A major privatisation and black economic empowerment deal has suffered a blow as a result of this week’s Constitutional Court ruling that the Richtersveld community has a legitimate claim to the land where a government-owned company, Alexkor, was prospecting for diamonds.
BusinessMap executive director Reg Rumney said the decision ”will put a question mark on the privatisation of Alexkor. I don’t know if many companies would be prepared to buy an asset where there is a land claim.
”It will certainly affect the value of the asset, it is not certain how, but it would probably decrease its value. It does create a lot of uncertainty,” Rumney told the Mail & Guardian.
But empowerment as a whole could still win the day if the Land Claims Court (LCC) rules in favour of the community because it is a black community, Rumney said.
”The mining charter requires that 15% of mining assets be transferred to blacks within five years [of the charter being adopted], and 26% eventually. The Richtersveld community is black, so they will more than satisfy the requirements,” he said.
In a judgement with wide implications for claims based on indigenous-law ownership, the court also ruled that in terms of indigenous law the community had the rights to the minerals lying beneath the surface.
The decision means at least three empowerment companies identified as potential buyers of a majority of the shares now owned by the state will have to wait a little longer to clinch the deal — and may have to start fresh talks with new owners.
The community and the mining company must now return to the LCC to determine whether the land, and with it the mine, should be returned to the community, or whether compensation should be paid.
The Richtersveld community’s lawyer, Desiree Africa, told the M&G, that the community saw this as an opportunity to ”make restitution, [to let] black economic empowerment and privatisation benefit the broader Namaqualand and not people in Johannesburg, Tel Aviv or Australia. … Should the LCC award the mine to the community, anyone who wants to have a hand in the pie would have to speak to the community first.”
The government has been trying to sell a majority stake in Alexkor and had, by June this year, shortlisted three empowerment groups — Pan African Gems, the New Alexkor Consortium and Dimeng Diamond Holding — as potential buyers of the 51% stake.
Bidders for the stake had to comply with the broad-based Socioeconomic Empowerment Charter, which requires that black people own at least 25% of each bidding company.
Alexkor’s star is on the rise, the company having reported two consecutive years of operating profit. In August, Minister of Public Enterprises Jeff Radebe announced that the company had made an operating profit of R63,9-million from its mining operations, an increase from the operating profit of R16-million in 2002. That followed losses of R197-million between 1996 and 2001.
The Department of Public Enterprises has declined to comment on the process of privatising Alexkor.
Though the parties must go back to the LCC, the Constitutional Court has already determined who owns the mineral rights. ”Alexkor and the government were unable to suggest in whom ownership in the minerals vested if it did not vest in the community,” said the judgement.
”Given that indigenous law ownership is the way in which black communities have held land in South Africa since time immemorial, the inevitable impact of the Precious Stones Act’s failure to recognise indigenous law owners was racial discrimination against black people who were indigenous law owners,” said the judgement.
Alexkor, supported by the government, had argued that whatever land rights the Richtersveld community may have held did not include ownership of the mineral rights and precious stones.
”The fallacy in this argument is that it ignores the undisputed evidence of the mining activities of the community. The submission that if there was any mining, such mining was unlawful after the annexation, simply begs the question,” continued the judgement.
Alexkor and the government said the Supreme Court of Appeal had erred in its decision in March when it found that the Richtersveld community fell within the ambit of the law regulating whose land could be restored.
The Constitutional Court upheld the Supreme Court of Appeal’s ruling and found that the community complied with the Constitutional provision that ”a person or community dispossessed of their property after 19 June 1913 as a result of past racially discriminatory laws or practices is entitled, to the extent provided by an Act of Parliament, either to restitution of that property or to equitable redress”.
Vuyo Jack, the chief executive of Empowerdex, said the sale of the mine and empowerment would only benefit the Richtersveld community if it received royalties from the project and was afforded jobs there, and local businesses were used as suppliers of some services and goods.