South Africa Says Mines Must Be 30% Black-Owned; Rand, Mining Shares Tumble

Not long after South Africa introduced legislation calling for the redistribution of white-owned land and business to the country's black population, in a redux of the catalyst that resulted in Zimbabwe's hyperinflation at the start of the century, on Thursday South Africa doubled down when it announced plans to revise its mining charter and introduce rules requiring all local mines be 30% black-owned, regardless of whether they have previously sold shares or assets to black investors that later divested. 

Mining stocks promptly tumbled on the news, with shares in Anglo American sliding 5% after the announced mining regulation changes; AngloGold and Kumba also fell 5 percent in Johannesburg, while Sibanye traded 6.5% lower.

The charter revision comes shortly after Africa’s most industrialised economy entered its first recession since 2009, with investor confidence already shaken by infighting within the ANC over the scandal-hit presidency of Jacob Zuma.

The proposal was unveiled by the Department of Mineral Resources which said it intends to raise the minimum black-ownership level from the current 26% to ensure more proceeds from the country’s natural resources flow to the black majority, Mining Minister Mosebenzi Zwane told reporters on Thursday in Pretoria. The charter will also require companies to pay 1% of annual revenue to communities and new prospecting rights will require black control, Zwane said.

“The mining sector does not exist in a vacuum,” Zwane said as he unveiled the charter on Thursday. South African miners needed “strong legislative regimes” to thrive, he added.

“We have listened to miners who have not seen real economic benefit; people who don’t see benefit of transformation structures,” he said.

Some more details from Bloomberg:

A holder who claims a historical transaction that achieved 26 percent prior to the new Mining Charter, which Zwane presented on Thursday, “must top up to 30 percent within 12 months,” regardless of whether the earlier black shareholders still hold their position, according to a statement handed to reporters

According to Bloomberg, most mining companies reached the 26% level under previous versions of the mining charter but many black investors have since sold out. The Chamber of Mines, which represents mining companies, has said it’s willing to fight the government in court over the issue of getting credit from earlier deals, which it says would kill investment in the industry.

Glencore Plc, Impala Platinum Holdings Ltd., South32 Ltd. and Kumba Iron Ore Ltd., which is majority owned by Anglo, would need to sell the biggest stakes if the new charter fails to give credit for previous deals, Avior Capital Markets (Pty) Ltd. said June 1. AngloGold Ashanti Ltd. and Sibanye Gold Ltd., the country’s two biggest gold miners, may also be affected by the new rules.

As the FT adds, President Zuma has called for “radical economic transformation” to more fairly share the benefits of South Africa’s economy among the black majority. Zwane, a close ally of embattled president Zuma, said the government was “not blind” to the downturn but added that “there’s a need to produce a new era of industrialisation driven by young economic champions,” referring to the charter as a “revolutionary tool”.

Miners who rely on international supply chains to operate in South Africa may be hard hit by rules that require companies to procure 80 per cent of services and 70 per cent of goods from black-owned local suppliers.

 

In addition, the holder of a South African mining right will be forced to pay 1 per cent of its annual turnover to communities.

Confirming that this is the latest disastrous populist policy adopted by South Africa, the rand promptly tumbled on the news.

Comments

ParkAveFlasher jcaz Thu, 06/15/2017 - 06:36 Permalink

Now, I'm not trained in university logic however in my mind I would estimate mining shares for any enterprise OUTSIDE OF SOUTH AFRICA to rise in price in news like this, foretelling of a major offlining of supply.  But what do I know, I never took political science in college.

In reply to by jcaz

Lanka booboo Thu, 06/15/2017 - 07:49 Permalink

Per Chicago Merchantile Exchange, less supply leads to lower wholesale prices. // = 0) {

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In reply to by booboo

Advoc8tr xtremers9 Thu, 06/15/2017 - 08:09 Permalink

What do you mean when ?? There are "affirmative action" quotas everywhere here already.  What exactly is / was stopping the blacks from owning 100% of the shares if they wanted to buy them like everyone else ?  80% of prisoners are Aboriginal / Black etc in SPITE of all the leaniiancy and affirmative action benefits they get and the experts conclusions are "The system is racist" Why any whites remain in SA is beyond me.  It is clear where this is going.

In reply to by xtremers9

ParkAveFlasher wmbz Thu, 06/15/2017 - 06:44 Permalink

You would think that, right?  Bear in mind we live in upside down world (disclosure, I have a face like Rocky Balboa in the sixth or seventh round, because I am long miners).  All these assets are daisy-chained together, pooled and price-monitored, so that their individual share prices dimly resemble the reality of their actual value.  This is the real goal of the modern innovation of the ETF - to effectively dilute the share pool from the top down, driven by the closeness of the ETF to the money spigot (infinite liquidity).  For example, day traders gambling their second mortgages, or funds that "trade" (in reality, carry) fed by funds that pay out pensions.  We live in upside down world.

In reply to by wmbz

saldulilem Thu, 06/15/2017 - 06:47 Permalink

Since the 70s a similar policy has been enacted in Malaysia, including requirement that all companies listed in the stock exchange be 30% owned by Bumiputera aka native Malays.

buzzsaw99 Thu, 06/15/2017 - 06:50 Permalink

if they give the workers shares in the company and said workers keep selling their shares then how in the fuck are they ever going to get to 30%?  If the gubbermint had any money they could buy the farms and mines.  In fact, what they want to do is take shit, then sell it to raise cash, then take it again, then sell it again. nice work if you can get it.

Infinite QE Thu, 06/15/2017 - 06:57 Permalink

F'ing niggers too stupid to realize that there was no one in SA until the Dutch arrived and made it civilized. Then the niggers, being niggers, showed up looking for something to do. White Sout Africans should be given free passage to the West along with funds, cell phones, houses and cars paid for by Soros. Then let the niggers destroy what was once there.