Markets bloodbath as Zwane shocks mining sector

Cape Town – There was a bloodbath on the floor of South Africa’s markets on Thursday, after Mineral Resources Minister Mosebenzi Zwane announced a new stringent law that will force mining firms to restructure their ownership to ensure they have 30% black ownership within 12 months.

The rand dived by almost 2% and mining firms saw about R30bn shaved off their combined market capitalisation, with the biggest losers being Sibanye (down 6.8%), Kumba Iron Ore (down 6.4%) and Assore (down 5.85%).

Anglo American (down 5.81%) lost the most value as its market capitalisation is leagues above the rest, at R242.06bn.  

Azar Jammine, chief economist at Econometrix, views the release of the Mining Charter to be negative for the economy.

"The Chamber of Mines has not agreed to the updated charter, government has gone ahead with it 'willy nilly',"  he told Fin24 on Thursday. "This will stifle further private sector investment, and will only directly benefit those well-connected to the president."

When asked if it will create investor certainty, he said: "On the contrary, it will cause more damage, the government has carried on without considering what the private sector says."

GRAPH: Rand dives on Mining Charter

READ: 12-month deadline to reach 30% black mine ownership

According to Sanisha Packirisamy, economist at MMI Investments and Savings, a lack of clarity around economic policy direction in the mining industry has played a role in dampening investment spend in the sector.

GRAPH: Mining investment, showing sideways movement due to policy uncertainty

"Mining investment has tracked largely sideways since the global financial crisis," Packirisamy told Fin24. "Today’s announcement of onerous regulations imposed on the mining sector is unlikely to instill much confidence in the sector and as a result, we expect the recovery in mining investment and hiring to be slow.

"The rating agencies have also voiced concerns about a lack of progress on meaningful structural reform in SA.

"Though today’s announcement brings to an end more than a year of indecision around the revised charter, the lack of broader consultation and potential negative impacts on the mining sector and growth in the economy as a whole is unlikely to placate the rating agencies," she said.

It will be good for GDP, "if" miners buy-in

Thabi Leoka, economic strategist at Argon Asset Management, said “it is good that the Mining Charter has been finally released”.

“Investment has been held back because investors were waiting for clarity on the charter,” he told Fin24. “The charter will be positive for GDP and investment if there is buy-in from the industry and if it is satisfied with the charter.”

This seems unlikely, as the Chamber of Mines boycotted a meeting with Zwane an hour before his announcement on Thursday.

It said it would not “be co-opted into participating in an attempt by the DMR (Department of Mineral Resources) to provide any support into what we believe has been a flawed process by the DMR”.

READ: Zwane reveals final Mining Charter, despite mining boycott

Zwane shocked the industry on Thursday when he announced the charter would increase the level of black ownership at mining companies from 26% to 30%.

In addition, mining prospecting rights need to have a minimum of 50 plus one, while companies will be required to give 8% of their shares to workers.

He said mining companies will have 12 months to adhere to the new ownership requirement.

“The Charter is being gazetted this afternoon,” Zwane said. “The button has been pressed. There’s no turning back. The success of this Charter to me is when we collectively get to a point where the minerals of the people in this country is shared among the people of South Africa.”

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