SA mine charter aims for 26% black equity

South Africa released a long-awaited final draft of a mining charter on Wednesday, which said 26% of the country’s mining assets must be owned by black businesses within 10 years.

Minerals Minister Phumzile Mlambo-Ngcuka told reporters after a cabinet meeting the industry had also pledged to achieve 15% equity ownership for previously disadvantaged, mainly black, people in all mines within five years.

“It concerns African, Coloured and Indian (people) … and it would also include white women, though the degree of the disadvantage would have to be evaluated,” she said.

Details of the charter have been thrashed out between the government, mining companies — among them some of the world’s biggest like Anglo American and diamond group De Beers — and labour representatives.

Anglo representatives were not immediately available to comment, and BHP Billiton and Anglo American Platinum said they would likely respond on Thursday.

Eight years after the end of apartheid, the South African economy is still largely controlled by whites, but government policies aim to give the black majority a bigger role.

The minister said mining groups would also help raise R100-billion in the first five years to assist new entrants into the capital-intensive industry — a backbone of the economy. There were no details of how this would occur.

“Within five years we will evaluate their overall progress and see if we need to do more,” Mlambo-Ngcuka said.

The minister said the 26% applied to each, separately licensed South African mine. “It’s 26% of the local assets…on the basis of the licence. It has got nothing to do with the holding company. If you’ve got 26 mines, it’s 26% of each mine.”

This compares to the original draft charter, leaked to the market in late July, which had scared investors with suggestions that 30% of mining assets and 51% of all new projects be sold to black businesses within 10 years.

Mining stocks were hardest hit by the first draft, with Anglo losing almost a fifth of its value at one stage.

Wednesday’s charter was released after the Johannesburg and London stock markets had closed for the day, where South African mining stocks had fallen after the charter release was delayed.

Merrill Lynch Investment Managers’ Graham Birch said the charter was “more realistic” than a first draft leaked in July.

“Of course it makes us rethink the portfolio strategy a bit, but I don’t think we need to take any drastic action.”

The fund manager has some $500-million invested in South African mine stocks. About 40% of its gold portfolios and 30% of its general mining investments are in the country.

Ian Henderson, vice president of JP Morgan Fleming Asset Management, said that at first sight the new draft settled some of the uncertainty that had been swirling around South African investments.

“It allays some of the worst fears that some of the foreign investors would have had… Something had to happen and without looking at the fine print it appears to take away some uncertainty,” he told Reuters in London.

The minister said the cabinet had accepted the draft charter, which would be fine-tuned over the next two months. “We need a month or two to talk to all the companies. We will start probably at the beginning of next year.”

She said there were no separate equity targets for black participation in new projects.

But the charter said 40% of all management should be from previously disadvantaged groups within five years and that mines must “aspire” to have 10% female participation in the industry within ten years.- Reuters

– Additional reporting by Rex Merrifield in London, Hilary Gush and Mariam Isa in Johannesburg

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