Govt, Chamber of Mines at BEE loggerheads. Regulatory uncertainty ten years on.

The global mining landscape is littered with challenges: turmoil in commodity prices couple with increased cost and labour pressures, it’s not a pretty picture. And one of those so called ‘own goals’ in the South African space is set around regulation uncertainty and empowerment targets. Government, which set a 26 percent target over a decade ago, says they have not been met. This in contrast to what’s coming out of the Chamber of Mines, which argues otherwise. Government says it wants to settle the disagreement outside of court. It’s a complicated tale as government doesn’t discount BEE stakes that are sold on, while the Chamber says it can’t be a perpetual cycle of re-empowerment. It’s this added threat of regulatory uncertainty which may affect further investment into a sector that’s already been battered. – Stuart Lowman

By Wendell Roelf

CAPE TOWN, Feb 8 (Reuters) – South Africa wants the black economic empowerment legal battle settled outside the courts, the mining minister said on Monday, to end uncertainty over a policy meant to spread economic wealth to the black majority.

Empowerment goals set by the mining charter a more than a decade ago to redress the absence of South Africans excluded from the mining industry, required that black partners own 26 percent of companies by 2014.

Mosebenzi Zwane, South Africa's Minister of Mineral Resources, speaks at a media briefing at the Investing in African Mining Inbaba in Cape Town, February 8, 2016. South Africa's government wants the black economic empowerment legal battle settled outside the courts, Zwane said on Monday, to end uncertainty over a policy meant to spread economic wealth to the black majority. REUTERS/Mike Hutchings
Mosebenzi Zwane, South Africa’s Minister of Mineral Resources, speaks at a media briefing at the Investing in African Mining Inbaba in Cape Town, February 8, 2016. South Africa’s government wants the black economic empowerment legal battle settled outside the courts, Zwane said on Monday, to end uncertainty over a policy meant to spread economic wealth to the black majority. REUTERS/Mike Hutchings

Data from South Africa’s Department of Mineral Resources, published in May, showed that the mining industry had failed to meet those targets. This was challenged by the Chamber of Mines, which took the government to court.

“We believe that they will withdraw and give the process a chance to unfold out of court,” Mosebenzi Zwane, the Minister of Mineral Resources, told a media briefing.

“We have taken a stance as government, that working together with the primary right holders, let’s deal with this matter out of court. It is in the interest of all parties,” Zwane said.

Read also: Mailbox: BEE – current version of Apartheid. Robbing the ‘Rainbow Nation’.

Regulatory uncertainty is a key concern for miners in Africa’s most industrialised but struggling economy, which has been hard hit by job cuts due to weakening global commodities prices for its platinum, gold, iron ore and coal exports.

The government wants to enforce a requirement that 26 percent of all mining companies be in black hands by 2014.

The state disqualified any transactions where black owners had sold out their shares in the companies, taking down the average empowerment level to 20 percent.

The Chamber of Mines however argues that once a company has sold 26 percent of its stake it had already met the empowerment principle even if shareholders subsequently sold of their stake.

Read also: New mining minister Zwane a shock to ANC insiders, but not Gupta watchers

Roger Baxter, the chamber’s CEO said the industry wanted the issue settled as it could affect investment in the sector.

“Shareholders and investors cannot be expected to perpetually re-empower if a company has shareholders selling out,” he told reporters at the conference.

“We need to have the certainty of knowing that we want to progress the transformation agenda.”

Earlier, an official at the chamber it preferred to reach a “negotiated settlement”, but the court case was continuing.

“The application has not and will not be withdrawn until we reach a negotiated settlement,” Charmane Russell, a spokeswoman for the chamber told Reuters.