Mining Clash Heats Up as South Africa Seeks Rights FreezeBy and
Minister Zwane says action is response to court challenge
Court case on charter anticipated to be heard in September
South Africa’s mines minister has struck back at attempts by the industry to fight his controversial new industry rules with a proposal to indefinitely freeze granting and renewing mining rights.
Minister Mosebenzi Zwane said Thursday that the moratorium is necessary to ensure that no rights are approved without being subject to the new regulations, which he has agreed to suspend pending an initial court judgment.
The Chamber of Mines, which represents the industry, will seek a court order suspending the notice of the proposed freeze if Zwane doesn’t withdraw it, the lobby group said in a statement. The proposal is unlawful and would “have an immediate negative impact on investment in the sector,” the chamber said.
The FTSE/JSE Africa Mining Index fell 1.2 percent by 4:24 p.m. in Johannesburg, pacing the same decline in the FTSE 350 Mining Index, while the Bloomberg World Mining Index was 0.5 percent lower.
Zwane’s new Mining Charter, published last month, would require mining assets in South Africa to be 30 percent black-owned, up from 26 percent, and previous deals from which black investors have since sold out are not given full credit, raising concerns about dilution for existing investors.
The government says the rules are required because companies have been too slow to redress the inequity caused by apartheid, while the chamber argues that the changes breach the Companies Act and the Constitution, and will scare off investment.
Halting the approval of mining rights looks like “an attempt to force the industry to ultimately bow to the minister’s whim in respect of Mining Charter 3,” Jonathan Veeran, a partner at law firm Webber Wentzel, said in emailed comments on Thursday.
Zwane appears to be using the moratorium to circumvent the deal he made with the Chamber of Mines to suspend the charter in return for more time to prepare his legal arguments, said Peter Leon, the Africa co-chair at law firm Herbert Smith Freehills LLP.
“It sends a terrible message,” he said by phone on Thursday. “This is freezing all transactions and all applications indefinitely.”
The Chamber of Mines said last week Zwane agreed not to implement the charter until there’s a judgment in its case seeking an urgent court order, which had been scheduled for a July 18 hearing. The parties have now asked the court for a date in September, the chamber said at the time.
The moratorium would ensure that any rights applications “are concluded in terms of the 2017 Mining Charter, and advance the socio-economic transformation objectives of government,” Zwane said Thursday. He has issued a request for public comment on the proposal, and the final moratorium, which would apply to applications received after July 19, would be in force until further notice.
South Africa holds the biggest reserves of platinum, chrome and manganese and mining companies operating in the country include Anglo American Plc, Glencore Plc and AngloGold Ashanti Ltd. Under South African minerals law, mining rights can be issued for up to 30 years.