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SA empowerment criticism casts ‘dark cloud’ on mining

Industry challenges data that shows it has failed to meet empowerment targets.

The South African government cast a “dark cloud” over the country’s mining industry by criticizing its attempts to be more inclusive of people who were marginalized under apartheid, the Chamber of Mines said.

The Department of Mineral Resources published data Thursday showing that much of the industry has failed to meet empowerment targets outlined in the 2004 Mining Charter, which required companies to sell 26% of their assets to black South Africans by the end of 2014 as a way to narrow economic disparities created by white-minority rule.

That data shows “no proper recognition” of the progress companies have made towards meeting those requirements, Mike Teke, president of the chamber, which represents companies including BHP Billiton and Anglo American, said Friday.

“All that we are asking for is a fair reflection of the significant progress the industry has made on the transformation front since the Mining Charter was developed,” he said.

Empowerment laws in South Africa, the world’s biggest platinum producer, aim to redress the economic marginalization of non-whites under apartheid by promoting so-called historically disadvantaged citizens’ participation in the economy.

‘Dark cloud’

“There is, more and more from the department, the threat of revoking Section 47, which is basically the removal of mineral rights from a public listed company,” said Graham Briggs, chief executive officer of Harmony Gold Mining Co. and vice president of the chamber. He was referring to the section in the Mineral and Petroleum Resources Development Act that deals with ministerial powers to suspend or cancel rights, permits and permissions.

“I’m being fairly blunt now, but every company has to look at its shareholders and stakeholders and say ‘How do we continue operating?’ This is a bit of a dark cloud over us.”

While 90% of the industry, weighted by the number of people employed, has met the requirement for 26% of shareholders being from historically disadvantage groups, this has mostly been achieved by selling stakes to “one or two” people, rather than involving communities or employees, the department told reporters Thursday.

Only 20% of the industry has “fulfilled the full requirements of meaningful economic participation,” the department said.

Assessment disagreement

The chamber disagrees with this assessment, saying that non-whites own 38% of mining companies, compared with the 26% requirement.

“It wasn’t a requirement in the charter that it had to be broad-based, it was more of an encouragement,” said Roger Baxter, chief executive officer of the lobby group.

Mining companies have exceeded targets on procurement, employment equity and community development, according the the chamber’s research. The department, using a different method for weighting companies, said 35% of the industry didn’t fulfill requirements for buying services from companies run by previously disadvantaged groups.

“When you look at statistics you can say things in many different ways,” Baxter said. There are “big differences” between the chamber and the department’s interpretation of the data, he said.

Another point of contention is whether a company that has previously sold stakes to black investors meets the black- ownership rules even if those people then sell their shares. The chamber and the department have agreed to test this “once empowered, always empowered” principle in court.

©2015 Bloomberg News

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