Immediate impact

ter has longer-term ramifications in terms of further investment in the sector, he adds.

Talk in Sandton’s investment banking district is that three deals were cancelled immediately after Zwane launched and gazetted the new, reviewed mining charter on June 15. At least one of them was the kind of deal which would have extended the life of the mining asset involved from three or four years to eight to 10 years. That would have sustained the jobs and livelihoods of employees and their families for several extra years, in an industry which has shed 70,000 jobs over the past five years.

It is an industry in which net investment is declining, so the capital spending going in is not even enough to ensure it can stay in business.

It’s not just the contents of the new charter, which the Chamber of Mines has argued make the industry all but uninvestable, but the uncertainty around its legal status and about the litigation process to come.

In an eerie coincidence, the R51bn that the release of this third charter wiped off the value of SA’S mining stocks was almost exactly the same number as the R52bn wiped off the value of mining stocks on July 26 2002, when a leaked draft of the first mining charter shocked the markets with a 51% black ownership requirement — a requirement that many months of intense negotiation between the industry, labour and government softened to 26%.

The 51% is much less in percentage terms now than it was in 2002, when the total market value of SA’S listed mining stocks was R750bn, less than half the R1.9 trillion it is now. Then, however, the leaked charter came as a shock. This time, it had been expected.

But nothing like this had been foreseen, with the new version containing new and highly prescriptive requirements that had not featured in the first draft of this charter, in April 2016, nor in the presentation which mineral resources official Mosa Mabuza made to parliament in November 2016.

There had long been mutterings from some black business quarters and some in the department about a “free carry” and that, in effect, is what the charter enables. It essentially gifts BEE shareholders in new mining licences their shares, by requiring that the loans to fund their 30% stakes be written off by the end of 10 years, by which time they have full ownership.

It also gives them 1% off the top of the turnover of the companies in which they are invested, so that they get cash regardless.

And they also get to maintain their percentage shareholding, without having to put in the money to follow their rights, if the company has a rights issue.

But at the same time, it completely undermines the market value of the share those BEE shareholders do own, by requiring they can sell only to other black shareholders — in effect putting a “race stamp” on their share certificates.

Its provisions would also be likely to raise costs and cut free cash flows, squeezing margins and cutting the amount of ore in the ground that is commercially viable to mine — so, in effect, all those untapped mining resources that the minister hopes will be exploited will simply become uneconomic.

Then there is the Mining Transformation & Development Agency (MTDA), which the minister will establish in terms of the charter. As yet, its governance and objectives are entirely opaque — but it will be the recipient of cashflows which the chamber estimates could total at least R3bn/year.

That includes the turnover take of the community trusts, which will have to be given 8% stakes in any ownership deal but whose BEE shares will be housed in the new agency. It also includes 1% of the turnover of multinational suppliers to SA mining compa- following the announcment of th DMR’S charter nies, which the charter requires be paid over, as well as two percentage points of the 5% of payroll that companies are required to pay as a skills development levy.

So if the minister controls the new agency, he will have charge of some rich pickings. No wonder the chamber and others are raising red flags about the unilateral process by which the minister and his team have imposed what he has called an “innovative” charter on the industry.

Asked for details on the governance and objectives of the new agency this week, all the department of mineral resources said in answer to a series of questions from the Financial Mail was: “The MTDA is an entity to be created in accordance with the provisions of the charter and managed within the provisions of the PFMA (Public Finance Management Act), and shall commence on a date to be published by the minister.”

What it means: The chamber says 50,000100,000 jobs could be at risk now if the industry does not get some new investment

The genesis of this third charter, MC3, goes back to 2014, which marked the end of the first 10 years of MC1, the mining charter which was hammered out and agreed to by the chamber, the National Union of Mineworkers and government, following the leaked charter fiasco.

That charter took effect in 2004, when the Mineral & Petroleum Resources Development Act was enacted. It was reviewed five years later and again, many months of round-table negotiations and quid pro quos between industry, government and labour resulted in an amended charter in 2010, with a score-