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Fitch says new mining rules may deter investment

“It indicates that the government is prioritising radical transformation even if this leads to weakening of the business climate”

Fitch Ratings agency said on Monday that new regulations seeking to accelerate black ownership in South Africa’s mining industry would deter investment.

The government published its revised Mining Charter on Thursday, raising the minimum threshold for black ownership of mining companies to 30% from 26%.

Read The new mining charter is populism on steroids

But the Chamber of Mines, which represents mining firms, said it would challenge the new rules in court.

Read Mines minister defends new mining charter

Fitch said in a statement that although the Black Economic Empowerment programme – meant to include more blacks in the economy to redress their exclusion during apartheid – was a longstanding feature of South African economic policy, the new charter was the result of a more radical approach.

The mining sector accounts for about 7% of South Africa’s economic output.

Read Just how bad are things in SA mining?

“It indicates that the government is prioritising radical transformation even if this leads to weakening of the business climate and could reduce trend growth,” Fitch said.

“Uncertainty about final outcomes, the implications on returns for existing shareholders of the new provisions, and the challenges of meeting procurement targets will continue to constrain investment in the mining sector.”

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Wouter Fourie

Wouter Fourie

Ascor® Independent Wealth Managers
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