South African Miners Target Government Over Mining Charterby
Regulations impose fresh taxes, tougher equity targets
Miners concerned about lack of consultation over new rules
South African miners will explore all options, including legal challenges, to oppose changes to a set of regulations known as the Mining Charter if the government implements new levies and black-ownership targets as proposed.
The Chamber of Mines, which represents companies including Anglo American Plc and Glencore Plc, wants the Department of Mineral Resources to reconsider the planned regulations, which could be implemented as soon as next month. South Africa is the world’s biggest source of platinum and the continent’s largest gold and coal producer.
Black-ownership rules and extra royalties could deter investment in the industry while targets on local procurement and employing more black South Africans may not be achievable, Roger Baxter, the chamber’s chief executive officer, told reporters in Johannesburg Wednesday. Since a draft charter was published in April, there has been “no meaningful engagement” between the chamber and the government, he said.
“Constructive engagement has been our traditional route but we’re not going to take this particular issue lying down,” Baxter said. “We’re concerned we’re being set up in this area to fail.”
The government is attempting to introduce policies that will speed up a fairer distribution of benefits from the nation’s mineral wealth, which was skewed toward the white minority under apartheid. They include mines being always at least 26 percent owned by black investors even if they subsequently sell their stake, and increasing procurement from local black-owned companies to as much as 70 percent of a mine’s spend.
Extra levies on miners and foreign suppliers could add as much as 1.5 billion rand ($106 million) to the industry’s annual costs, Baxter said.
“The industry made a combined loss of 37 billion rand last year and 10 billion the year before, after impairments,” Baxter said. “Now we’re faced with a whole bunch of extra levies which are going to add extra to the cost profile.”
The DMR and the chamber went to court in 2015 to seek a declaratory order on whether the government could force companies into more black-economic empowerment deals, which typically dilute existing investors, even after they had sold stakes in the past. They agreed to put the issue on hold while negotiations over the charter took place. The case may be revived, the chamber has said.
The new charter also seeks to create a Mining Transformation and Development Agency that will direct money to local communities and invest in education. The agency will be funded with a 0.5 percent annual levy on revenue, amounting to about 1.5 billion rand a year, and by claiming 2 billion rand of the 5 billion rand a year the industry currently spends on developing skills, the chamber said.
“That’s going into an agency of which we have no idea what the governance procedures are, what the money is going to be used for,” Baxter said.