South African Mining Law Amendments Could Hurt Sector
By Chris Bishop and Jonathan Loades-Carter
June 15, 2017 - Mining analysts in South Africa warn new legal amendments, which call for an increase from 26% to 30% in black ownership in the country, could hurt an already struggling industry by burdening it with more costs.
The South African government is calling for a range of new measures including: 50% black membership in the boardroom; up to 1% of turnover to be paid in dividends to the 30% black shareholding before other shareholders are paid; 70% black ownership for suppliers, when it comes to procurement, and 50%, plus one share for the securing of prospecting rights.
"I think these new amendments are unworkable, unfeasible and undemocratic. There is nothing in here about job creation or profitability," Peter Major, a mining analyst with Cadiz Corporate Solutions in Cape Town, said Thursday. "Companies are going to struggle to comply with a quarter of these new regulations."
Other analysts warned that it all adds up to more costs for South African miners as a time when the country, after two quarters of negative growth, is in a technical recession.
"Most miners are finding it incredibly difficult at the moment as it is," Wickus Botha, the head of mining at Ernst & Young in Johannesburg, said Tuesday.
"I think the deeper and more labour intensive precious metals mines are likely to struggle to carry these costs. But other commodities like iron ore, zinc and chrome, which are better supported by prices at the moment, could cope better."
The new amendments to the Minerals Petroleum and Resources Development Act -- which governs mining in South Africa -- were four-and-half years in the making.
They were sent back to the legislature by President Jacob Zuma more than once because it was feared they would infringe the country's constitution.
Many analysts, who asked not to be named, believe industry body the Chamber of Mines will be able to hold the amendments up with a court challenge long enough for a change in government, which could see these rules abandoned.
The next election is in 2019 and the ruling African National Congress is under increasing pressure from the opposition.
The CoM -- which represents 90% of the country's miners -- is expected to announce Thursday that it will challenge the amendments in court. It filed a case last year, but put it on hold in the hope negotiation would bear fruit in the shape of a compromise.