05 Mar

Why South Africa Is Ripping Up Its Mining Rules Again

South Africa’s mining industry is a prime example of the nation’s stark imbalances. Its highly paid, mainly white male executives oversee hundreds of thousands of mostly black workers labouring in deep and dangerous operations.

To spread the nation’s wealth more equally, in 2017 the government revised its mining charter to require that companies give more ownership to black shareholders.

The industry lobby group sued to stop this, saying that the changes were illegal and would deter future investment. Now, corporations, labour unions and mining communities are pinning their hopes on President Cyril Ramaphosa and his new mines minister to find a solution that everyone can live with.

1. Why were the rules changed in the first place?

Despite earlier versions of the mining charter designed to increase black ownership and benefits, the ruling African National Congress has said companies have still been too slow to share South Africa’s mineral treasures.

Former Mineral Resources Minister Mosebenzi Zwane, an ally of then-President Jacob Zuma, argued that more stringent regulations were needed to ensure “radical economic transformation,” a loosely defined concept championed by Zuma aimed at speeding up the redistribution of wealth. Zwane published his new Mining Charter on June 15.

2. What were the changes?

While some parts of the new rules were murky, it didn’t appear to include the “once empowered, always empowered” principle, which companies had relied on to count previous sales to black investors to reach a 26 percent black-ownership requirement, even if those investors later sold their shares to whites or foreigners. (There was disagreement about whether the principle applied in the previous versions.)

Zwane’s new rules also raised the ownership mandate to 30 percent. The chamber considers other contentious changes to include a requirement for holders of new mining rights to pay at least 1 percent of annual turnover to black shareholders, before and in addition to distributions to all shareholders.

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