Minister takes rain check on charter (Parliament, Sapa, 17/10/2002) - Minerals and Energy Minister Phumzile Mlambo-Ngcuka on Thursday took a rain check on a briefing to the National Assembly on the mining empowerment charter. She was supposed to make a statement to MPs after President Thabo Mbeki's question period on Thursday afternoon, but did not show. Her spokesman, Kanyo Gqulu, said: "She's no longer speaking today. She'll probably do it at a future stage because there's other things she's trying to rush through now." He said her statement would simply have been a briefing on what was in the charter. "It was not going to be something that the government has up its sleeve," he said. "It was just going to be the charter, which is known by everybody." The charter, approved by Cabinet on October 9, says 26 percent of existing South African mines should be black owned within ten years.
A better charter (Business Day, 12/10/2002) - Mining industry stakeholders will be struggling to get their teeth mind around the full title of the revised mining charter, now dubbed the "Proposed broadbased socio-economic empowerment charter for the SA mining industry." But the new charter, which prescribes empowerment equity stakes for the industry that are half those of the original leaked draft document, will clearly be easier for the industry to live with. Though 26% of every mine will have to be black-owned within a decade, it is estimated that about 10% of SA gold production and 9%-11% of coal and platinum production is already in black hands. And the "willing seller willing buyer" principle is entrenched. - no doubt a relief to those who expected a worst case scenario. As importantly, the charters tooth-breaking title reflects the more-rounded view taken of the empowerment issue. The focus is not only on black ownership but also on educating and training the industrys employees - and former employees - and improving their living and working conditions. Empowerment targets are also set for management structures and procurement. And there is a novel system of "offsets" where mining companies may, in effect, be able to trade off, say, lower empowerment equity stakes but higher levels of procurement from black suppliers. All of this opens the way for changes in the industry that go beyond enriching a mere handful of middle-class black folk to potentially providing real benefits for poorer people. in and around the industry. The flexibility in the new approach is essential. But it leaves plenty of uncertainty about how the charter will be implemented. A key question is funding - it is unclear how the R100bn in empowerment finance the industry has agreed to facilitate will come about. Clearly some of it will be more of the same - most empowerment deals so far have involved bank project financing and/or vendor financing in which the companies selling the shares lend the new owners the money to make the purchase. But ultimately, investors in SAs mining companies will have to provide the support for these initiatives, whether directly or indirectly. And here lies a big problem. Fund managers, particularly in London and other international centres, were horrified by the contents of the original leaked charter and the prescriptive-type approach by government that it seemed to presage. They are still far from reassured, despite the positive way talks between government and industry have proceeded since the initial disaster. Many international fund managers are still extremely concerned that, though this charter may look acceptable, SAs government could decide to shift the goalposts again in a few years time. Some want iron-clad guarantees that this will not happen before they invest again. But no government in the world can give those kinds of guarantees. In SA, at least, institutions such as the constitutional court are there to protect property rights in the last instance. Nonetheless, government and the industry are going to have their work cut out to rebuild the trust of foreign investors whose backing for the new charter is critical to its success.
Unstated struggle of wills behind mining accord
(Business Day, 12/10/2002) - One of the main positive
features of the publication of the Broad-based Socioeconomic
Empowerment Charter for the SA Mining Industry is theoretically
that it brings clarity and certainty to government's empowerment
requirements. But does it? And if not, how much certainty do the
players really want? The charter is the subject of an intense but
often unspoken and disguised struggle of wills. Government,
potential beneficiaries and the industry tend to speak in a code
language about the contents of the charter. All would agree, for
example, on the basic proposition that black participation in the
industry is desirable and even crucial. But from here, paths
quickly part. The extent and speed of the transformation, its
precise nature and the ultimate outcome are all of course highly
contested aspects of the new charter. There is plenty of room for
misinterpretation here. Despite some suggestions to the contrary,
government genuinely does not want to be in a position where it
is obliged to refuse a mining licence to a mine because the mine
has failed to measure up. And despite suggestions to the
contrary, industry's concern is not about transformation as such
it has been actively transforming without state inducement for
years. The industry is most afraid of being required to fulfil
unattainable fantasies of politicians who have little
appreciation of what their businesses requires. According to
Peter Leon of legal firm Webber Wentzel Bowens, the new charter
is a huge improvement and light years away from the first draft.
"It is quite clever," says Leon, differing mainly
because it is "deliberately vague in order to promote a high
degree of flexibility". The charter introduces the concept
of a "scorecard approach" in which various aspects of
transformation are specified and can be set off against one
another. These aspects require commitments from various parties,
including government. From industry's point of view, the main
aspects are human resource development, employment equity,
community and rural development, housing and living conditions,
procurement, ownership and beneficiation.
The charter then goes on to say that when licence conversions from old order mineral rights to new order mineral rights are processed, all of these aspects of transformation will be recognised on the scorecard. What it does not say is the extent to which aspects of transformation will be taken into account. In other words, it is impossible to know exactly what level of beneficiation is required to offset what proportion of the 26% ownership condition. The charter does provide some distinctions. On ownership, passive and active involvement are distinguished. Presumably, this is to suggest government's overall preference for active, black involvement. However, the fact that passive involvement is mentioned at all suggests government is prepared to recognise the role of passive shareholders, including, for example, employee share ownership schemes. Once again, however, the precise weighting of passive and active ownership is not specified. One other set-off possibility is mentioned in the charter. "The currency of measure of transformation and ownership could, inter alia, be market share as measured by attributable units of SA production controlled by historically disadvantaged South Africans," it states. This is much more significant than it might appear, since it introduces the possibility that high production companies with comparatively lower black ownership could nevertheless meet the licensing requirements. But how many production ounces will be required to offset the ownership formula? A new aspect of the charter, which Leon describes as "very ambitious" is the requirement that 40% of management should be black within five years. However, here too, the precise working of the document is, well, imprecise. Stakeholders are in fact required to "aspire" to the 40% level, leaving companies a rather large escape hatch. Perhaps the most vague aspect of the charter is the requirement that 15% of each mine should be owned by black South Africans within the first five years. Minerals and Energy Minister Phumzile Mlambo-Ngcuka stated the 15% and the 26% requirement when presenting the document. But the figure does not appear in the charter.
The charter does mention an addendum, not yet released. It seems likely that this figure would appear in this document, but the status of this addendum is presently unclear. According to Blaize Vance of legal firm Bell, Dewar & Hall, the overall effect of the charter is that mining firms will have to develop a SAspecific strategy. Investors can take comfort from the number of measures introduced by the charter. However, Leon says the downside of the flexibility is that a large measure of ministerial discretion will need to be applied. Despite the facade of providing certainty and clarity, the charter in fact provides only the framework within which transformation will take place, providing here and there specific pointers of what will be required of industry participants. Absolute certainty is of course an unattainable dream. While SA's industry will not be too perturbed by the blank spots, and in fact might welcome the flexibility, whether the more tough-minded European and US bankers will agree still remains to be seen. Investors too remain sceptical. Anglo American's London share price was under pressure yesterday, and the huge price to earnings gap between Anglo and its most comparable competitor Rio Tinto has not narrowed. Investors are perhaps wary that flexibility might mean the flexibility to introduce new requirements.
Mining groups come out in support of charter (Business Day, 12/10/2002) - SA's largest mining companies said yesterday that they backed the final draft of the empowerment charter for the mining industry. The charter differs radically from the draft that was leaked in July, and call for 26% of the mining industry, which government values at R750bn, to be empowerment controlled in 10 years. AngloGold, Gold Fields, Harmony and Kumba Resources all said that they supported the charter. Anglo American was also positive, but like the Chamber of Mines suggested there were some loose ends that needed tying up. As expected the charter promotes broad-based empowerment, including improved living conditions for workers, education and training projects, employment equity, encouraging procurement from empowerment companies and employee share-ownership schemes. A significant element of the final draft is that companies will be given credit for empowerment deals they have completed as well as for a number other issues, when government comes to determine who has met their target and who has not. The targets will not be measured in equity holdings. According to the minerals and energy department, companies' empowerment credentials will be based on market share as measured by attributable units of SA production controlled by historically disadvantaged South Africans. Elements of the charter are still woolly. The details of the much talked-about "score cards", which will be used to assess companies, still have to worked out. Companies are now keen to show how they back the principles of the charter and demonstrate empowerment already carried out. "AngloGold has completed a number of sales of assets in the past four years, which have shown how it is possible to craft viable transactions that expand empowerment with no significant loss of value and which will be credited by the charter. We have no doubt that the 15% target can be realistically met," said AngloGold CEO Bobby Godsell. Mining analysts in Johannesburg said the charter presented a realistic blueprint for empowerment "I'm not panicking about it. What we have got is a wide range of interpretations. The approach will quantify how far the companies have to go and what they have done already," one analyst said. "AngloGold's sale of Free Gold looks like a good deal now," he said. Kumba Resources CE Con Fauconnier said the Mineral and Petroleum Resources Development Act and the charter were a definite milestone and a bold move. "What I regard as extremely positive was the spirit of trust and commitment in which industry, government and labour negotiated issues of critical importance to our country's economic empowerment ideals and the requirements of international competitiveness," he said. Gold Fields CEO Ian Cockerill supported government's aim of redressing historic social and economic inequalities.
Mine deal: money fears persist (Mail & Guardian, 11/10/2002) - The only way to finance empowerment in the mining industry is for big mining houses to guarantee loans made to empowerment players, said David Hall, a senior mining analysts at Merrill Lynch. Lynch spoke to the Mail & Guardian after the release of the long-awaited Broad-based Socio-economic Empowerment Charter for the Mining Industry. Negotiated by often conflicting interests -- government, labour, foreign investors and representatives of established and emergent mining -- the charter is a triumph for "the South African way" that is likely to be a model for other economic sectors, analysts said. The charter sparked only mild market jitters on Thursday morning when the financial markets opened. The resources-dominated Top 40 index on the Johanessburg Securities Exchange fell 1,4% in the opening session. This was in sharp contrast to reactions to an earlier leaked document that proposed black ownership of 51% of new mines and 30% of existing mines in 10 years. Mining stocks crashed immediately in response, based on investor fears that these targets could only be met by huge asset discounts. But doubts persist about how the charter's black ownership targets are to be financed in an industry valued at R750-billion. Minister of Minerals and Energy Affairs Phumzile Mlambo-Ngcuka conceded on Wednesday that the Industrial Development Corporation (IDC) would play a minimal role.
The government had touted the IDC as a financing agent for the programme. One feature of the charter is the proposed transfer of 26% of mines to black ownership in 10 years, with 15% transferred in the first five. The mines must apply for 30-year renewable mining permits in five years. Their empowerment performance will be central in granting the licences. Monitoring is expected to start early next year, when the minerals legislation is gazetted. Mlambo-Ngcuka suggested that in time black mining entrepreneurs would become sufficiently credible to raise their own finance from lending institutions. The charter commits the industry "to assist historically disadvantaged South African companies in securing finance to fund participation in an amount of R100-billion within the next five years". Mlambo-Ngcuka said it was expected that mining houses would use their clout in the financial services sector to secure favourable lending for their empowerment partners. Another option suggested by an industry insider was to structure asset sales so that repayments would come from cash flow and operating profits. Both options, Hall suggests, would transfer risk to established players. He said if a mining giant recommended an empowerment player, it might still have to guarantee the loan from its balance sheet. This would raise the selling company's risk profile slightly. In most cases the loan would constitute a small percentage of the asset base. He said even when a loan was financed from operations some of the money might have to be guaranteed. Hall said if something went awry and a loan could not be repaid, or cash flows did not meet repayment commitments, this would point to a deeper problem. "Then we would have more to worry about than just loans." Other novel features include: " A focus on broad-based empowerment. The charter recognises employee share ownership as empowerment and commits signatories to "offer every employee the opportunity to become functionally literate and numerate" in five years. Communities from which workers are drawn or that host mines, as well as ghost mining towns, will get developmental and infrastructural help. " The industry undertakes to achieve 40% black participation at junior and senior management level in five years, as well as a 10 % representation of women. " Mining apprenticeships will be increased from 1200 to 5000 by 2005. Companies are expected to increase beneficiation, with achievements able to be offset against black ownership requirements.
Mining giants endorse South Africa's mining charter (Perth, Australia, Sapa-AFP, 11/10/2002) - Global mining giants BHP Billiton and AngloGold Ltd. Friday endorsed South Africa's controversial charter which aims to ensure 26 per cent black ownership of the mining industry within 10 years. The South African government this week approved a charter on black economic empowerment in the mining sector which sets out a framework of mining industry objectives. These include equity ownership of South African mining assets, the contribution of black-owned companies in the supply of goods and services, and equity employment in the appointment of management. Approval comes after a draft report leaked in July caused panic among investors with its proposal that all new South African mining projects have an empowerment holding of at least 51 per cent and 30 per cent for existing projects. The new targets approved by government after intense negotiations among industry, government and labor are 15 percent in five years and 26 percent in 10 years. BHP Billiton said in general it supported the charter's objectives. "The effect of the charter will ultimately depend on the specifics of the implementation process," a spokesman said. "BHP Billiton has a long history of successful major partnerships in Southern Africa, many involving the Industrial Development Corp." he said. "Our group was also the architect of South Africa's most successful black economic empowerment endeavour in mining, namely the creation of Eyesizwe Coal. "We therefore think we are well positioned for the opportunities that the future might bring." BHP Billiton's South African mining operations include the Ingwe energy coal mines, Samancor manganese and chrome mines and its investment in the Richards Bay Minerals mines, which together represent about six percent of the company's total net operating assets. The proposed legislation does not affect its South African aluminium smelters, Hillside and Bayside, or the Mozal smelter in Mozambique. The chief executive of South Africa-based AngloGold, Bobby Godsell, said the company had completed a number of asset sales in the past four years which showed it was possible to craft transactions which expanded empowerment with no significant loss of value. "We have no doubt that the 15 percent target can be realistically met," he said. "If it is implemented in the spirit in which it has been constructed, the new legislation and the charter will be a valuable tool in turning our country's extraordinary mineral endowment into real wealth to the benefit of all of South Africa's people."
Nafcoc welcomes mining charter (Johannesburg, Sapa, 10/10/2002) - The National African Federated Chamber of Commerce and Industry (Nafcoc) has welcomed the mining charter unveiled on Wednesday and congratulated the mining sector on promising to make available R100 billion to address imbalances in the industry. Nafcoc secretary-general Yolisa Kashe-Mzamo said: "The Minister of Minerals and Energy Pumzile Mlambo-Ngcuka has taken a positive step towards economic transformation especially with regard to black empowerment by removing economic disparities in the mining sector." The charter states that 26 percent of South African mines should be owned by historically disadvantaged people in 10 years with a 15 percent target in the first five years. The charter has so far won approval from mining houses and the labour unions.
Gold mining companies welcome charter (Johannesburg, Sapa, 10/10/2002) - Gold mining companies lauded the empowerment provisions of the new mining charter on Thursday, while the market reacted neutrally. The JSE mining index lost 0,5 percent by Thursday afternoon, in line with the 0,5 percent dip in the allshare index. The charter, provided for by the Mineral and Petroleum Resources Development Act, states that 26 percent of existing South African mines should be owned by historically disadvantaged people in 10 years. Outlining the latest draft to reporters in Pretoria on Wednesday, Minerals and Energy Minister Phumzile Mlambo-Ngcuka said the charter set a 15 percent target for the first five years. The mining industry had agreed to raise R100-billion over the same period to assist new entrants. Said AngloGold CEO Bobby Godsell on Thursday: "AngloGold has completed a number of sales of assets in the past four years which have shown how it is possible to craft viable transactions which expand empowerment with no significant loss of value and which will be credited by the charter. "We have no doubt that the 15 percent target can be realistically met." Godsell said AngloGold was considering the implementation of an employee share ownership plan. Gold miner Harmony's chief executive Bernard Swanepoel also expressed his support for the Act. While the charter prescribed some very demanding conditions, Harmony was well positioned to meet them well ahead of the targeted date. Swanepoel said: "We support the mining charter which, in addition, focuses on other important issues, such as the development of our people and the communities around our mines, as well as beneficiation. "We remain committed to the beneficiation of the gold we produce, thereby enabling a broader sharing in the benefits of gold mining." Anglo American CEO Tony Trahar said the mining house was making progress towards achieving the five year target of 15 percent. Subject to the availability of finance, the final 10 year target of 26 percent was also potentially attainable, Trahar said. "Anglo American had been associated with in excess of US1,3-billion (R13-billion) of black economic empowerment deals in South Africa, comprising over US1-billion in empowerment transactions and over $300 million on procurement from black-owned businesses," he said. Standard Bank group economist Dr Iraj Abedian said the charter represented a giant leap towards the reduction of investment risk in South Africa. "The mining charter marks another significant step towards the normalisation of the South African socio-economic environment." The impact of the charter was likely to go beyond the mining sector and could well form the foundation for other sectoral charters, Abedian said. Abedian said that a well-functioning market economy required policy predictability and a credible operational framework. "In this regard, the mining charter is a pragmatic foundation for the resolution of some critical and competing imperatives." The fact that the charter enjoyed the full support of the mining houses, the government and the labour unions was vital for its credibility. - AngloGold's shares rose by two percent to R520,00 by Thursday afternoon while Harmony's JSE counter dropped by 0,3 percent to R155,50. Anglo American's share price shrunk by 2,3 percent to R127,70.
Charter is a critical milestone for SA (Business Day, 10/10/2002) - The mining charter constitutes a breakthrough for socioeconomic policy making in SA, even by global standards. The charter has both symbolic and substantive significance. Ever since the dawn of the new SA, the question of distribution of wealth and income has been uppermost in the minds of analysts and the business community. This is because, much like Brazil, SA is one of the most unequal societies in terms of the gap between the poor and the rich. In SA, this is compounded by the racial profile of economic disparities. Glaring inequalities are neither economically sustainable nor conducive to sociopolitical stability. The imperative of redressing the historic inequities has become even more pronounced after SA's successful macroeconomic stabilisation policy during the 1990s. Beyond macroeconomic stability, widespread poverty and high levels of unemployment pose the most intractable risk to the business environment. Failure to deal with the issues is also a sure recipe for augmenting investment risks over time. To make matters worse, globally there are very few successful cases of striking a balance between dealing with inequalities and sustainable growth. Over the past few years, investment analysts and long-term investors increasingly focused attention on the attendant risks of a policy vacuum in regard to socioeconomic disparities. Typically, policy analysts conceived the worst and discounted SA asset prices accordingly. This is most evident in the recent valuation of mining stocks following the leak of a document on July 19. The listed mining stocks were battered, leading to a loss of more than R100bn in a very short space of time. This was due to the perception of an unfavourable mining charter as opposed to the revenue or profitability of the mining companies. Ironically, the substantial loss of mining-stock value since July hit black economic empowerment mining groups the hardest.
It is common knowledge that a well-functioning market economy requires policy predictability and credible operational framework. In this regard, the mining charter is a pragmatic foundation for the resolution of some critical and competing imperatives. First, the charter must enjoy the full support of the mining houses, the government and the labour unions concerned. This is vital for its credibility. One of the objectives of the charter, and its ultimate test of success, is its approach towards promoting investment in this sector. Given that the charter takes cognisance of the risk-reward relationship in this investment intensive sector, it is market-sensitive and designed to engender predictability. The most significant objective of the charter is its approach towards black economic empowerment. The charter introduces both specific and general targets. Over the next 10 years, it is estimated that about 26% of the value of the mining industry will be channelled into black empowerment deals. Progress towards the target will be assessed in five years time. In today's money, about R160bn is involved in these transactions. Significantly, the mining houses are to facilitate the financing of these deals. As importantly, they will be based on fair market value, or "willing buyer-willing seller" principle. In principle the charter aims at broadening the participation of a much higher number of black empowerment groups and individuals in this sector. A corollary of this is the emphasis on investment in human resources development in the charter. This augers well for the stabilisation of the labour force and skills development in this complex sector. Last but not least, the charter's provisions centre around the development of the "sending areas" from which mine workers originate.
It is an ironic reality of the SA landscape that more often than not, the sending areas are hardest hit by an array of socioeconomic forces ranging from family dislocation to disruption in economic activity and labour force displacement. Consequently, poverty in such communities intensifies, placing an added burden on already weak and over-stretched public sector institutions of local and national governments. It is recognised that within the framework of the mining charter, such communities should receive some form of "compensation" or developmental support. Increasingly, new mines source their required labour from the surrounding communities. The interest of these "mining communities" needs to be integrated into the structure of black empowerment. The broadening of the concept of empowerment within the charter is a significant step forward and a strategic departure from the narrow notion of black empowerment which more often than not has benefited a select few in the past. The acid test of the charter's success then may well be the extent to which it succeeds in spreading economic and financial benefits of wealth generation. The more such benefits translate into human resource development as well as local and community infrastructure, the more likely that the overall objectives of the charter will be seen in the reduction of poverty particularly in the rural areas. But, any charter is as good as its implementation. Much attention needs to focus on implementation. Mining houses and the financial institutions have a vital role to play. The mining charter marks another significant step towards the normalisation of the socioeconomic environment. Its impact is likely to go far beyond the mining sector. It may well set the baseline for other sectoral charters. In so doing, it represents a giant leap towards a meaningful reduction of investment risk in the country. Dr Abedian is Director and Group Economist for the Standard Bank Group of SA
Miners to join R100bn holy grail (Johannesburg, Miningweb, 09/10/2002) - South Africas resource heavyweights have committed to assisting in the provision of finance worth R100 billion to facilitate black empowerment in the mining sector over five years. The amount will cover half of the governments new empowerment targets over the next 10 years, during which it plans to regulate the sale of 26 percent of the industry to black business. South Africas minister of minerals and energy, Phumzile Mlambo-Ngcuka, said the government hoped that after five years black business would have entrenched its position in the mainstream mining sector sufficiently to allow it to secure its own funding for new ventures. The industrys commitment to assist black business in obtaining R100 billion in financing will effectively cover the governments empowerment objectives over the next five years. What happens beyond that is less clear. What has emerged as a pivotal aspect of the charter for the industry is the governments commitment to ensuring the asset transfer to black business will be done purely on commercial terms. Crucially, this means that if the governments 26 percent ownership objectives look impractical after the first five years, it is more likely to modify its ownership targets rather than it commitment to attaching market valuations to the assets. They say it will done on market terms. Thats entrenched and thats critical, said one mining industry executive. The government has pegged the business end of its mining empowerment policy on absolute values, which equates to about R200 billion (based on a R750 billion valuation of the industry). Mlambo-Ngcuka remains confident the 26 percent target can be achieved; but analysts and corporate finaciers remain unconvinced. South Africas miners committed to assisting with half of the sum, or R100 billion, over five years will provide a good start. It is likely the bulk of that figure will be achieved through structuring imaginative finance packages; the sale of 10 percent of Harmonys Elandskraal operation to empowerment group Khumo Bathong is a case in point. Khumo was given a soft loan to purchase the stake and was left to repay the sum from the after-capex cashflows from the mine. Listed black-controlled group Mvelaphanda is another example; it bought large stakes in diamond producer Trans Hex and platinum miner Northam, both funded from dividend flows. One analyst said that while the companies would structure the deals favourably for the new entrants, shareholders would ultimately lose to some extent.
Valuations are difficult
Another analyst points to the tricky business of valuing unlisted assets, as another potential hurdle for industry and government to overcome in the years ahead. Its easier when you look at the listed entity, the market simply determines a price which can then be paid, said the analyst. When it comes to determining the price of the assets, a task riddled with the subjectivity and vagaries of financial modelling, there are likely to be a host of different valuations attached to mining assets. What discount rates will be used and how bullish are buyers likely to be on commodity price forecasts?
Line up the buyers
Questions of this ilk introduce another headache for the industry: the depth of commercial black skills base will cause some concern when implementing the basic tenets of the charter. Assuming the government addresses the funding issues and arrives at a universally objective valuation for assets, there is still the likelihood of the proposed top-down empowerment process being dogged by a dearth of qualified empowerment partners.
Yes, Minister! (Johannesburg, Miningweb, 09/10/2002) - The South African governments mining charter for black empowerment reads like a work-in-progress document with the principles of compromise most explicit in the discretion afforded to the minerals and energy ministry. Phumzile Mlambo-Ngcuka, South African minerals and energy minister, has already raised the prospect that the charter could be reassessed to wide-ranging effect by 2007. In five years we can evaluate progress and see if we need to do any more or leave things how they are, the minister told Mineweb. Industry insiders say her comments could point to the government lowering its 26 percent black ownership targets in five years, particulalrly if financing for new entrants dries up. But foreign investors, chary of changes in legislation, are unlikely to expect what they deem to be a positive shift. Regardless of what the minister intends, comments of this character will do little to assuage fears, offshore and locally, that the government will not shift the goalposts of black ownership in years to come. Its also not known how government will be able to monitor success despite promises that mining companies in South Africa will be required to submit annual and audited accounts of their progress a proposal that one analyst says is likely to create a top-heavy, and costly, bureaucracy. Government has promised to implement a scorecard approach in recognising the commitments made by the private sector. Who will take this scorecard and who will be the final arbiter, particularly as instances of black empowerment will be widespread and varied, is another complication. The current minister may well move to another portfolio in years to come with little guidance set down to light the way of the successor. Certainly, assessing the success of the charter will be manifold: employment equity, share ownership schemes, beneficiation, procurement are some of the criteria set to be used. This will be in addition to the extent black-owned entities and interests own equity in existing mining projects.
The minister has said that certain advances in this broad-based scheme can be netted off against others such that if a company successfully intervenes in beneficiation then this can be offset against equity transformation requirements. How this will be exactly executed is unknown: It must be done on a case-by-case basis, Mlambo-Ngcuka said. Her comments chime with statements made last month by Anglo chief Tony Trahar, that a one size fits all charter, would not be practicable. White controlled companies will also be provided with credits for previous deals while government will attempt to control liquidity in the market by offering black empowerment companies as yet unspecified inducements not to realise the value of their investments. Some suggest taxpayers will ultimately have to pay empowerment companies to retain their equity in projects, while others reckon the government might decide instead to impose onerous capital gains tax obigations on companies selling shares prematurely. Traditional mining entities will also be able to mix and match equity deals as Anglo Platinum may well ponder: its 50:50 joint venture with the Royal Bafokeng Nation in the Bafokeng-Rasimone mine will give it the flexibility to make a fraction of its lucrative Rustenburg Platinum operations available to black ownership, if any. The outcome at this preliminary stage is that the South African government has set down a catch-all set of principles under the aegis of a difficult to bottle spirit or ethic. Companies not seen to be acting in the spirit of the charter for it declines to outline a single criteria for success but a combination of possible successes can expect to have future growth plans rudely interrupted. In the meantime, Mlambo-Ngcuka said the government would take a month or two to clean up the charter, redraft it in legal language, and ensure it had taken the interests of all stakeholders into account. She added that the principles of the document presented today, were cast in stone.
R195 billion charter approved
(Johannesburg, Miningweb, 09/10/2002) - R195 billion
charter approved (Johannesburg, Miningweb, 09/10/2002) - South
Africas government today (09 October) approved plans to
transfer 26 percent of the countrys existing mining assets,
estimated worth R195 billion, to black-owned interests over the
next ten years. Minerals and energy minister, Phumzile
Mlambo-Ngcuka, described the document termed a broad-based
socio-economic plan as a well crafted balance that
all parties put together. It is understood that South
Africas private sector, represented by the Chamber of Mines
of South Africa (CoM), has also approved the charter. The charter
is widely different to an earlier draft, first handed to Mineweb
in July, in which ownership of 30 percent of existing assets, and
more than 50 percent of new projects, were to be transferred
during a 10-year time frame. South African and international
markets were so surprised by these proposals, later described by
government as a first position, that more than R50
billion flooded out of the Johannesburg Stock Exchange within
days. Governments new charter, however, sets far lower
targets for the transfer of ownership, and defines no equity
targets at all on new, as yet unannounced, projects. But
Mlambo-Ngcuka suggested that higher proportions of equity were
expected to be made available to black businesses in the case of
new projects. Over-arching these pronouncements, Mlambo-Ngcuka
said the implementation of the redrafted charter would be on a
case-by-case basis and using more than one criteria for success.
Crucially, the charter stipulates that the targeted 26 percent
ownership must be implemented at the asset level only. This is an
important clarification that further improves the previous
charter document which suggested large slices of equity, even at
the corporate level, might be transferred to new shareholders.
Trade and industry minister, Alec Erwin, said governments
charter would be market driven: the industry faced a
predictable, long-term future, he said.
In addition, the charter also imposes a five-year interim assessment of its effectiveness in which it hopes roughly R100 billion worth of assets about 13 percent of the industry - will be owned by black companies. The charter also states that the private sector has undertaken to assist funding new entrants: The industry agrees to assist HDSA (Historically Disadvantaged South Africans) in securing finance to fund participation in an amount of R100 billion within the first five years. Implementation of the charter will be through the granting of mining licenses. In other words, mining companies must apply to transfer old order rights into new order mining rights, a process through which government will identify opportunities for black empowerment. Companies that fail to meet the charters criteria will not be granted mining licenses. Annual public disclosures will be made to monitor the implementation of the ownership transfer envisaged by government. Progress will also be assessed by additional criteria including providing employment equity for black people. In terms of this feature of the charter, about 40 percent of junior and senior managerial roles in the South African mining industry must be held by black South Africans after five years. Other features of the charter are preparations for social plans to provide for the future of potential so-called ghost towns, communities which once hosted mining operations. Beneficiation, share ownership schemes for mining employees, and a drive to boost black owned providers of mining equipment and supplies are other key aspects of the charter.
The pocket charter (Miningweb,
09/10/2002) - Everything you need to know about South
Africas newly launched mining charter is easy-to-absorb
Proposed Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry
All the actions and commitments set out below are in the pursuit of a share vision of a globally competitive mining industry that draws on the human and financial resources of all South Africas people and offers real benefits to all South Africans. The goal of the empowerment charter is to create an industry that will proudly reflect the promise of a non-racial South Africa.
The Big Picture:
Mining companies have agreed to:
1. To achieve 26 percent HDSA (Historically Disadvantaged South Africans) ownership of the mining industry assets in 10 years by each mining company.
2. Where a company has achieved HDSA participation in excess of any set target in a particular operation then such excess maybe utilised to offset any shortfall in its other operations.
3. All stakeholders accept that transactions will take place in a transparent manner and for fair market value. Stakeholders agree to meet after 5-years to review the progress and to determine what further steps, if any, need to be made to achieve the 26 percent target.
The Undertakings of government and the private sector include:
1. Human Resource Development
2. Employment Equity
4. Ownership and Joint Ventures
1. Human Resource Development:
Companies undertake to offer every employee the opportunity to become functionally literate and numerate by the year 2005.
2. Employment Equity:
Companies agree to spell out their plans for employment equity at the management level. The stakeholders aspire to a baseline of 40 percent HDSA (Historically Disadvantaged South Africans) participation in management within 5 years.
South African subsidiaries of multinational companies and South African companies, where possible, will focus their overseas placement and/or training programmes on historically disadvantaged South Africans.
Stakeholders undertake to give HDSAs a preferred supplier status, where possible, in all three levels of procurement: capital goods, services and consumables.
4. Ownership and Joint Ventures:
To achieve 26 percent HDSA (Historically Disadvantaged South Africans) ownership of the mining industry assets in 10 years by each mining company.
Mining companies agree to identify their current levels of beneficiation and indicate to what extent they can grow the baseline level of beneficiation.
Measuring the success of ownership:
i. the currency of measure of transformation and ownership could be market share as measured by attributable units of South African production controlled by HDSAs
ii. capacity should be built in to allow for credits or offsets to allow for flexibility
iii. previous black empowerment deals should be included in calculating credits and offsets
iv. government will consider special incentives to encourage HDSA companies retaining newly acquired equity for a reasonable period
A scoreboard approach will be introduced to help government process license applications. Points will be notched up based on a number of ownership transformation criteria such as employment equity and human resource development.
The industry agrees to assist HDSA companies in securing finance to fund participation in an amount of R100 billion within the first 5-years.
Companies undertake to report on an annual basis their progress towards achieving their commitments with these annual reports verified by their external auditors.
Government to burn midnight oil on charter (Pretoria, Miningweb, 09/10/2002) - The South African government looks set to work well into the evening as it hammers out the finer aspects of the charter on black empowerment in South African mining. According to sources close to the Cabinet it was not impossible that last minute alterations could still be made to the draft of the charter which was handed to South African president Thabo Mbeki last Friday by a focus group. The focus group was formed from representatives of unions, government and private sector to redraft proposals which initially called for the transfer of control of new mining projects to black owned companies by 2010. On Friday, Mineweb reported that the South African government was poised to ratify the charter on black empowerment in mining which, in its final form, is asking for the transfer of 15 percent of the industry into black hands over next five years, increasing to 26 percent during the subsequent five years. Mineweb also reported that focus group representatives were discussing the possibility that R100 billion*, equal to 16 percent, of the existing mining industry would be transferred in black empowerment deals over a certain period. That has now been set down in the charter along with a second target of a further R60 billion within 10 years. In addition, mining companies will be accredited for black empowerment deals already completed. In addition, the final charter reportedly does not set targets for black empowerment in new mining projects. According to sources, there will be a great deal of subjectivity applied coupled with a number of other empowerment hurdles such as community involvement, share ownership schemes and the transfer of skills to black professionals. What appears to be clear is that the charter is not a blue-print, but a rough guide that must be tested on a case-by-case basis. One predominant theme is that the minerals and energy department has significant discretion which suggests it will have the power to keep the private sector operating in the spirit of the charter. The Chamber of Mines is also meeting to hammer out details of the charter and will hand its findings to government in the next few days. The South African market came under heavy pressure today as investors pulled out of mining stocks ahead of the release of the charter. The resources index took the most strain closing the day almost 2% in the red with Anglo American losing 4.4% to end at R130.70. London-listed Xstrata, which has a number of South African investments, is almost 5% negative.
The final mining charter (Johannesburg, Miningweb, 04/10/2002) - The South African government is poised to ratify the charter on black empowerment in mining which, in its final form, is asking for the transfer of 15 percent of the industry into black hands over next five years, increasing to 26 percent during the subsequent five years. South African President Thabo Mbeki was handed the document today (04 October) only a week after the principals of the focus group, the organisation that redrafted the document, were called to discuss and approve of its contents. The charter was presented at the public signing of the minerals and petroleum bill at the presidents residence in Pretoria. The bill is now promulgated after more than five years of intense negotiation. The central tenet of the bill is that ownership of mineral rights vests with the state rather than with the predominantly white-owned private sector. Mining companies must now apply to have old order mineral rights converted into new order mineral rights, a process which will help government identify opportunities for black empowerment. As for the redrafted empowerment charter: it is now scheduled for cabinet debate on Wednesday (09 October) after which the document is expected to be released for public consumption. The Chamber of Mines (CoM) of South Africa will also discuss the charter on Wednesday. The focus group consisted of representatives of South Africas National Union of Mineworkers (NUM), the private sector (CoM) and the governments minerals and energy department. It was created to redraft a new charter after Mineweb published details of an earlier document which profoundly shook international confidence in South Africas mining industry. This was owing to sweeping demands on ownership transformation in the industry. Today, however, Anglo American, the UK listed stock that was hammered by the market in July, improved 1.5 percent. Analysts said this was on hopes for a more practical charter. Mbeki said the government had no intention of nationalising the South African mining industry.
The final charter
Mineweb reported last week that focus group representatives were discussing the possibility that R100 billion*, equal to 16 percent, of the existing mining industry would be transferred in black empowerment deals over a certain period. That has now been set down in the charter along with a second target of a further R60 billion within 10 years. In addition, mining companies will be accredited for black empowerment deals already completed. According to a Reuters report, Barry Davison, Anglo Platinum chief executive and Chamber of Mines president, described the document as a satisfactory compromise, but declined to provide details. Similarly, Kanyo Nqulu, minerals and energy department spokesman, said the public would be kept waiting for details, yet he added that targets had been set in the charter. As already reported by Mineweb, the final charter does not set targets for black empowerment in new mining projects. According to sources, there will be a great deal of subjectivity applied coupled with a number of other empowerment hurdles such as community involvement, share ownership schemes and the transfer of skills to black professionals.
Not a blue-print
What appears to be clear is that the charter is not a blue-print, but a rough guide that must be tested on a case-by-case basis. One predominant theme is that the minerals and energy department has significant discretion which suggests it will have the power to keep the private sector operating in the spirit of the charter. A source close to the focus group said lawyers had now been called in to work on implementing the charter, a process that could take months to complete. Nonetheless, the document was something to work on, and would be a useful precursor for other documents of transformation in the South African economy such as the property ownership and a financial services charters. According to a market source, there are at least five aspects of the charter which could possibly be unconstitutional and which need to be discussed. There are also unsolved questions on how to ascribe value to those empowerment deals for which mining companies will be accredited. For example, will value be calculated on the discounted share price at todays level or at the time when the original transaction was struck? Nonetheless, the crux of the document is that the private sector and government have grounds to believe they have won a victory. Certainly, Anglo Platinum will now be able to press ahead unhindered with its expansion projects although its doubtful the group will meet its initial production timetable.
*Mineweb has assumed a South African mining industry worth about R600 billion. Obviously this figure fluctuates as mining stocks rise and fall. Mineweb's souce referred to ownership transformation in percentage terms: 16 percent and 26 percent.
Mines won't be nationalised: Mbeki (Pretoria, Sapa, 04/10/2002) - President Thabo Mbeki reiterated on Friday that the government did not intend to nationalise the country's mining assets, minerals and energy department spokesman Kanyo Gqulu said. He received a copy of the final draft of the mining industry's empowerment charter on Friday. Gqulu said industry representatives had been party to the negotiations resulting in the final draft and had expressed support for it. In July mining stocks fell sharply when a previous draft of the charter was leaked. That document called for black business to own 51 percent of all new mining operations within 10 years. At a subsequent meeting with major roleplayers, Cabinet ministers gave the assurance that the nationalisation of the mining industry or part of it was not on the cards. At the time, they said the draft was only intended for discussion purposes. The Minerals and Petroleum Resources Development Act, which was signed into law by Mbeki on Friday, provides for the charter on black economic empowerment. Gqulu said the final draft would be discussed in Cabinet and by the Chamber of Mines first before it would be publicly released.
R100 billion charter circulated (Johannesburg, Miningweb, 27/09/2002) - An advance copy of South Africas redrafted mining charter, circulated to key industry participants today (27 September), has ownership redistribution worth R100 billion ($10 billion) at its heart, roughly 16 percent of the current South African mining industry. While this only relates to existing assets, it is nonetheless half the amount envisaged by the South African government in the first draft of the charter leaked to Miningweb in July. That document said 30 percent of existing South African assets should be in black hands within 10 years. The new charter is expected to specify a 5 to 10 year time-frame. Crucially, no definitive figure has been placed, or is likely to be placed, on the ownership of new projects, a step intended to build in the flexibility required to soothe the nerves of local and international investors. A source close to the charter drafting focus group, consisting of government, union and private sector representatives, said the document did not stipulate figures, but he said participants believed the transfer of 16 percent of existing assets to black owned companies seemed reasonable. This is the figure that everybody is talking about at the focus group and I think its quite a positive message, the source told Miningweb. The minerals and energy department said the release of specifics on the charter was specious. We have absolutely no knowledge of that and it is dangerous to have made that suggestion without waiting for the public release of the document, department spokesman Kanyo Nqulu said. We condem this leak in the strongest terms, he said. But analysts said the 16 percent transfer of ownership was a positive message to the market as it was a much more reasonable target and one that could be achieved, one said. The document, which also details skills development, share ownership schemes for black employees and training, was circulated to members of the minerals and energy department, the Chamber of Mines, the South African Mining Development Association (SAMDA), and The National Union of Mineworkers (NUM). SAMDA is an organisation representing small black mining business in South Africa. The redrafted charter will be circulated among the principals of the organisations for additional comments and then handed back to the focus group for refinement. Gqulu said government had until six months after promulgation of the minerals and petroleum bill which is currently waiting for presidential sanction. As a result, we will easily meet the deadline for completing a charter, but were still hopeful the charter will be in place by the end of the year, Gqulu said.
Anglo's value and the charter (Johannesburg, Miningweb, 12/09/2002) - After the several weeks of preliminary work, the government and the private sector are from next week knuckling down to the nitty-gritty of finding an acceptable black empowerment charter for South Africas mining sector. Against this background, analysts are divided on Anglo Americans [LSE:AAUK] true value and are unmoved by Anglo chief executive Tony Trahars hope that only 25 percent of new projects and 15 percent of existing operations will end up in black-owned companies, quantums that diverge from government expectations. The scepticism stems from the view that theres uncertainty on how much will be paid by black-owned companies for assets earmarked for empowerment by Anglo. ABN Amros David Bird says: While the government may have stated that full value will be paid, the actual value achieved is likely to be lower and may never be known, he says. This raises the important aspect that the charter needs to transparent as well as commercial in tone. CIBC World Markets analyst, Jack Jones, takes a similar line: We understand that talks (between the government and the South African private sector) have yet to focus on the key issues of the definition and level of empowerment targets .. (we) sense industry nervousness that political surprises cannot be fully discounted, he said. Ultimately, investors are faced with deciding whether uncertainty outweighs the fundamental attractiveness of Anglo relative to its peers, BHP Billiton [LSE:BLT] and Rio Tinto [LSE:RTZ]. In its favour, Anglo American has proved it has a solid business amid a difficult investment climate and an impressive pipeline of projects. Richard Chase, an analyst at BNP Paribas, says that if one removes the South African issue from Anglos affairs, then the company is the preferred counter to BHP Billiton and Rio Tinto. This is owing to the promising project pipeline which Anglo possesses including considerable flow-through from its platinum subsidiary, Anglo Platinum [JSE:AMS] and from the depreciation of the South African rand and the elevated price of gold which benefits AngloGold [JSE:ANG]. Dresdner Kleinwort Wasserstein is positive lifting its target price for Anglo American, but ABN Amro have moved the other way, urging investors to reduce (see table). CIBC World Markets is a clear Anglo pessimist; Deutsche Bank remains convinced of the intrinsic value. Anglo optimists point to the better than expected financial results announced by the group earlier this week and to the fact that Anglo has been oversold.
Who leaked the mining charter? (Johannesburg, Miningweb, 11/09/2002) - The most interesting question at the Anglo American interim results presentation this week was neither a searching examination of company strategy, nor an eagle-eyed point of accounting, but a simple poser submitted by a newspaperman who wanted to know if Anglo American had leaked the mining charter for black empowerment. In response, Anglo chief executive, Tony Trahar, said he didnt know and theres not a word of a lie in that. Anglo doesnt know. But, Pitcher hears the UK-listed group is trying to establish whether the leaking of the document was authorised at the highest government level. According to an Anglo insider, the company believes only the finance minister and one other minister would have understood just how damaging the leak would be to share prices. It is believed that any other minister in the government would have been too na´ve to understand the implications of the mining charter. The release of details of the mining charter took a quarter off Anglo Americans share price which fell to a 12 month low. The group further believes it inconceivable that any mining company would have leaked the charter story. The prevailing view at Anglo HQ is that it must have come from the government possibly to put pressure on mining groups. Thats not what others think. The counter view is that Anglo Platinum leaked the charter to put government on the back-foot ahead of negotiating a black empowerment deal on new mining projects it was planning. Its all academic of course. Governments working paper for black empowerment transformation in mining is now a matter of fact and a different arrangement is being negotiated by all stakeholders. Anglo American describes recent meetings with government on a charter as constructive and realistic and with an international roadshow coming up for the South African government, it appears as if a working plan is already on the table.
Anglo Platinum & Gold Fields
Just in case there was any doubt, Anglo Platinum employees are packing boxes and are heading to the mother ship, aka the Johannesburg head office of Anglo American. That seems to seal the long-known strategy that Anglo is keen on buying full control of its platinum subsidiary, in time. Trahar said earlier this week further purchases would be made of the platinum producer as the market allowed. Interestingly, a similar strategy of buying shares from the market opportunistically - is planned for Gold Fields, the gold company in which Anglo already has a one fifth stakeholding. I do think that the management of Gold Fields and AngloGold can explore opportunities for shared services and rationalisation, we might buy some more shares in Gold Fields if we think the value is right as we will do in platinum from time to time, Trahar said on Miningweb sister radio programme, Classic Business recently. This brings into view the question as to whether Anglo American, which controls Gold Fields rival AngloGold, would ever take a board seat. Anglo has said it wont do so unless asked. That seems sensible as Gold Fields financial director, Nick Holland, points out: They (Anglo) probably realise the potential conflicts such a board representation would create. Anglo hasnt asked us and were probably not going to offer, he said.
Anglo draws line on 'realistic' black empowerment targets (Business Day, 11/09/2002) - Anglo American has made clear for the first time what it believes are realistic expectations for black empowerment in the mining sector, and they fall far short of targets touted in government circles. Anglo CEO Tony Trahar said yesterday that a realistic target for black ownership in SA's mining industry would be between 10%-15% in the next five to 10 years. The SA-listed mining sector is valued at about R500bn, and if the increase in empowerment investment in the country's mining sector grows as Trahar has suggested, empowerment investors would be holding (at 2002 stock market valuations) between R50bn to R75bn of existing mining equity by 2012. "Over the next five to 10 years we could see the transfer of 10%-15% of existing operations, for fair value. It is my personal view, but I think the mining sector could live with a much higher percentage on new projects, 25% plus," Trahar said. This contrasts with proposals in a draft mining charter leaked at the end of July, which suggested government wants 51% of SA's mining sector to be held by black-controlled companies within 10 years. The leaking of the charter caused much concern in the sector, and the FTSE-JSE Africa Resources Index lost more than R45bn of its value by the close of trading on the day news of the proposed targets spread. Along with all of the major mining companies listed and operating in SA, Anglo American rejected the targets as unrealistic. Government was quick to highlight the fact that the proposals were not policy, but investors remain wary. A task force has been set up to draw up a second draft. The minerals and energy department said yesterday it would not comment on the targets suggested by Trahar, saying negotiations were continuing. Empowerment in the mining industry is a key issue in SA, and while the charter is being drafted and a money bill, which will deal with the financial aspects of the Minerals and Petroleum Resources Development Bill, is drawn up, SA's listed mining companies have made their views clear. "We must get recognition for past empowerment deals. Anglo has been at the forefront," said Trahar. "We must persuade government that one size does not fit all."
Anglo's BEE charter compromise (Johannesburg, Miningweb, 10/09/2002) - Anglo American [LSE:AAUK] has provided some vital clues on a compromise it could broker with the South African government regarding the countrys crucial black empowerment charter for mining. Speaking at the UK-listed groups interim results today (10 September), Trahar said that a quarter or more of the groups new projects and about 10 to 15 percent of existing operations could be transferred to black-owned companies in time. Trahars comments diverge from government proposals in July outlining possible changes to raditional ownership patterns in South Africas mining sector. The main differences are that the South African government was seeking control (51 percent) of new projects and 31 percent of existing projects. Government also specified a 10 year time-frame to implement the plan whereas Trahar spoke of a 10 to 15 year time-frame, presumably building in some slack in order to make such a transition less traumatic. Commenting on these possibilities, Trahar said that: That is where we can deliver significant black empowerment. He said earlier his company had had several realistic discussions with government on the topic of the charter for black empowerment in mining. Local and international analysts said Trahars comments were intriguing as they suggested a compromise regarding black empowerment was already on the table. Yet it may not make much difference to the way offshore investors viewed Anglo and mining investment in South Africa: The damage has already been done, said Jack Jones, executive director of international mining research at CIBC World Markets. He also suggested that governments upcoming world roadshow on the charter and the minerals bill indicated an agreement with the private sector was at hand. International investors voted with their feet when governments first blueprint for black empowerment in mining later repudiated as not an official policy was made public. Anglo American shed roughly 25 percent of its share valuation to trade at a 12 month low. Trahar and Nicky Oppenheimer, chairman of De Beers, the company in which Anglo is a 45 percent shareholder, were among the first to meet with government after the publication of the mining charter story by Miningweb. A working task team, mandated to find a workable empowerment charter for mining by the year-end, was also formed including private sector multinational and small-scale miners as well as unions and government representatives.
However, Trahar warned that a rigid charter for black empowerment which failed to account for subtle and more obvious differences between mining companies operating in South Africa could not be applied: One size does not fit all, he said. Analysts believe Trahar, as well as rest of the private sector, are grappling with the transfer of mine ownership by value. In Trahars words, for example, 10 percent of an Anglo American mine might be worth more in terms of value than 80 percent of a fledgling mine owned by another company. He also warned companies should receive recognition for past empowerment deals. This has particular relevance for a company like Harmony Gold whose deal to provide black empowerment firm, Khumo Bathong, with a stake in Elandskraal, no longer exists because the value in the stake was ultimately realised by Khumo Bathong. Anglo has also participated in a range of empowerment deals such as ARMGold, South Africas fourth largest gold producer which listed earlier this year having bought a number of key gold producing assets from AngloGold, Anglo Americans listed gold producer. In addition, Trahar repeated Anglo Americans aims to support black empowerment in other areas of the business such as a voluntary employee stock ownership scheme. In an earlier interview with Miningweb, he said such a scheme, although at the conceptual stage, could involve investment in black empowerment of R2.5 billion to R5 billion, roughly 1 to 2 percent of Anglo Americans market capitalisation. Trahar also espoused plans to nurture more small and medium enterprises as well as lift group involvement with black-owned procurement companies. Anglos black employees held about a fifth of total skilled and managerial positions within the group, but this could be doubled in five to ten years, Trahar said.
SA mining hobbled by apartheid
(Johannesburg, Miningweb, 27/08/2002) - Early August
marked the turning point in the painful legacy of South Africa.
The expression of this legacy is migrant labour, impoverished
black communities, unskilled workers, servant's wages, prevalence
of aids, and a generally moral bankrupt nation. This week marks
the starting point in our match towards a new dawn, characterised
by true liberty, equality and fraternity. The many delegates in
the coming deliberations will all be guided, not by selfish
(what's in it for me mentality) but by the over arching national
interest of our country. Together, the delegates shall seek to
find a real solution to the daunting question-what is best for
South Africa. We, the people of this country, and those who have
vested interests in this critical and delicate process, must all
lend our support and encouragement to those who shoulder the many
hopes and dreams of our young nation. From the Minerals Bill, to
the mining charter, the tedious path to change in our mining
industry has taught us (Gov, Business, Labour etc) a lesson in
humility; each one of us has had to learn that none has the
Monopoly of Brains-that the fact that we occupy different spaces
whilst giving us unique perspective and vantage points, does not
in itself endow us with the true view. And yet for that
multiplicity of ideas, with all the heated Debates, we have
stretched each other's mental faculties to the highest level of
human ability. It is such challenge and healthy wrestling that
assures us of a good quality product. After all, our constitution
is a product of a similar process. If anything, such processes,
whilst pushing us to the edge with gritted teeth, conclude with
far greater results and the larger world aghast with amazement.
To us this has become a norm, to the world it's still
extraordinary - hence we are called a miracle nation. Even our
mining industry has carved its own path with the long awaited
Minerals Bill. Its successful conclusion must surely increase our
self-confidence. Instead of fearing the future, we should have
the necessary courage to take the Bull by its horns and wrestle
it to the ground. We have the intelligence, we have the
experience, we have the vision and the staying power to meet the
challenge and rise to the occasion.
We therefore owe it to ourselves and the world to continue this precedent as we proceed with the elephant task of reconstructing our mining industry. As a bedrock of our society, from centuries past, we cannot but change it, if our society is to be transformed into a perceptably democratic one. Indeed, the recent spate of strikes and protests, may well be a clear message of public discontent with a democracy that has as yet not delivered economic benefits. Perhaps it is wise to respond to the myriad voices that braved nature's whims (rain, wind, cold and the scorching African Sun) to cast their ballots and chose a democratic future. As unrealistic as their expectations might sometimes be, let us attempt to respond to cries of our people when they say, bread and butter now. If it is true that it is hard for an empty sack to stand upright (as Benjamin Francklin claims) then we should not think to hard in searching for answers to our moral bankruptcy. The answer might be staring us in the face - the many gaunt faces of our poorest people, whose only crime is being born in a country that knew no decency, no human dignity, and no righteousness. Though our history has shaped who we are, we are not prisoners of our past. We can shape our shape new destiny as surely as we have been to mould a democratic nation, like Venus rising out ashes. Though each ones interests is more important one that the other, we cannot allow that to blind us from what is real and of greater value to us all. Fortunately, our past successes should give us enough confidence to know that we are capable of winning races and scoring successes. Perhaps these should ordain us with a great sense of worth that make us realise what true champions we are. Only yesterday we took a chance and climbed a steep path to the land of milk and honey. Many, even among us, doubted the sanity of those who saw wisdom in forging a future devoid of apartheid and our painful past. Today we have the advantage of yesterday's triumphs to know that tomorrow we will surely win. Like Ulysses, let us face our challenge with a view to strive, to seek, to find, and not to yield.
Scope of mining empowerment may be widened (Johannesburg, Business Day, 22/08/2002) - The first meeting of the task force set up to provide proposals for an empowerment charter for the country's mining industry appears to have achieved a major aim of both unions and industry broadening the scope of empowerment to be defined in the charter. The parties involved were giving little away yesterday, but the Chamber of Mines said issues were discussed which should form the basis of a broad-based socio-economic empowerment charter. Industry had been pushing for a shift from the focus on equity ownership by empowerment parties. Last week, Anglo American and De Beers presented proposals to government along these lines. This followed the leaking of draft government proposals, which spooked the markets with the suggestions that all new mines should be controlled by black investors.
SA's top miner urges government to act fast (Johannesburg, Moneyweb, 19/08/2002) - Anglo American chief executive Tony Trahar says no time must be wasted in setting up a definitive empowerment charter. Talking on Moneyweb's Classic Business programme on Friday evening, Trahar urged Government to move rapidly ahead after the progress made at last week's meeting of representatives from Anglo American, De Beers and government. The meeting was in response to a huge sell-off of South African mining stocks in the wake of Miningweb's disclosure of a draft document outlining government's "first position" to increase black ownership in the industry. Trahar believes: "There is no doubt that this was a set-back to investor confidence in the country. The challenge in South Africa is to re-establish a base of investor confidence that brings long-term investors back". He added that an important step towards this long term process would be to a definitive empowerment charter, put together as soon as possible. Government's assurance at last week's meeting that it would not define the success of an empowerment strategy to a single percentage target, is consistent with Anglo's own approach to BEE (Black Economic Empowerment). Trahar says Anglo has a multi-pronged empowerment approach that includes procurement from small and medium sized businesses; small business development; community involvement; and a conscious expansion of black numbers in skilled and management bands within the company. However, he admits that "we can do more in all of these areas". For instance, Trahar estimates that blacks hold around 20% of the skilled and managerial positions within Anglo. The company aims to increase this to 40% in five to ten years. Anglo is also considering some form of employee stock ownership with voluntary participation. Although this proposal is still at a conceptual stage, Trahar estimates that such a scheme could involve something between R2,5bn and R5bn (1%-2% of the company's market capitalization). Trahar in no way feels that security of tenure is at stake in government's empowerment line, noting government reaffirmed its view that "it was not pursuing nationalisation. We are also protected by the new terms of tenure - a 30-year tenure in the Minerals Bill - when we convert our old-order rights into new rights. And we're protected by the Constitution, which protects property rights". He is satisfied that "government has no intention to disturb existing operations and the security that goes with it".
There is scope to avert a business nightmare (Business Day, 15/08/2002) - For investors, there is one thing worse than a government with plans for intervening in the economy: one without them. To explain: "alarming" position papers and the negotiation they can produce are a far better prospect for business than politicians whipping up racial sentiment to stay in power. The former may also be needed to avoid the latter. Those who analyse investment environments in SA may need to give far more attention to whether we can settle our differences on change, and far less to the fact that they exist. The relationship between government and white business is fraying. The leaked draft mining charter, apparent sympathy for Christine Qunta's report on the rand, and proposed legislation forcing banks to lend to home buyers in low-income areas are among the apparent signs of a tougher government stance on racial inequality in ownership and, a lesser degree, poverty. Many in white business see this as a herald of government action against them. This is an overreaction. Yes, government does feel pressure to speed change. A key constituency, black business, is impatient at the pace of movement towards greater black ownership. And government may be sensitive to charges that it does not care about the poor. But none of this is the bogey much of business seems to see. The charter was a discussion document; the Qunta report was implicitly rejected by Justice Minister Penuell Maduna who said no legal action would be taken on the rand; the proposed housing law is based on a model derived not from Cuba, but the US. All are open to debate; none signal an assault on business. Government's aim is to persuade business to negotiate, not to bring it to book: witness the deal between it and Anglo Platinum setting aside parts of new ventures for joint ownership by empowerment groups. And most importantly, here and perhaps elsewhere globally, investment analysis may be in danger of setting up criteria making a longerterm return on capital impossible. The recent panic is based on two unspoken assumptions. First, that it is only a matter of time before a black-led government seizes white assets, as in Zimbabwe. Second, that if political pressures get in the way of the smooth functioning of markets, they had better get out of the way. But, ironically, it is the second assumption which can make the first inevitable. To repeat, many in black business believe empowerment is not altering the racial make-up at the top of the economy. And there is a strong feeling among the new elite that mainstream white business has no confidence in this society and will not invest in it unless the costs are low and the benefits immediate. But this is not necessarily negative for the investment environment: if business handles them appropriately, they could produce a greatly improved climate. The Zimbabwean model in which the black majority control politics, the white minority economics is, as we see now, untenable. Either we will have a growing black presence at the commanding heights of our economy in a way which preserves prospects for growth, or in one which destroys it.
The Anglo Platinum deal and Maduna's response to Qunta's report show what is on the table now is an offer to try a route which preserves growth, a plea for help in defusing tensions affecting the African National Congress's political health and the economy's wellbeing. The prospect in a decade or two, if the opportunity is ignored, is conflict. So current events should be prompting excitement in markets because, if they produce creative deals, they can show that Zimbabwean-style conflict is not inevitable as long as business does not respond in a way that makes it so. Certainly, current government approaches are open to charges that they pander to a small business elite or that they will not address poverty. But that should be an invitation to produce alternatives. Similarly, it should be a sign of hope that politics is firmly on the table. If it is ignored, as in Zimbabwe until it was too late, it will return to bite not only the politicians but the investors who insisted that ignoring it is the way to prosperity. Research has shown that economic success in the so-called third world comes not from following economic recipes, but settling political conflicts. That is why a Mauritius which builds its economic future on agreement between business, labour and government grows, while countries which faithfully obey the economic recipes but do not settle their conflicts stagnate. Analysts' failure to understand this may not be a problem in SA alone it may betray an approach which ensures that sustained returns in emerging markets never quite materialise. If investors and those whose advice they follow assume that only countries which follow "pure" recipes are worth risk, the only places they will favour are those whose governments ignore the political pressures which may make pure approaches impossible. And because ignoring pressures means conflict down the line, the only way countries can become good investment risks is by creating the seeds of later conflicts which will destroy growth. If a SA which pays no attention to racial redistribution is likely to face severe tensions in a generation, how many other countries have been impelled down self-destructive paths in the vain hope that ignoring politics would bring a payoff which would defuse tension? And how far does this explain why the promised emerging market take-off somehow never comes? A rational approach to investment would see the threat not in political pressures, but in failure to deal with them. If investors understand the compromises which are possible, and businesses rise to the challenge, the nightmare some in business expect can be averted now.
Government allays some mining industry fears on charter (Business Day, 15/08/2002) - South Africa's mining industry got some of the assurances it was looking for yesterday after government said there would be no fixed target for empowerment involvement in the sector. After the leaking of the draft empowerment charter late last month, which spooked investors and led to billions of rands being wiped off SA mining stocks, the mining industry has been keen to get clearer guidance on government's empowerment aspirations. Government, in a joint statement with Anglo American and De Beers after their meeting in Cape Town yesterday, also said that there would be a great deal of flexibility in the negotiations, which would lead to the drafting of the final charter. "All its (the draft mining charter's) aspects are negotiable," said the statement. Anglo American and De Beers had requested the meeting after the charter suggested that government might be looking to see 51% of SA's mining sector held by black controlled companies in 10 years. Alarm was also caused by comments in the draft, which suggested the Industrial Development Corporation would "warehouse" equity in companies or projects if a suitable empowerment partner could not be found. There were suggestions this could be seen as a move towards the nationalisation of the industry. These fears were allayed yesterday, when government stated it had never been its policy to nationalise the mining industry. "It is fairly positive that both sides have got together so quickly. This is a resource economy, the government needs the tax revenues and can't afford not to have the jobs the industry creates," said SCMB securities analyst Justin Pearson-Taylor. Anglo CEO Tony Trahar and De Beers chairman Nicky Oppenheimer met the minister of minerals and energy, Phumzile MlamboNgcuka, finance minister Trevor Manuel, labour minister Membathisi Mdladlana, trade and industry minister Alec Erwin, and deputy minerals and energy minister, Susan Shabangu, in Cape Town yesterday to discuss industry concerns. Jack Jones an analyst at CIBC World Markets in London was more sceptical about the outcome of the talks, suggesting the market was likely to remain nervous until government provided a clear statement on its commitment to security of tenure in the mining sector.
Mining giants tackle government charter (Business Day, 15/08/2002) - Executives from global mining group Anglo American and diamond giant De Beers are to meet top government officials on Wednesday to thrash out the principles of empowerment in the mining industry. Anglo, which earns the majority of its revenue in South Africa, and De Beers are meeting the government as they are primarily seeking clarity and certainty following the leaking of a draft charter on empowerment. The draft charter shocked the markets and resulted in fears of creeping nationalization and prompted Anglo chairman Julian Ogilvie Thompson to request a high-level meeting with President Thabo Mbeki. "Anglo and De Beers are meeting the government to find out what the mining charter really means. They need something fixed and they want to know if they are going to be forced to give away part of their business in order for empowerment to take place," a Johannesburg mining analyst said. On the government's side, four ministers are likely to attend the meeting. Minerals and Energy Minister Phumzile Mlambo-Ngcuka is to lead the meeting while Finance Minister Trevor Manuel, Labour Minister Membathisi Mdladlana and Trade and Industry Minister Alec Erwin are all expected to attend. Anglo American spokesperson Anne Dunn refused to disclose who would be attending the meeting from Anglo and was mum on the precise details of the gathering. Anglo CEO Tony Trahar and De Beers chairman Nicky Oppenheimer said in a joint statement in early August that they were confident that the meeting would confirm the fundamental principles governing the industry transformation, most importantly security of tenure and the sale and transfer of assets in a transparent manner reflecting fair market value. The draft charter proposed the transfer of 30% of existing mining business and 51% of all new projects to black owners within 10 years. Mining executives, such as Ian Cockerill, Gold Fields Chief Executive Officer, have called for the debate around black empowerment in the mining industry to move away from talk of specific quotas. A key concern from domestic and international investors is how black ownership of mining in South Africa will be financed.
SA ministers to meet Anglo, De Beers (Cape Town, Mail & Guardian, 15/08/2002) - Top South African ministers will meet diversified miner Anglo American and diamond arm De Beers on Wednesday to discuss plans to give black business a bigger role in mining, a government source said. "My understanding is that they will meet at 2 pm (1200 GMT) in Cape Town," the source told Reuters. The two mining giants will meet Minerals Minister Phumzile Mlambo-Ngcuka, Finance Minister Trevor Manuel, Labour Minister Membathisi Mdladlana and Industry Minister Alec Erwin. Anglo and De Beers officials said they would not comment on the meeting. Anglo's announcement of the talks last week was seen as a move to soothe market nerves over a controversial draft charter that has spooked investors. Details of the charter, which first emerged on July 24, sent mining shares tumbling and wiped out as much as a fifth of Anglo's value. Anglo has since clawed back some of its losses and was trading at R129,50 at 0851 GMT on Wednesday, but still way off its year high of R216 hit in February. South Africa has already approved a Minerals Bill that aims to give blacks a greater role in one of the mainstays of the economy. But the draft charter caused alarm with its targets and deadlines to drastically change the white-dominated industry. It proposed that control of all new mining projects would have to rest with black business within 10 years. It also suggested that up to 30% of equity in existing operations must be given to black-owned mining firms before licences to mine an expansion-related project were issued. The government has distanced itself from the proposals, saying they are not official policy, but rather a starting point for lengthy discussions. Eight years after the end of white minority rule, the South African economy is still largely in the hands of whites. But government policy aims to give black people a bigger role.
Government backtracks on empowerment quotas (Johannesburg, Miningweb, 14/08/2002) - The South African government appeared to step back from its quota driven philosophy to introduce black empowerment into the mining industry. The Department of Minerals and Energy had previously stated, in a document leaked to Miningweb on July 24 that it planned to facilitate 51 percent black ownership in new mining projects and 30 percent black ownership in existing operations within 10 years. The news shook international investor confidence and single-handedly peeled R70 billion from the market capitalisation of South Africas largest mining companies. But initial indications are that the state has changed tack after a high level meeting today between senior government and Anglo American delegations in Cape Town. Crucially, a joint statement issued by the government and Anglo American this afternoon (14 August), said: The process with the stakeholders now in progress will identify the need for progress in many areas and will not be measured by a single percentage target. The line, buried in the second paragraph of the statement, appears particularly relevant given the degree of fright taken by international investors after the high levels of equity transfer were first mooted in the leaked charter. But just how the government manages to achieve what it calls substantive change in the industry, remains to be seen. Neither government nor Anglo would comment on the matter before a press conference planned for tomorrow afternoon in Cape Town. David Plemming, mining analyst at BoE Securities in Johannesburg, said while the statement was positive, there remained more work to be done to reassure foreign investors. This is by far the most positive thing to come out of this process so far, but more is going to have to be done to allay the fears of international investors in this sector, said Plemming. The balance of the statement was packed with exactly the reassurances both the investment community and South Africas previously disenfranchised population require. The government continued to put more daylight between itself and the charter; it assured it had no intention to nationalise any mining assets; it emphasised its flexibility and commitment to negotiation; and most importantly, it reaffirmed it absolute commitment to accommodating the needs of foreign investors. The programme to broaden involvement and ownership by HDSAs within the mining industry must not have the unintended consequence of undermining opportunities or rewards for investors. To this end, the Ministers also gave the assurance that any sale or transfer of ownership in the industry would take place in a transparent manner and for fair market value, said the statement. Jack Jones, director of international mining research at CIBC World Markets in London, said the statement was long on apple pie, but noted the governments stance in nationalisation and the removal of percentage targets in determining the success of its empowerment strategy. He said, however: One interesting omission from the press release was any obvious government commitment to security of tenure for existing operations. This was something Anglo had been keen to establish and clearly could not get desired assurances. The press release talks of ongoing negotiations in the months ahead. We believe that market is likely to stay nervous until these detailed negotiations are completed. Given ongoing government empowerment initiatives, it remains hard to believe negotiations will be easy, said Jones.
200 black mines to gain from new law
(Business Day, 12/08/2002) - About 200 small and junior
mining firms in South Africa are likely to reap big rewards from
the new Black Economic Empowerment (BEE) mining charter, which
gives the smaller companies more clout in terms of expansion and
exploration of resources. This accounts for about 30 percent of
the total number of mining firms in South Africa, according to
Emile Roux, head of statistics from the Department of Minerals
and Energy. The Charter, a draft copy of which has been leaked to
the market, aims to more tightly regulate the licencing process
for new or expanding operations. It calls for the transfer of 51
percent of new mining industry assets to historically
disadvantaged South Africans. However, a bigger percentage of the
total number of local mining firms, including the big players,
could indirectly benefit from the Charter - by becoming technical
or financial partners to BEE firms. Of the 662 mining companies
registered in the departments database, there are 49 junior
mining firms with 170 operating mines, and 336 small mining firms
with 404 operating mines. There are only 20 large mining
companies with 888 operating mines. Small companies are measured
on an annual turnover of less than R30-million of their estimated
value of production. Junior mining companies have an annual
turnover of between R30-million and R1-billion, and large mining
entities produce an annual turnover of over R1-billion. Roux says
these statistics are based on last years count, which could
have excluded many small informal companies the department is
unaware of because they are either not actually operating or not
in production as yet. This could explain why a survey done by the
Mineral and Energy Policy Centre for the South African Mining
Development Association (SAMDA) - which represents junior and
emerging mining companies, including BEE firms puts the
total number of mining companies at 830. The sample survey of 62
junior companies based on an annual sales value of between
R30-million and R1-billion - identified only about 22% of those
as BEE firms which would immediately start benefiting from the
charter. BEE firms were identified on the criteria that majority
of the board of directors were black and virtually in all cases
the CEO was black. The shareholder value was not investigated.
Some of the smaller and medium-sized players that are likely to
see greater results and increased production include:
- Mmakau mining,
- Mvelaphanda (Tokyo Sexwales consortium),
- Maluti Resources,
- EMPR diamond mining and
Bridgette Radebe, head of Mmakau mining and co-chairperson of the of SAMDA, says these companies are already negotiating contracts for possible partnerships in anticipation of the Charter being signed by President Thabo Mbeki soon. The companies are pressing forward on the premise that the Charter affords them some capacity in terms of technical skills and operational advice. "Most of these miners dont have the technical capacity, engineers, geologists and other specialist professionals. Under the new law, they will be able to tap into the government and private sector resources and get assistance on matters, such as exploration and procurement, from Geoscience, Mining Technikon and Mintek etc," says Radebe. This will allow companies to become equity partners in joint ventures and sit on the board with the technical knowledge to make decisions that directly affect the operation of the business. Radebe hopes this will give BEE mining owners impetus to adopt a more hands-on approach, and eventually operate independently with limited assistance. "The aim of the Charter is to eventually build entrepreneurs who will be able to continue mining and sustain a business without relying on foreign investors or major local investors companies that could stand on their own feet." Radebe maintains this will lead to a chain reaction that will produce huge spin-offs for the economy and unsurpassed growth for the mining sector and the rural communities in which the mines operate. She is a big believer in protecting the surrounding mining environment and enforces that mining producers should collectively contribute to social upliftment by "putting in what they get out". "Small businesses will secure procurement deals, and should inevitably leave behind increased levels of employment in towns that will be able to sustain themselves long afterwards," she says. Reg Rumney, director of communications at BusinessMap Foundation, says the benefits to the medium-sized companies and the communities will come through new foreign investment. With the freeing off of mineral rights and big companies not having the privilege of exploiting resources, medium-sized companies will be able to explore avenues to expand its operations. "New foreign investors will now have to find a local empowerment partner to start new explorations. The smaller local miners will have a chance to capitalise on this and become strategic thinking partners and there will be a transfer of knowledge. "Empowerment companies will (also) have more operational involvement and move away from passiveness." Rumney cautions, though, that mining is a capital-intensive business, which will "explode" if the Charter is not implemented properly. "There is a lot of hard bargaining to do between stakeholders. "What we are approaching now is getting to the heart of economic transformation and all the relevant parties cannot be cosmetic about it."
Mining giants to set up charter talks (Business Day, 12/08/2002) - Resources giant Anglo American and diamond producer De Beers have confirmed they will be meeting with the government to discuss the mining industry charter. The charter was leaked to government on July 26 and its proposals for ensuring empowerment in the South African mining scene - by entrenching control of new mining projects with black business within 10 years - spooked investors and sent local mining stocks plummeting. In a statement, Anglo American CEO Tony Trahar and De Beers chairman Nicky Oppenheimer indicated that they were pleased that it has been made clear that the leaked draft mining industry charter is not official and does not in any way reflect government policy. "The mining industry remains a fundamental pillar of the South African economy and is identified in the minds of investors, internationally and domestically, with business in our country. "To that extent the Minerals Bill is the most important piece of legislation enacted since our Constitution came into effect in 1994 and it is vital that government should implement the Act in a way which promotes the stability and growth of the mining industry and confirms the reputation of South Africa as a proponent of sound and investor friendly economic policies. The statement revealed that Anglo and De Beers would meet with government "at the highest level over the next few days" to set the scene for a constructive debate on the negotiation of the mining industry charter. "We are confident that the meeting will confirm the fundamental principles governing industry transformation to which government and the industry have committed themselves, most importantly the security of tenure and the sale and transfer of assets in a transparent manner reflecting fair market value," the two mining leader said.
Mining houses must make a plan (Sunday Times, 11/08/2002) - Hysterical reaction to the proposed empowerment charter for the mining industry was not unexpected as the intentions of the government and the mining industry have of late appeared to be moving further and further apart. Since long before the 1994 elections, the issue of nationalisation of South Africa's prized mineral assets has been a huge political hot potato, and one of the most vocalised fears of whites. It is now clear that when nationalisation did not happen, mine owners rested a little too easily on their laurels. They have only themselves to blame for not realising that South African companies, and perhaps mining houses in particular, needed to take some proactive, voluntary steps to spread some of the country's natural wealth. The government, meanwhile, has managed the whole affair terribly. Firstly, the announcement of a proposal to get to black equity targets of 51% within 10 years came a little too soon after there appeared to be belated consensus on the recently passed Mineral and Petroleum Resources Bill. The Bill's requirement that mining licences be passed into the hands of the government caused some heated debate, but it was generally well accepted. This spirit of good faith was, however, short-lived. It is understood that there was certainly consultation on the equity plan, but that much lower numbers - somewhere nearer the 25% proposed for the oil industry - had been mooted and discussed. If this is true, the government was not playing fair to up the stakes significantly only after consultation took place. In addition, if the document was, as the government says, meant only to form the basis of a discussion, why did it choose a number which it must have known would result in hysterical arm-waving rather than the debate it was looking for? In the end, mining companies should take a leaf out of Anglo Platinum's book. It has managed, quite swiftly, to find a solution that pleases everyone. It announced this week that it had earmarked 12 properties for the opening of new mines together with empowerment partners. This deal sees Angloplats continue with its plan to significantly increase production, while the labour, and the fruits thereof, will be more equitably shared from the much bigger pot.
Angloplats was at loggerheads with the government just a few weeks ago on the issue of security of tenure after the passing of the new Bill. It has now dropped the fight, having struck this deal, which will secure R20-billion of investment in the local platinum industry. Anglo American and De Beers, which meet the government later this week to discuss the empowerment issue, would probably do better to think of similar innovative empowerment plans than to try to change Mineral and Energy Affairs Minister Phumzile Mlambo-Ngcuka's mind. There is no reason why mining, or any other industry in South Africa for that matter, should not feel the need for transformation and empowerment. The motivation should not just be philanthropy. Surely the long-term sustainability of business in South Africa should depend to some extent on its ability to transfer wealth, skills and ownership? When the Earth received Sarah Bartmann's remains on Friday, the Khoi woman who had died in a foreign land had finally come home. Through this ceremony, attended by dignitaries and those who have claimed her as their own, Bartmann has been restored and her status as victim has been transformed into that of a hero. The meaning of her burial on Women's Day cannot be underestimated. Her gender and race were inextricably interwoven in the oppression and exploitation that occurred during and after her death. Bartmann has a legacy to offer all of South Africa's women. By using her life as an example, our country's daughters, sisters, wives, partners and mothers can know their lives need not be determined by others; that they inhabit a completely different society to the one she was born into - one that demands racial and gender equality. As President Thabo Mbeki wrote in the ANC newsletter this week: "As we lay her to rest, we must make the commitment that we will not allow that the black woman continues to be used and abused by those intent on the perpetuation of the practice of human inhumanity to other human beings."
South Africa criticised over mining laws (Financial Times, 09/08/2002) - Mining investors and executives have criticised the South African government for rejecting their concerns about radical, new mining laws and the limiting of industry negotiations over them to Anglo American and De Beers. The criticism came after Fhumzile Mlambo-Ngcuka, South Africas minerals and energy minister, pulled out of a video conference with investors planned for Monday and hosted by JP Morgan. It also emerged that neither she nor Thabo Mbeki, the South African president, would be at a meeting with Anglo and De Beers next Wednesday. Ms Mlambo-Ngcuka is understood to have written to JP Morgan saying she has been advised no longer to talk publicly about the laws. Shares in mining companies with South African operations have tumbled after a draft mining charter was leaked to Miningweb, an industry website, two weeks ago. The document said that within 10 years, all mining industry assets should come under the control of the black population, discriminated against under the apartheid regime. This would require companies such as Anglo American, Xstrata and Lonmin to relinquish ownership of some of their most prized assets. Mining executives have sought publicly to play down the possible impact of the laws, pointing to the South African governments statement last week that the leaked document does not in any way represent official government policy. But behind the scenes executives and investors are becoming increasingly concerned about the way negotiations with the industry are being carried out. One, who declined to be named, said: If the minister is serious about managing the process through dialogue rather than leaks it is regrettable that she appears to have rejected the opportunity to provide clarity on the governments policy. He added: Investors just wanted their concerns and views to be heard. After all, they effectively own these assets and are the people who will influence whether further direct investment is made into South Africa.
Government finds minerals compromise (Johannesburg, Miningweb, 07/08/2002) -
Mbeki steps into charter furore (Johannesburg, Miningweb, 06/08/2002) - Anglo American [JSE:AAUK] and De Beers are to meet with four senior South African cabinet ministers next Wednesday as a precursor to talks aimed at agreeing on the controversial minerals charter on black economic empowerment. The meeting is a bid by Tony Trahar, chief executive of Anglo American, and Nicky Oppenheimer, executive chairman of De Beers, to rebuild investor trust in the country after massive divestiture of South African mining stocks by foreign investors in recent weeks. Bheki Khumalo, spokesman for South African president Thabo Mbeki, told Miningweb the talks were prompted by a letter sent to the president last week by Anglo American chairman Julian Ogilvie Thompson. Khumalo said the president had declined the invitation to meet as he was on holiday, but had instructed the Minster of Trade and Industry (Alec Erwin), the Minister of Finance (Trevor Manuel), the Minister of Labour (Membathisi Mdladlana) and Minister of Minerals and Energy Phumzile Mlambo-Ngcuka), to meet with Anglo and De Beers. The president will not be there but there is no doubt that he will be fully briefed by his ministers, said Khumalo. The statement issued jointly by Anglo and De Beers said the two companies would meet with high level government representatives in the next few days to set the scene for a constructive debate on the negotiation of the mining industry charter. We are confident that the meeting will confirm the fundamental principles governing industry transformation to which government and the industry have committed themselves, most importantly the security of tenure and the sale of assets in a transparent manner reflecting fair market value, said the statement. The investor carnage on world stock markets has stripped billions of dollars from the capitalization of South African mining shares since the end of last month, after the so-called discussion document on black empowerment in the mining industry was leaked to Miningweb. The sell-off by offshore investors has not been limited to the resources sector. A raft of major listed counters in other South African industries are also feeling the effects of investor concerns around security of tenure and government guarantees that any transfer of ownership of assets would be done along commercial lines. Stephen Mildenhall, chief investment officer at Cape Town based fund manager Allan Gray, said the statement was clearly good news, although he said the market was likely to take a wait and see approach until the outcome of the meeting with the government was known. The biggest problem in the market at the moment is uncertainty and if that meeting leads to some clarity on this issue it can only be helpful, said Mildenhall. He said that while the leaking of the empowerment charter was clearly bad news for the industry, it had created some good value opportunities in the South African mining sector. From our point of view we consider what the market is discounting. In certain instances the market has discounted a worst case scenario and in some cases this has created some good investment opportunities, said Mildenhall. One senior mining analyst said while a positive outcome from the meeting with government remained a strong possibility and would undoubtedly be a step in the right direction from an investment perspective, the international investment community would now be keen to see any agreement written down and signed into legislation. What were seeing is international investors selling into the rallies rather than buying into the dips and that means that any small run in the share price is going to be choked off, said the analyst.
SA mining companies move to limit bill damage (Kalgoorlie, Miningweb, 06/08/2002) - South African-based mining giants have sought to water down the perceived implications of the controversial mining charter document leaked to Miningweb recently, which the SA Department of Minerals and Energy (DME) has since distanced itself from and described as not representing official government policy. At the moment the charter was regarded by many stakeholders as an early draft empowerment policy still well short of substance in a commercial sense and was definitely a work in progress. Undue credibility is being given by Australian and overseas mining participants to an ill-considered position paper, one of the SA companies told Miningweb today (Tuesday) at the Diggers & Dealers conference in Kalgoorlie. We mustnt be guilty of a knee-jerk response to a poorly thought through paper. While another company urged global mining and investment sectors to take into account South Africans proven ability to negotiate their way to sensible settlements. I think its unfortunate for all of us that an early position was leaked, said Harmony Gold executive director, Ted Grobicki. Were confident that the final agreement thats going to be hammered out is not going to look anything like that position statement that has appeared in all the press. We dont believe that there is any nationalisation intended at all, he said. Most certainly that is not the current government thinking.
During various times at the conference, AngloGold, Harmony and Kumba Resources, who saw the value of their shares plunge dramatically on the back of the leaked mining charter document, said they were fully supportive of black economic empowerment in the mining sector and would adopt a pro-active stance towards reaching workable legislation. They added that the charter would not hinder mining development in SA as they were committed to empowerment. I dont believe its the intention of the government to kill the goose for the sake of getting the last of the eggs, said Kumbas executive director strategy and business development, Richard Wadley. I think the intention has to be to nurture the goose in order that it continues to produce eggs, albeit a different shade. Wadley was flabbergasted at what he called the astonishing naivety of officials in the DME who would choose to distribute such an unrealistic document, oblivious of the consequences it might have on the sharemarket, particularly among investors who are perhaps not familiar with the style of negotiation in SA. Most if not all the SA miners were already empowerment leaders and had already undertaken black empowerment initiatives, shareholdings and transactions, and much of the empowerment that had taken place was not credited by the wider industry and investment sectors, according to Kumba. For instance, its major shareholder Anglo American had spent more than 11 million rand in achieving black empowerment objectives, either via asset sales or through assisting empowerment parties to establish businesses. We all have a common goal to have more black ownership, said Grobicki, who along with Wadley and AngloGold global investor relations manager, Steve Lenahan, concurred there was an imbalance of ownership that had to be addressed. The governments stated intention, and a comment that can be made for the SA mining industry in general, is to address the racial imbalance in the management, ownership and control of the SA mining industry, and its something we support, Lenahan said. We are hopeful that dialogue between industry and government will soon yield a mutually acceptable outcome and achieve the level of certainty that is required to ensure confidence and stability in the market, AngloGold CEO Bobby Godsell said in the companys June quarter report. However, that wont happen overnight, according to Grobicki and Wadley. In the context of the overall empowerment procedure, this is just another step in the long process of achieving the commercially-based demographic transformation of the SA mining industry, Wadley said. There will be a long negotiation process that will follow. It was agreed up front that there would be several phases of negotiation. Grobicki believed stakeholders would be doing well to have an advanced draft plan in place by year end. Everybody recognises theres going to be quite a long time frame to negotiate and implement the law, he said. Wadley said he would be surprised if even by this time next year weve actually concluded the whole process in terms of agreeing on an equity rate and a style of encouraging empowerment in the industry and also the extent of royalties to the government. The Kumba director was exasperated by the damage the leaked document had done over the past few days.
Its fair to say that were very annoyed by the nature of the (leaked) minerals charter statement, rather than concerned, because in one fell swoop it knocked 30 per cent off our (market cap), which we will now have to spend a number of months recovering because it was unrelated to the underlying value of our assets, he said. Wadley was also not impressed with the absence of sensitivity in the handling of the release of the charter. We were annoyed by the naivete displayed in the statement and the ill-considered nature of the way in which such a statement was leaked, he said. Na´ve in that firstly it takes no account of the realistic ability to convert that position paper to reality. Wadley said the mining industry in SA had a total value of approximately US$35 billion, and that a 30 per cent black empowerment stake would mean about US$10-12 billion of value in black hands. Thats well in excess of the total empowerment shareholding in the country to date. And that has not been achieved without a great deal of difficulty, he said. Just the numbers (contained in the early charter document) are totally unrealistic in the short term. The other aspect of the naivete is the lack of appreciation of the impact that such a statement would have on those sectors of the global market that dont have a good understanding of the commercial and political negotiation processes characteristic of SA, he said, referring to the over-reaction of the industry and global markets. Those of us who live there are irritated that we now have to do a lot of work to recover lost value. There was no doubt among AngloGold, Kumba and Harmony there was still a disproportionate share of ownership of SA mineral resources. The intention of the minerals bill was beyond contention, Lenahan said. I imagine over the next month or so, we expect to see a consensus emerge between all stakeholders in the industry including the larger mining companies, smaller employers, labour union movement and government, which will acknowledge the need for this kind of legislation and will agree on, at least in broad terms, how it will be achieved.
Mining charter will bring SA to its knees, says industry (Johannesburg, Miningweb, 01/08/2002) - Gaping holes have begun to appear in the governments blueprint for black empowerment in the mining industry, with senior market commentators warning that the planned ownership change of the countrys mining assets will bring the country to its knees. Economists and fund managers have warned that the mass deportation of capital needed to facilitate the shift in ownership in the largely foreign-owned mining sector would lead to a massive devaluation in the rand, spiralling interest rates and a resultant crisis for the country and the Southern African sub-continent. Sandy McGregor, a director at Cape Town-based fund manager Allan Gray, said the governments proposed transfer of 30 percent of existing mining business and 51 percent of all new projects to black owners within 10 years, raised serious concerns for South Africas broader economy. McGregor said the foreign ownership base of South Africas mining and resource companies, currently estimated at about 60 percent, would make the charter difficult to implement. The government has repeatedly stressed that black ownership will be achieved on a commercial basis, which begs the questions of how essentially untested black businesses will gain access to the amounts required to secure the levels of equity ownership mooted by the state; 30 percent of the South African resources sector has been variously quoted at between R175 billion and R200 billion. First, however, these nominated black-owned businesses will need to gain access to the debt required to buy the equity in the mining multi-nationals. Secondly, given the high levels of foreign ownership in the sector, they will need to find a novel way to export tens of billions of rand out of a country, which still enforces stringent foreign exchange controls. Making the assumption that they achieve what many seasoned commentators maintain to be a near-impossible task, these black business pioneers risk placing South Africa in the real danger of systemic collapse. The South African government has been trying to attract foreign capital, but now if it looks at deporting R200 billion, it will become a net exporter of capital for 10 years, said McGregor. Another point to consider, he says, is what the South African companies will do with the cash inflows from the sale of participation rights in projects. McGregor says the chances are excellent that this additional cash will be paid out to shareholders in dividends, exempt from South African capital regulations. In the case of most JSE-listed mining companies, that means more expatriation of cash. Chris Hart, senior economist at ABSA Bank in Johannesburg, says the first effect of the outward capital flows would be a dramatic devaluation of the rand. To a large extent, the rand is stabilised by investment capital inflows into our stock exchange. That has been positive for 10 years and if it reverses there could potentially be big problems, said Hart.
The knock-on effects from here are painfully clear to most South Africans, who are currently going through the inflationary pain that the December crash of the rand precipitated. The scenario simple; rand plummets, inflation rockets and the South African Reserve Bank inevitably implements its knee-jerk interest rate hike to keep inflation in check. Hart says in this case, the interest rate increases would be substantial. McGregor agrees. You would be locking yourself into a perpetually high interest rate environment and that would be devastating for economic growth for at least 15 years, he says. Figuring out the apocalyptic effect this would have on the housing market, the building sector, new car sales and retailers, among a host of other industries, is no rocket science. The resulting job losses alone would exacerbate an unemployment problem in South Africa which is already untenable. And while the middle and upper classes would no doubt suffer, the countrys multitudinous poor, as always, would take the brunt of the crash. That is the terrifying aspect of this bill; the effects it could have on the rest of the economy, says McGregor. The consensus for the meantime appears to be for the government to distance itself still further from the last weeks empowerment proposals. Hart says the statement made earlier this week by the department of minerals and energy, that the charter was merely a discussion document, appears to have averted a full blown crisis for the meantime in the equity, currency and bond markets. The governments response so far this week has been encouraging. But they definitely need to go softly, softly with this charter. If you look at the economic crises in South America (Ecuador, Brazil and Argentina), they have been precipitated by foreigners selling shares and bonds. We definitely dont need that here, especially when confidence has been recovering, says Hart. Others believe that the damage to international investor confidence is done, and that the only thing that will pull South Africas mining sector back from the brink is an unequivocal statement from President Thabo Mbeki, guaranteeing security of tenure for skittish foreigners. It seems that for the situation to be recovered, the government needs to come out more strongly against what was originally leaked, than what theyve been to date, said one analyst. Like many within the industry commenting on the charter, he declined to be named.
Minister calms mining nerves with meeting (Cape Town and Johannesburg, Business Report, 31/07/2002) - Phumzile Mlambo-Ngcuka, the minister of minerals and energy, yesterday moved to defuse private sector concern about her proposed black empowerment charter for the mining industry by getting all parties together to start thrashing out a common approach. She met representatives from organised labour, the Chamber of Mines, the SA Mining Development Association (an association of emerging mining companies), the African Minerals and Energy Forum (for black entrepreneurs and women in the mining and energy sectors), the African Minerals Association, the Foreign Investors' and Prospectors' Forum and the government. These groups form part of the tripartite sector partnership committee set up by Mlambo-Ngcuka to help draft a charter for the mining sector similar to the one already in place for the oil industry. But the draft mining charter leaked to the media last week proposes 51 percent black ownership within 10 years compared with the 25 percent stake agreed on in the oil industry. However, a statement issued by the committee late yesterday said the draft document "does not in any way represent official government policy. [It] was an attempt to balance the diverse and competing views and interest across the spectrum of our society. All parties denounce the fact that the document was leaked to the media." The statement, which helped reverse some of the slide in mining stock prices when the draft was leaked last week, said all parties at the meeting "noted the importance of the transformation of the mining industry in general and the promotion of black economic empowerment in particular". It "noted the importance of developing a proper process of engagement to avoid negative public perceptions and ensure the emergence of a charter that will represent the national interest". A task team will be established as soon as possible to hammer out a charter, which has to be in place six months after the Minerals and Petroleum Resources Development Bill is signed into law by President Thabo Mbeki. No date has been set for this to happen. The bill transfers mineral rights into state hands and calls for a charter on black economic empowerment. The international investment community was less willing to entertain promises to soften the charter's blow. Peter Davey, a mining and resources analyst at SG Securities in London, said the "damage is done" and "this is not going to just go away". He warned that fund managers, who had been reluctant to get into South African mining stocks from the start, were "never likely to come back into these shares now that they have dumped them". "Political risk has come screaming to the fore and the cost of doing business in South Africa has just shot up." Patrice Motsepe, the executive chairman of ARMgold, said yesterday: "It is absolutely crucial that the South African mining industry continues to be globally competitive. We have a responsibility, in the first instance to our shareholders, and then to our economy and our country, to find an arrangement with the government." South African mining companies would still have to compete with the best in the world, Motsepe said.
Mining sector braces for its own Codesa (Business Day, 31/07/2002) - Discussions began yesterday between government and the mining industry on an innocuous sounding topic: the Socioeconomic Empowerment Charter. However, next to the constitution itself, it is hard to imagine a bout of negotiations that is more important and far-reaching than this charter. The charter will define the terms on which mineral rights will be transferred from the old order in terms of SA's previous dispensation, into the new order according to the new Minerals and Petroleum Resources Development Bill. Hence, we are talking about the existing mining industry, which is SA's number one internationally competitive industry, SA's largest taxpayer, collectively SA's largest export product and the industry that employs the largest number outside of farming and domestic work. New mining ventures will undoubtedly happen, but since the industry is so old, it is a reliable guess that all of the best resources have been identified, bought and many have already in fact been mined out. In a way, the importance of the talks is underlined by their similarity with the constitutional negotiations. LIke the Codesa talks of the early 1990s, they will be preceded by posturing and bravado; they will be accompanied by deadlocks and then breakthroughs; but ultimately there will be an agreement. The reason there will be a settlement is that both sides know right from the beginning they are mutually interdependent. Both government and the mining industry know that without each other, the country will lose its future because every school built, every road travelled on, every presidential jet bought, is ultimately dependent on the effective and profitable exploitation of SA's remarkable geological heritage. Or at least we hope they realise that.
And as with all negotiations, the biggest risks each side faces are either demanding too little or overplaying their hands. An early indication of both was the release this week of proposals that had mining financiers in stitches of laughter. In a quick four-paragraph section, the proposed charter suggests that "Government undertakes to consider the following before issuing new licences and converting old rights: That the applicant has a (black economic empowerment) partner with at least 30% equity in an existing operation; That the applicant has a black economic empowerment partner with at least 51% equity in a new operation; Should the applicant be unable to find a suitable partner, government should intervene through vehicles such as the Industrial Development Corporation or Development Bank, so that such shares can be warehoused within these organisations." The proposal also states in a different section that: "Government and industry undertake to negotiate the transfer of ownership of at least 51% of mining industry assets to (historically disadvantaged South Africans), within the next 10 years". And lest industry hand over poor assets, ownership of assets is divided into two classes, and B class assets are described thus: "These are very risky/marginal ventures which for various reasons such as those that involve very deep deposits, deposits with unreliable markets or the assets are too small to make a significant impact. This class is not considered as real empowerment." The document is controversial as it proposes the handover of assets currently valued on the JSE Securities Exchange at about R500bn about 40% of the JSE's total market capitalisation. Who on earth has this kind of money and is prepared to invest it in mining? Who would finance such a project? How will the recipients be selected? On this and other crucial topics, the document is silent.
But it would be fruitless for the industry to just throw up its hands and claim the process is impossible. This route will just lead to increasingly debilitating standoffs. Ultimately, the ownership and management profile of the mining industry must look more or less like the country. How can it be achieved? Actually, getting most of the way there is hard, but not impossible. First, we must presume the parties are talking about SA mineral assets. Therefore, for example, Anglo's foreign assets are excluded and Rio Tinto's local assets are included. This makes a substantial difference, as even a company like AngloGold, which is strongly associated with SA, earns half its income offshore. This brings down the total funding requirement from R500bn to R350bn. How can this be funded, or in fact, does it need to be funded? Existing funding mechanisms are based on a system of guarantees provided by the future cash flow of the company, or on a system based on security provided by the assets themselves. One of the problems with the new legislation is it strips away funding security provided by the assets themselves, so we are left with the firm's future cash flow. From here a number of options present themselves; existing financing systems include mechanisms based on issuing convertible debentures and using dividend flow to cover financing costs. This is not apt in all cases, and it is quite slow. What about the issuing of new shares? This is possible, but needs existing shareholders' assent. As weird as it might seem, the proposed charter itself makes a huge concession, defining "historically disadvantaged South Africans" as, basically, anyone other than white, able-bodied males. Women will not constitute a huge proportion of the shareholding public, but they are significant shareholders and their inclusion in the formula will mean many of the mining companies could be more empowered than they think already. What the parties ought to be aiming for is precision and detail in the process. All stakeholders deserve to know exactly what is required of them. Let the games begin.
Mining empowerment charter under fire in SA (SABC, 30/07/2002) - A mining charter drawn up by the South African government which will give black companies control of all mines within 10 years has run into a storm of criticism from mining companies and analysts alike. The document, described by the South African minerals and energy department as a "first position to be discussed and adapted over time", will require a minimum 51% black empowerment stake in all mines within 10 years. Mines in South Africa employ more than 500 000 workers - 4.3% of the country's total workforce - and the industry accounts for about a third of all exports. The document, leaked to the local media last week, sent mining share prices into a tailspin on international and local markets. London-listed AngloGold share prices dived 11% on Friday on London's FTSE 100 to close at 8,54 pounds sterling while on the Johannesburg Securities Exchange its shares fell 8% to close at R139 ($14 dollars / euros) per share. "Aspects of the draft charter are not feasible and are unacceptable," Anglo American, AngloGold's parent company, said in a statement, but added it was in favour of a charter supporting black economic empowerment in the industry provided it was well researched and feasible. In the past eight years, the company has done deals with black empowerment companies in South Africa worth some R8 billion Anne Dunn, Anglo American's spokesperson, said yesterday. This included the sale of seven loss-making shafts for R40 million to up-and-coming black businessman Patrice Motsepe, chairperson of African Rainbow Minerals. Said Dunn: "There are some concerns, but the government has said this was a first position and we are comfortable that the details will be discussed." "Anglo American and the industry intend to engage strongly in order to arrive at a charter that is well considered, practically feasible and supports the goals...of the health of the mining industry and the country's economy," the company's statement said. Mike Schussler, an economist at Tradek analysts, said he believed a hastily prepared charter which gave control of mines to black empowerment companies could scare away both local and international investors. He added that even within 10 years, there might not be enough black empowerment companies in the market to take control of mines. "To be realistic, even in 10 years' time, the fact is only a few black people will be able to participate," he said. The Johannesburg-based daily Business Day severely criticised the proposal. "The call for all mining operations in South Africa to be 51% in black hands in 10 years is nonsense. How does a society, let alone an industry, respond to a proposition quite so shallow?" the paper asked. "The fact is that black empowerment, as a political strategy, in anything from the mining industry to making funny hats, makes no sense - and will not make the black underclass any less poor and threatening nor the black middle classes any more secure - if it is to be no more than a recolouring of the economy."
Anglo labels charter unacceptable (Johannesburg, Miningweb, 26/07/2002) - Anglo American [LSE:AAUK] has labelled parts of the South African governments charter on black economic empowerment (BEE) in mining as not feasible and unacceptable. The UK-listed mining company said in a statement today (26 July) that it would engage strongly in order to arrive at a charter that was well considered and practically feasible as well as being supportive of the goals of the Minerals Development Act. It added that it had received confirmation from the Minerals and Energy department that the proposal was a first position document which would be adapted over time. News of the proposals made an impact on share prices with Anglo American shedding 8 percent on the JSE Securities Exchange. The counter ended the day at R139.00 a share after touching an intraday low of 136.60 a share, a decline of 9.7 percent. In London, Anglo was 11 percent lower compared to its peer group Rio Tinto and BHP Billiton which have less exposure to South Africa which were both about 1 percent lower. Clearly the differential is due to worry about minerals legislation, said Jack Jones, executive director of UK-based broker and banker, CIBC World Markets. Miningweb reported yesterday that control of all new mining projects must rest with black business within 10 years. This was according to a charter proposal on BEE in mining. The proposals say that up to 30 percent of equity in an existing operation must be made available to black-owned businesses before licenses to mine an expansion-related project are issued. Government also proposed that it intervene where mining companies are unable to find a suitable BEE partner by warehousing shares in projects with entities such as the Industrial Development Corporation (IDC) or the Development Bank, both state-owned institutions. New projects must have a BEE partner owning 51 percent - representing effective control.
Anglogold chief executive, Bobby Godsell, admitted to being confused in respect of ownership and control as addressed by the charter. They (the Minerals and Energy department) discussed in the draft charter this in three different places and its not clear if they are saying the same thing, he said. Whether its 30 percent or 51 percent it seems to be enormously ambitious, especially for large global companies. Its also not clear if this could be achieved in a way that is constitutional. I accept that the document is a first work and not the last word, but its not a good indicator of where it will end up, Godsell said. There are two things that will prevail: this government is too smart and well-led to jeopardise the most globally competitive industrial sector in South Africa. The other thing that is clear is that this society and economy need racial transformation, he said. Jonathan Oppenheimer, executive director of De Beers, said it was difficult to understand the proposed BEE charter given the dynamics of South Africas mining economy. Making available about 30 percent of the mining industry, as it currently stands, would mean R250 billion would have to be financed as BEE companies would be required to buy in to mining projects. Speaking on Classic Business, Miningwebs sister radio business show, Zoli Diliza, chief executive of the Chamber of Mines of South Africa, said the charter proposal was governments opening gambit. He believed government would be flexible as it did not have an agenda to destroy the mining industry. The draft charter was a bit worrying and had had a profound effect on the industry as well as affecting South Africas balance of payments. Analysts were equally unsettled by reports of the document. If you dont have resources you cant mine. It is the lifeblood of a company. You could find a business is worth nothing, said CIBC World Markets Jack Jones. It is extremely worrying that government has taken such an extreme position. It will harm international confidence, he added. International mining stocks, exposed to South Africa, could come in for more punishment on Monday when trading resumed: What other nasty surprises are in the pipeline? he said. Rob Oellerman, portfolio manager at South Africas Coronation Asset Management, said the draft charter smacked of nationalisation. He hoped sanity would prevail.
This page was last updated on 03 December 2002.