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Rand slumps as SA seeks higher black mine ownership

Currency falls the most against the dollar since March 27.

The rand weakened the most in more than two months as South Africa said local mines should be at least 30% owned by black people in an effort to redress economic imbalances caused by the apartheid system.

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

The currency fell as much as 2.1% against the dollar, the most since March 27, to be the biggest decliner among 31 major and emerging-market currencies tracked by Bloomberg. The rand was 2% lower at 12.8775 by 4:11 pm in Johannesburg. Local mining stocks slumped, while benchmark government bond yields rose by the most in almost a month.

The new rules will deter investment and weigh on the rand at a time when the country’s economy is in a recession, according to Nomura. The higher level of minimum black ownership would need to be achieved within 12 months, mineral resources minister Mosebenzi Zwane said Thursday, risking dilution of shareholdings as companies are forced to sell stakes.

“They’re negative reforms,” said Peter Attard Montalto, a London-based economist at Nomura International, which forecasts the rand at 15.5 per dollar by year-end. “This will set the industry back. It will be negative for growth and investment in the industry. It will ultimately lead to outflows, both in a portfolio sense and in terms of foreign direct investment.”

Most mining companies had reached a threshold of 26% set by the existing rules, but many black investors have since sold out. The Chamber of Mines, which represents mining companies in South Africa, said it would seek a court order to stop implementation of the new framework as it hadn’t been properly consulted.

Mining stocks were among the biggest decliners on the Johannesburg stock exchange. Sibanye Gold fell as much as 7.8%, Anglo American Plc tumbled 6%, the most intraday in almost four months, while AngloGold Ashanti dropped as much as 6.2%. The industrial metals index fell as much as 4.6% to an eight-month low as the mining gauge retreated 3.2%. The broader benchmark was 1.4% lower, it’s retreat cushioned by stocks that benefit from rand weakness.

Yields jump

South African bonds fell, with the yield on the benchmark government rand-denominated bond due December 2026 rising nine basis points to 8.48%, the biggest jump since May 18.

Glencore Plc, Impala Platinum Holdings, South32 and Kumba Iron Ore, which is majority owned by Anglo, would need to sell the biggest stakes if the new charter fails to give credit for previous deals, Avior Capital Markets said June 1. AngloGold and Sibanye, the country’s two biggest gold miners, may also be affected by the new rules.

The rand has gained this year, even against a backdrop of credit ratings downgrades from the three biggest ratings companies and political turmoil surrounding Jacob Zuma’s presidency, as investors sought higher yielding assets in emerging markets. Finance Minister Malusi Gigaba said Thursday that South Africa is likely to miss its 1.3% growth target this year and may have to curb spending.

The drop in share prices and the rand suggest investors have been too sanguine about prospects for South Africa, Nomura’s Montalto said.

“It shows an ignoring of the risks in this kind of environment. Investors have been ignoring some of the specifics,” he said. “This is waking people up to fact that the reform agenda is not quite what it seems.”

© 2017 Bloomberg L.P

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“Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein

The Mining Charter is to blame for the fact that South Africa missed out on the previous commodity boom. It is to blame for rising unemployment, while the beneficiaries of the BEE schemes are bankrupt. They thought they are getting ownership of a mining company and easy cash. They were left with a heap of debt instead.

BEE caused a decline in the value of pension funds as share prices of mining companies dropped. Government employees funded the BEE schemes with the drop in the value of their pension funds.

So, who actually benefited from BEE? Luthuli House is the only beneficiary as they bribed the naive voters with assets they stole from retirees, widows and orphans (members of pension funds).

After they realized that BEE is a dismal failure, they decided to expand it, and to broaden it’s scope, to try and solve the problem. BEE is just another failure of socialism, but these fools will blame the disaster on “white capital”.

Luthuli House is one huge insane criminal disaster.

So Mr. Minister. Is this the way to instill confidence in our failing economy. Should you not be looking for inward investment instead of scaring off those who still have money invested in this failed mining industry. Could this not have waited until the economy was in an upward trajectory? Ar$ehole!

What a bunch of losers we have at the helm of our government. The public and the investors in this country are ashamed of you.

“Too sanguine” hey! Remember commenting abt why the rand had strengthened even as bad news was seeping out. Anyway the question is whether this is good for the country – not the chamber of mines – but the masses of have nots. Just don’t see any winners here at all for anyone

They are going to dilute the shares, a stock market investment concept Mineral Resources Minister Mosebenzi Zwane is clearly not aware of, many companies will collapse. Investors won’t invest. Investment funds are about to leave with trillions of Rands of investment, the stock market will collapse and the Rand too. It’s called share holder dilution. Google it.

Here are some links to this investment concept:

http://www.investopedia.com/terms/d/dilution.asp
https://seekingalpha.com/article/234695-the-dangers-and-benefits-of-share-dilution
https://www.capshare.com/blog/dilution-101-startup-guide-equity-dilution/
http://www.investinganswers.com/financial-dictionary/stock-valuation/dilution-2026
http://www.nbcnews.com/id/7477469/ns/business-answer_desk/t/what-are-diluted-shares/
http://finance.zacks.com/dilution-affects-stock-price-6875.html

They are going to dilute the shares, a stock market investment concept Mineral Resources Minister Mosebenzi Zwane is clearly not aware of, many companies will collapse. Investors won’t invest. Investment funds are about to leave with trillions of Rands of investment, the stock market will collapse and the Rand too. It’s called share holder dilution. Google it.

I don’t understand the obsession with mining and farming, surely technology and manufacturing is where the most opportunity is.

correct but that would require too much effort-
these guys want the low hanging fruit

sa gold mining has dropped from 1st to 7th , or lower
with this new trick the whole mining industry will become a pariah among investors
he he he , we are so clever he he

latest:Investec and other SA banks advising clients to stay away from
SAMININING.INC

Does it really matter who owns the shares in a mining company? As long as they mine and employ people, pay taxes and look after the environment.

If it matters buy your own shares or start your own mining company.

BEE is a mafia scheme to extort money for the connected few.

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