Report shows mining houses’ shortcomings
A REPORT on the Mining Charter has shown how some South African mining houses, including Sibanye Gold, fell short of targets in the Reviewed Mining Charter, also known as Mining Charter III, which is under scrutiny for being a threat to investment and jobs.
The SBG Securities, a Standard Bank subsidiary, said in a note published yesterday that among the country’s top four major gold producer, Harmony Gold was leading in terms of empowerment ownership credentials.
“Sibanye falls significantly short of new management equity targets, while Gold Fields is unaffected,” it said.
It said that Harmony had 37.5 percent empowerment ownership, Gold Fields was 35.8 percent empowered, Sibanye Gold was 26.8 percent empowered in its gold division and platinum divisions respectively, while AngloGold Ashanti was 26.8 percent empowered.
According to the Mining Charter III, the new empowerment target is 30 percent of mining houses and a voting right.
Mining companies had 12 months in which to top up to this new target from the previous 26 percent target in the previous version of the Mining Charter.
SBG Securities also found that the majority of empowerment ownership had been based on credits from historical asset sales and should be allowed if the “once-empowered, always empowered” held.
It argued that the drafting of the charter was ambiguous as it was not clear to what extent Mining Charter III recognised prior deals for empowerment ownership.
“An increase from 26 percent to 30 percent is clearly required; to the detriment of existing shareholder. The employment equity and procurement targets are materially higher too, particularly for women in mining. The 12-month deadline to meet all these targets is unrealistic in our view”, it said.
The charter requires that boards should have a 50 percent black representation with exercisable voting rights of which 25 percent must be black women.
It also required that 50 percent of top management be black at executive director level as a percentage of all executive directors, 25 percent must be black women.
It also called for a minimum of 60 percent of senior management be black, of which 30 percent should be women and 75 percent of middle management be black with 38 percent being black women.
In terms of procurement, SBG Securities said AngloGold Ashanti would need to improve its scorecard the most. This is because mining rights holders were required to spend a minimum of 70 percent of total mining procurement spend on South African-made products.
In terms of platinum group metals, Northam Platinum and Anglo American Platinum met the new 30 percent black ownership target in the charter, because Northam was 31 percent black owned, and Anglo Platinum 32 percent black owned.
The world’s biggest platinum producer Anglo Platinum’s compliance is severely dependent on the treatment of asset disposals which remains ambiguous in Mining Charter III.
While Lonmin, the world’s third biggest platinum producer, and Impala Platinum, the world’s second biggest producer, required top-up deals to meet the 30 percent black ownership threshold, it said.
“All the producers are exposed from an employment equity perspective, particularly at lower management levels. Our analysis shows that Lonmin is the most compliant from a preferential procurement perspective, with all the other miners needing corrective action in either the goods or services categories,” said the report.
Peter Major, a mining analyst at Cape Town-based Cadiz Corporate Solutions, said that the mining charter was an “improved recipe” for even more economic disaster in the mining industry.
He said that mining had proven to be the worst investment and career choice of all South Africa’s sectors for nearly two decades.
“But worst of all – this charter will only cause further and more rapid job losses in South Africa. Does no one seem to care about that?” asked Major.
Liquid gold flows from a furnace into a casting mould. Mining in SA is the worst investment, says an analyst.