Photographer: Waldo Swiegers/Bloomberg

South African Mining Rules Would Wipe Out Returns, Chamber Says

  • Tax on revenues would leave little for non-black shareholders
  • Government says opponents reject the country’s transformation

South Africa’s new mining rules will all but wipe out returns for non-black shareholders, driving other investors from the industry, according to mine owners who are seeking to block the changes in court.

“There would be nothing left for remaining shareholders,” said Roger Baxter, chief executive officer of the Chamber of Mines business lobby. “It’s going to make the mining sector uninvestable.”

A new 1 percent levy on revenue, to be paid first to black shareholders, would have cost 5.7 billion rand ($440 million) if applied last year, Baxter told reporters in Johannesburg. That compares with the 6 billion rand that companies paid in total dividends.

The levy on revenue is among measures in the mining charter that came into force with its publication in the official gazette on June 15. The chamber says the charge will cripple an industry already lacking investment. That’s even before more headline-grabbing moves such as forcing an increase in black ownership of miners to 30 percent. The charter will see as many as 100,000 job losses, or about one in five in the industry, Baxter said.

South Africa is already seeing employment shrink in the industry as companies struggle to contain costs in aging deposits. AngloGold Ashanti Ltd. said on Wednesday it was shutting operations in a move that may affect 8,500 workers.

Mine owners have applied to block the charter with an interdict and will present their arguments to court on July 18. The legal action is "unfortunate," the country’s Department of Mineral Resources said on Tuesday. “Those who are in opposition to the Charter are in fact opposing the transformation objectives of government,” it said in an emailed statement.

About 3.5 billion rand a year would flow to a so-called Mining Transformation Development Agency governed by the department, almost twice its annual budget, according to the chamber. “It has no governance issues in place, Baxter said. “We don’t know or understand what the primary objective is.”

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