Prospecting gets a bad deal in new charter

The newly gazetted Mining Charter may be a policy that all stakeholders can live with, but the ultimate loser will be the prospecting industry.

The charter has been broadly welcomed by local mineral producers, who say it provides a level of certainty after years of policy and regulatory paralysis.

Importantly, a court victory about the once empowered, always empowered rule means previous black ownership deals must be recognised, and this has been reflected in the charter.

Some niggling issues remain, but for those mining companies that have already sunk capital into SA it’s enough to keep them producing until their mining rights expire in coming years. However, there is no mention of prospecting rights in the charter. In one way, it’s a relief because the draft charter proposed some onerous requirements for prospecting, but it is worrying that the charter is silent on the issue, and this could discourage exploration.

There has been a drop in mineral exploration globally, particularly in recent years, when commodities prices had a downturn and belts were tightened. Now that things are looking up, more funds for exploration have become available.

In the absence of incentives, however, any new investment in exploration is unlikely to happen in SA.

In 2000, SA claimed more than 20% of exploration budgets for Africa. By 2017, it was down to 8.7%, and it’s not because there’s nothing in the ground.

SA is resources rich and home to significant mineral discoveries. There is potentially much more to be found in the country. However, there have to be incentives for investors to decide to take a gamble.

Something unpleasant seems to be brewing at Botswana-based grocery retailer Choppies. The company, which has a primary listing in Botswana and a secondary listing on the JSE, was initially scheduled to release its yearend results on Friday.

However, it informed shareholders in September that the release of the results would be delayed. The company’s new auditor, PwC, which Choppies appointed in January, has uncovered information, which the company is reassessing.

The information relates to historical purchase price allocations on business acquisitions, depreciation and amortisation accounting, valuation of inventory and the impairment assessment of property. What is perhaps most concerning is that the company, which is chaired by former Botswana president Festus Mogae, does not know when it will release the financials for the year to June 30.

The firm’s statement that its board and auditors had uncovered a number of matters relating to the current and earlier financial periods, “which require independent verification and expert legal analysis”, will unsettle shareholders.

What is concerning is that some of the information that needs to be re-evaluated relates to recent acquisitions. This goes to the heart of the company’s growth strategy.

The Choppies expansion story — from a single store in Botswana in 1986 to more than 200 shops in various African countries — has been quite something. It is hoped that these outstanding matters can be cleared up as soon as possible.