Saki Macozoma: Promises of change are hollow when laws chase off investment
Promises of change are hollow when laws chase off investment
● The government needs to understand the link between transformation and attracting investment, says struggle veteran and business leader Saki Macozoma.
Laws and regulations in the name of transformation are “just vanity and posturing and nothing else” if they deter investment, as is happening in the mining industry, he says.
Macozoma has created a highly profitable manganese mine in the Kalahari basin in the Northern Cape in partnership with Australia’s Jupiter Mines, led by Brian Gilbertson. Gilbertson has just listed the 49.9% of Macozoma’s Tshipi mine that Jupiter owns on the Australian Securities Exchange at 40 Australian cents, which values Macozoma’s 50.1% stake in Tshipi at R8-billion.
He plans to list it on the JSE in about four months. But the success of the listing might depend on what changes Mineral Resources Minister Gwede Mantashe agrees to make to Mining Charter 3.
The charter was meant to promote transformation but caused such wealth destruction that Macozoma's Ntsimbintle mining company and Jupiter Mining had to scrap what would have been a lucrative sale of the Tshipi mine. They were about to secure binding offers of $1.2 billion (R15 billion), but then Mining Charter 3 was announced, and the offers dropped to $450-million.
“Within a week of the new charter being announced, we lost more than $600-million and decided there’s no way we could sell at those prices.”
He blames the charter and its misguided attempt to force transformation on the industry for his company’s “dramatic loss of value”.
Tshipi made a net after-tax profit of R1.9billion in the last financial year, and R891million the year before. Since production started in 2012, more than R1-billion has been paid out in dividends to 19 groups in his BEE consortium involved in teacher education, youth and small business development, and much more.
This is in addition to thousands of jobs created directly and indirectly by the mine.
None of this would have happened without foreign investment, he says.
And in today’s climate of uncertainty and distrust, this would not have been available.
“A lot of Australian investors are very sceptical about the South African mining industry,” says Macozoma.
He sees the ASX listing as a vote of confidence in his manganese mine and its “unique” ore body and the $7.23 per ton manganese is currently fetching. Not in the local industry.
The charter stipulates a 30% empowerment level, up from 26%, but he says this is not a train smash.
“The real issue is that there are so many arbitrary provisions in the charter that the goalposts can be moved at any point by whoever is the minister.
“When the previous charter was put in place, mining companies had to go to investors and tell them: ‘You need to do this thing because this is South Africa, which has this kind of history.’ But they told them the charter would settle the matter so the industry could move on.
“To then come three years later and say ‘Well, actually, that’s not the end of the matter’
There are so many arbitrary provisions in the charter that the goalposts can be moved at any point by whoever is the minister
sends a message that is killing mining in South Africa.”
The charter gives too much discretionary power to the department and the minister, and scraps the “once empowered, always empowered” clause of previous charters.
Black investors should not be locked in forever, he says. Nor, if they want to sell, should they have to sell to other black investors — or that the shareholders who are left in the business “must now go and find new empowerment partners”.
Laws and regulations “that actually stifle investment will keep the wealth below the surface instead of being used for transformation”. He’s not sure beyond “some pockets” in the government that the connection between investment and transformation, and the importance of making the country attractive for investors, is understood.
Nor is it grasped “that effectively we are in competition for investment funds with other places in the world”.
The consequences for South Africa will be calamitous if the mining industry continues its downward spiral, he says.
“The mining industry is the biggest earner of foreign exchange. You just have to look north of our border to see what happens to an economy when foreign exchange dries up.”
Macozoma, 61, was a student leader in Port Elizabeth during the 1976 uprising and spent five years on Robben Island after being sentenced under the Terrorism Act.
He was Nelson Mandela’s blue-eyed boy in parliament, which he left in 1996 to become the first black head of Transnet and chairman of SAA. He was deputy chairman of Standard Bank, chairman of Liberty Life and president of Business Leadership South Africa, among other top corporate positions.
He has relinquished all but two board positions (Vodacom and Volkswagen) to concentrate on running Safika Investment Holdings and his mining company.
He was a member of the ANC national executive committee from 1991 to 2008, when he left to join COPE after it was found that the National Intelligence Agency had been spying on him.
He believes the ANC led by Cyril Ramaphosa represents the best chance of saving the country from disaster, but it’s going to be tight.
The level of debate at ANC conferences doesn’t inspire much confidence, he says.
“When people are at the level of sloganeering about these issues without applying their minds you get results at a policy level that are impervious to reality.
“We need to find those in the ANC and the state who understand what needs to be done and work to help them prevail with policies that are right for the country.
“We need to teach our people, the general voter, about the consequences for them and the country of what the politicians are saying.”