South Africa has raised the minimum threshold for black ownership of mining companies to 30 percent from 26 percent, the government said on Thursday, though an industry body said it would try to block it and other regulatory changes in court.
Mining firms in the world’s top platinum producer have complained about a lack of consultation over revisions to an industry charter that sets targets for black ownership and participation in the powerful sector.
The charter is part of a wider empowerment drive across Africa’s most industrialized economy designed to rectify the disparities of apartheid that persist more than two decades since the end of white minority rule in 1994.
The Chamber of Mines, which represents mining firms, said it would take the government to court over the charter because it had not been consulted sufficiently and feared the new rules would create regulatory uncertainty and scare off investors.
Announcing the new rules on Thursday, Mines Minister Mosebenzi Zwane said companies had 12 months to meet the new 30 percent target.
The rand fell 2 percent after Zwane announced details of the revisions. Johannesburg’s Mining Index ended the day more than 3 percent lower, underscoring investor concerns about the charter and the uncertainties it raises
“The value destruction is hard to quantify and the uncertainty will persist. What is certain is that South Africa continues to be a terrible destination for mining investment and assets in South Africa will continue to trade at a discount,” said Ben Davis, an analyst at London-based Labarum Capital.
The government has said in the past that companies must stick to ownership targets even if black shareholders sell their stakes but Zwane said it had not yet decided whether mining firms must maintain the threshold permanently.
The Chamber of Mines said it would also take this issue back to courts. It argues that a company should only be obliged to meet its black ownership targets once.
The Mining Charter was introduced in 2002 to increase black ownership of the mining industry, which accounts for about 7 percent of South Africa’s economic output.
Black South Africans make up 80 percent of the 54 million population, yet most of the economy in terms of ownership of land and companies remains in the hands of whites, who account for about 8 percent of the population.
“NOT OUR CHARTER”
Zwane told a news conference in the capital Pretoria that he had consulted widely with businesses.
“We will engage with business going forward in a respectable manner. We will never take them to court,” he said.
The new charter stipulates that mining firms must pay 1 percent of their annual turnover to the Mining Transformation and Development Agency, which helps black communities.