but not entirely whites) have no interest in giving up what they have got

States in general and the South African state in particular are very poor at managing assets. Putting all land in the hands of the state means that low-level civil servants will decide how to allocate most of the country’s physical assets.

Anyone who thinks this would be an efficient, fair or quick process is clearly somewhat out of touch with the reality.

This short post gives us more useful information and valuable insight than the last 100 articles I have read.

Yes, the scenario where the regime confiscates land and precipitates and economic collapse leading to widespread pain and suffering would have you effervescent with your own malicious brand of schadenfreude.

The question is what kind of person lacks basic empathy to this degree?

Looking back at the brilliant track record that these turkeys have managing and growing any business, especially SA Inc, I propose that one successful mine is selected and all personnel removed. Then hand it over to the ANC and tell them to get on with it. Hire staff, mine it, grow it, make a profit and pay dividends. After a year compare it to Aurora, if there is any resemblance take it back.
After all it should be easy, no startup costs, no capex needed no lag time, just push the ON button.

It’s called a 3rd world landslide, but when you’re living in the upper esoleans of society people think what IS coming is not REALLY already here.
If you are unsure on who or what is driving the thought process of business in South Africa, look North to Zimbabwe. Close relatives of our general population are grabbing the last remaining white farms. My question to white capital and white business is this, do you think it’s going to stop at 30%? In 10 years time you’ll be wishing it was 30% by then it will be 80%. Eventually it will be 100%. The justification will be “all whites are just settlers any way”. As inciteful as this may seem, I am yet to be proven wrong after example after example after example of how Southern Africa is eclipsed into what can only be described as “SADC reformation and decolonisation agenda”. That’s bug English for, “let me pack up and leave before I have nothing to leave with”.

I salute you sir for your insight into the way Africa works. Pointless saying it’s right or wrong – it IS the reality.

The are going to dilute the shares, a stock market investment concept this minister is clearly not aware of.

“The minerals in South Africa were not created by these companies and should benefit not only their shareholders but the community whose environment is being harmed.”
Ever heard of taxes on profit mmmm?
Government takes no risk; resources is cyclical – so govt takes a big fat wad of the profit in good times and takes no pain in the bad times. Then the taxes should be applied for the benefit of these communities but the cadres’seemingly unsatiable desire for bling and beemers bleeds the bank dry….. so, sure, go for it. But I’m not holding my breath to see who will benefit most – more bling and beemers.

Dear minister Ignorant, Zuma and Clan. Please just look at the reaction of the market and decide for yourself whether this is a good plan. Also look at multi nationals such as BHP, Anglo, etc. who are all divesting away from South Africa. And oh it seems important to remind you that mining actually needs the market and also needs to be competitive to survive. If mining in SA is completely made unattractive to any investor (including White Monopoly Capital) thousands more will be without work and the economy will never recover.

please start with banking and asset management ASAP

I fully agree that a mining business utilise resources that “belong” to the country. The compensation for this is however the royalties and additional tax levied by government on mining companies.

SA already missed out on the commodity supercycle as mining houses where reluctant to commit capital when ownership is uncertain.

SA’s gold and platinum mines are already very marginal. I sometimes think that the global mining houses are only too glad to offload there suboptimal, high cost SA mines…

I just wonder who is the consultants associated with the Minister, definitely no one from the mining industry.

On the news, “ANC worry about the new mining charter” – how do this govment operate – putting new charters and decisions on the table without any consultations or insight on the outcomes. Typical of the “follow your clueless leader” cadres. Now, again playing we did not know game, just plain idiotic actions pushing SA closer to total carnage.

Destroy R50 billion in pension fund value to create a few BEE deals which will yield far less than R5 billion for a few connected individuals.

The fan is spinning fast and the minister and the rest of the cabinet are crouched above it with their pants drawn down to their ankles. Any moment from now on and either one at a time or all together, then are going to release the contents of their colons onto the fast spring fan below them. And when that happens, the entire economy and all the citizens are going to be covered in the result of the disaster this minister and his henchmen are about to release via their colons onto the spinning fan.

I guess you have your own idea of what is about to happen when the $h1t hits the fan?

New need to vote these fools out of office and put anyone in power who gives us a glimmer of hope for the future. Like the DA and EFF coalition.

The good news is people and institutions with any savvy have 1 year to dump SA mining stocks- the PIC can buy them all

Mr Zwane, you seem to be a complete fool. Consulting does not mean that you’ve told industry that you are reviewing the mining charter. It actually means you consult (actively listen & test) inputs from a wide range of experts & mining houses. It also means that you explain your objective and ask them to review, provide input and that impacts of are thoroughly assessed. Once this assessment is done, you meet again with industry to provide feedback & develop solutions. This is consultation. If this process was not followed you simply have not consulted industry, you should put the new charter on hold and restart the process.I

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