The chief executive of Anglo American has called on South Africa’s government to end a “20-year rot” in the country’s mining industry by issuing investment-friendly legislation about black ownership of the sector’s companies.
Mark Cutifani said the next three to four months would be the “most important for the South African mining industry in 150 years”, with the ruling African National Congress overhauling laws to redress economic inequality in the sector.
“We’ve had an industry [in South Africa] that’s been shrinking for 20 years. If we are going to stop the rot, we need a document and a framework that encourages investment,” Mr Cutifani told the Financial Times on the sidelines of a mining conference in Cape Town.
Mosebenzi Zwane, the country’s mineral resources minister, told the Mining Indaba event, involving 6,000 delegates, that his department would release a revised South African mining charter about black ownership in March, and press ahead with implementing “a tool for transforming the mining industry”.
Rising costs, red tape and political uncertainty have made companies increasingly wary of investing in South African mines, in spite of the country hosting the world’s biggest platinum reserves and significant holdings of coal, gold and iron ore.
The latest draft of South Africa’s mining charter requires companies to keep the level of black equity ownership at 26 per cent, even when original investors sell out. This has triggered a furious response from the industry, which has threatened to take the government to court.
The Chamber of Mines, representing the sector in South Africa, says requiring mining companies to maintain this 26 per cent level of black ownership could force them to dilute other investors and therefore destroy shareholder value.
Mining companies including Anglo have argued for a “once empowered, always empowered” view of black ownership. This would mean that, once the level of black equity ownership has reached 26 per cent, thereafter it could fall below that level.
Mining companies have also pushed back against the government’s proposals to revoke mining rights as a way of enforcing black ownership legislation.
Mr Cutifani said there had been intense engagement between the government and the Chamber of Mines during the past month but it remained unclear if the industry’s input had been taken into account. “We haven’t seen the document so we don’t know,” he added.
Mr Cutifani said that, while “none of us wants to go to court”, it might be necessary if Anglo’s concerns were not reflected in the revised mining charter.
“If it [the charter] doesn’t serve the long-term interest of the industry, it won’t serve the interest of the country. They have to be one and the same,” he added.
Anglo, which is marking the 100th anniversary of its founding in South Africa this year, has extensive operations and employs thousands of people in the country.
The company is divesting its South African coal, iron ore and manganese assets under Mr Cutifani’s plans to restructure the company; its platinum and diamond mines in the country remain critical to his strategy.
Roger Baxter, chief executive of the Chamber of Mines, said it was fully supportive of the mining charter but had a different interpretation to the government on black ownership.
A court case that it brought to clarify the ownership provision was currently on hold, but could be restarted once the chamber saw the final version of the mining charter, he added.
“Our prayer is an outcome that is mutually acceptable so that the court case be withdrawn,” said Mr Baxter.
Meanwhile, Mr Cutifani said Anglo was unlikely to announce a resumption of dividend payments until later this year, as commodity markets would be volatile.
Anglo suspended its dividend in 2015, and Mr Cutifani said the company would not start spending on new projects until shareholders had received payouts. “[Investors] are first in the queue,” he added.
Anglo is seeking to focus on mining three core commodities: copper, diamonds and platinum. But last year the company abandoned plans to sell two Australian coking coal mines after a surge in the price of the commodity.
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