Publications
Partners
Mineral Resources Minister Gwede Mantashe will appeal a court ruling that held that mining companies did not have to maintain at least 26% black ownership in perpetuity, the mineral resources department said on Tuesday.
The appeal will add a layer of uncertainty to a sector battered for years by depressed prices, soaring costs and opaque policies, and which had hoped that the new mines minister would quickly act to improve the investment climate.
Earlier in April a high court ruled in favour of a Chamber of Mines challenge to a government regulation which specifies that a black ownership target of 26% must be maintained throughout the life of the mine.
The ruling, in the form of a declaratory order, meant mining companies in the world’s top platinum producer needed only to make the 26% threshold once, and did not need to top up again if black shareholders decided to sell their stake.
The industry said it could not afford to continually top up its black ownership levels because such shares were often offered at a discount in complicated and costly transactions. Mining accounts for about 8% of South Africa’s GDP and was an important source of export revenue.
In a statement, the mines department said the judgment would hurt the policy of economic transformation – changing the ownership structure of the economy that was controlled by the white minority under apartheid.
It is a thorny topic in South Africa where wealth inequality remains high and ownership still largely concentrated in white hands more than two decades since apartheid ended.
The department said it had already approached the Supreme Court of Appeal.
“The judgment has dire implications for the economic transformation imperatives of the Constitution, the mining sector and South Africa at large. It also has the potential of extending regulatory and policy uncertainty,” the department said.
The Chamber of Mines said it respected the government’s right to appeal the ruling and that it would continue to negotiate outside of court with the mines department.
Peter Leon, a partner at law firm Herbert Smith Freehills who is not involved in the case but follows it, said the government’s appeal went against an earlier promise not do so in the interests of policy stability and risked spooking investors.
“Any appeal is unlikely to be heard by the Supreme Court of Appeal until early next year and any decision by that court is likely to be appealed in turn to the Constitutional Court,” Leon said.
The industry and the government had been negotiating the terms of a third version of a Mining Charter, which spelled out various targets including black ownership requirements which companies must meet to maintain or secure mining licences. – Reuters
