South African mines have achieved limited transformation of their ownership structures, almost eight years after the signing of the Mining Charter, reports market advisory firm KIO Advisory Services.
According to a comprehensive review of black ownership in the sector commissioned by the South African Mining Development Association (Samda), the gross value of black shareholdings among the top 25 mining companies in the country is 5,27% of the total R1,8-trillion market capitalisation.
In the Mining Charter, industry stakeholders were committed to achieving 15% black ownership by 2009 and 26% by 2014. The industry agreed to review the implementation of the charter within five years. At a recent sector summit, Mineral Resources Minister Susan Shabangu set the June 30 deadline for the charter review process to be completed.
The KIO Advisory Services report indicates that the black economic-empowerment (BEE) market capitalisation within the top 25 companies is R98-billion. This figure does not take into account the debt incurred by black shareholders. The report further indicates that the gross value of black shareholding in Exxaro, African Rainbow Minerals and Impala Platinum is R66,8-billion, equivalent to 69% of the BEE market capitalisation of the top 25.
KIO Advisory Services founder Duma Gqubule says that this report is the most comprehensive review of black ownership in the sector, and has reviewed more than 90% of BEE transactions by value in the mining sector over the past decade.
“However, the report was unable to determine the net value in the hands of black shareholders for most transactions. “The company feels that very few of the mining companies are anywhere close to achieving the 26% net value target that was set by the Department of Mineral Resources. “KIO Advisory Services also calls on government to pierce the veil of industry confidentiality agreements and conduct a deal-by-deal evaluation of BEE funding structures in the sector to determine the net value in the hands of black shareholders. “Government must also put in place mechanisms to monitor the financial viability of BEE transactions on an ongoing basis,” says Gqubule.
The report presents for the first time in South Africa an in-depth analysis of the performance against the charter’s ownership targets of five subsectors within the mining industry – platinum-group metals (PGM), coal, gold, iron-ore and manganese – which accounted for more than 80% of South Africa’s total commodity sales in 2008. This analysis reveals a mixed performance for the subsectors.
The gold mines were the worst performers, followed by the PGMs industry, while the coal sector led the way for the mining industry.
“The lesson is clear: there is public-sector leverage in the coal sector where Eskom, the largest buyer, has stringent BEE policies. “However, the gold and platinum mines sell their product to international markets,” Gqubule says.