Why South Africa’s Mining Rules Are Drawing Fire: QuickTake Q&A – by Kevin Crowley and Paul Burkhardt (Bloomberg News – June 16, 2017)


South Africa is far from the egalitarian rainbow nation envisaged by Nelson Mandela when he ushered in democracy in 1994. A prime example is the mining industry. Its highly paid, mainly white male executives oversee hundreds of thousands of mostly black workers laboring in some of the world’s deepest and most dangerous operations.

The government’s updated rules for so-called black economic empowerment, including more stringent ownership requirements, seek to reverse the imbalances. The new regulations have the mining industry up in arms, as producers protest what they say was a disturbing lack of consultation on changes that are likely to require dilution of their existing shareholders.

1. What are the new regulations?

A new national Mining Charter, published in a government gazette by Mineral Resources Minister Mosebenzi Zwane, aims to involve more black groups and women in the mining industry and ensure that more of the proceeds from mining flow to the black majority.

Mining companies are being asked to comply with a black-ownership threshold of 30 percent within 12 months, up from a previous 26 percent. The charter doesn’t include the “once empowered, always empowered” principle, which allowed companies to claim credit from past deals even if black investors sold out.

They must also contribute 1 percent of annual revenue to community development, allocate 80 percent of total spending on services to black-owned companies and ensure more than half of senior management are black.

2. Why are the rules changing?

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