Mosebenzi Zwane (Deaan Vivier, Netwerk24)
The ANC meeting follows allegations that it was not properly consulted by Mineral Resources Minister Mosebenzi Zwane, who gazetted the new laws last week.
The Mining Charter will force mining firms to restructure their ownership to ensure they have 30% black ownership within 12 months. It will also require a 51% black shareholding in all new prospecting licences.
According to the Business Day, the ANC’s economic transformation committee will meet with the Chamber of Mines, which is set to take the matter to court over a lack of consultation.
The meeting is said to include former finance minister Pravin Gordhan, Finance Minister Malusi Gigaba, Zwane, ANC deputy secretary-general Jessie Duarte, ANC treasurer Zweli Mkhize and ANC national executive committee members Enoch Godongwana, Ebrahim Patel and Gugile Nkwinti.
Fitch: Charter will hit investment
The meeting comes as Fitch Ratings criticised the new laws, saying it will deter investment.
“Mining investment has already been hit by the fall in commodity prices, relatively high costs and uncertainty about the new rules,” it said in a statement on Monday.
“The charter may also weaken business and investor sentiment in other sectors by raising fears of more onerous policies. Business confidence in the second quarter fell to the lowest level since the financial crisis, likely weakened by political developments.
“The revision to rules applying to South Africa’s mining sector supports our view that the direction of economic policy has changed following March’s cabinet reshuffle.
“It indicates that the government is prioritising radical transformation even if this leads to weakening of the business climate and could reduce trend growth.”
Fitch: A more radical approach
Fitch said the new charter is the result of a more radical approach.
“Uncertainty about final outcomes, the implications on returns for existing shareholders of the new provisions, and the challenges of meeting procurement targets will continue to constrain investment in the mining sector, which accounts for about 7% of GDP,” Fitch said.
Fitch warned that weaker trend GDP growth than ratings peers, cause in part by the deteriorating investment climate, is a key sovereign rating weakness for South Africa.
“A further weakening in trend growth would make fiscal consolidation more difficult,” it said. “The authorities aim to reduce the consolidated government budget deficit to 3.1% of GDP in 2017/2018 from 3.4% the previous year, but these targets look ambitious in the face of under-performing growth.”
Fitch downgraded South Africa’s sovereign rating to junk status (BB+) with a stable outlook in April, reflecting its view that political events, including the cabinet reshuffle, would weaken standards of governance and public finances. It affirmed this rating on 1 June.
A recap on the Mining Charter:
- The ANC had saught an urgent meeting with Zwane last Thursday. ANC spokesperson Zizi Kodwa told News24 that the ruling party’s economic transformation committee had raised a number of concerns about the new charter – specifically about the impact the raised level of black ownership to 30% could have on jobs in the sector.
- The bloodbath resumed on the JSE following Mineral Resources Minister Mosebenzi Zwane’s announcement of stringent new laws in the mining sector on Thursday.
- The Chamber of Mines said it will serve an interdict on the minerals department to force it to immediately suspend the implementation of the charter. It will also take the charter on review.
- One veteran black mining executive told City Press that the department of mineral resources may have wilfully plunged itself into months, or possibly years, of lawfare “because by doing so, they think they will be seen to be doing radical economic transformation”.
- The new Mining Charter contains a number of flaws that are not in accordance with legislation, said mining lawyer Peter Leon of Herbert Smith Freehills.