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High court shelves black mining ownership rule changes

The ruling of the high court in Pretoria could potentially stimulate lagging investor interest in the mining sector in SA. File photo.
The ruling of the high court in Pretoria could potentially stimulate lagging investor interest in the mining sector in SA. File photo.
Image: Christopher Furlong/Getty Images

The high court in Pretoria struck down some changes to mining regulations that govern black ownership targets, in a move that could potentially revive investor interest in the sector.

In 2018, minerals and energy minister Gwede Mantashe adjusted the rules to stipulate that an ownership target of 26% for black investors in SA mining companies would remain in perpetuity, so miners that had previously met the threshold would need to find new black shareholders if the original ones exited their holdings.

The high court on Tuesday set aside that provision and other changes to the charter, backing a challenge by an industry lobby group that represents producers.

The challenged clauses of the 2018 charter are unconstitutional, as the minister doesn’t have the power to make law, according to a ruling by the court.

The charter, first introduced in 2004, is aimed at distributing the benefits from mining more widely among South Africans to make up for racial discrimination during apartheid. Mining exploration and investment in SA, the largest producer of platinum and rhodium and formerly the world’s top gold miner, have dwindled in recent years amid regulatory uncertainty.

The Minerals Council of South Africa, which represents large producers including Anglo American Plc and Impala Platinum Holdings Ltd, and challenged parts of the 2018 charter, welcomed the ruling.

“The judgment removes the clauses dealing with the renewals of existing mining rights and the transfers of mining rights, compelling companies to top up their black economic empowerment shareholdings to the 2018 charter levels, which would have the effect of diluting shareholders and stifling investment in the sector,” the council said.

The department of minerals and energy said it was studying the court’s decision and would communicate in due course.

While the ruling is a “big win” for investors, as it resolves concerns surrounding security of tenure for mining rights, much will depend on the government’s response, according to Patrick Leyden, a mining industry lawyer at Johannesburg-based Herbert Smith Freehills.

“If they decide to appeal, it means there is uncertainty for the duration of the appeal process,” he said.

More stories like this are available on bloomberg.com