The resources sector is in many ways the hottest political potato when it comes to the subject of black economic empowerment (BEE).
BEE hardliners see the sector as one which developed out of the sweat and blood of black workers. Now it's payback time. Whatever the case may have been, the sector now makes up the heartbeat of the SA economy and needs to be handled with extra care.
Though all the other sectors of the economy are required to align their transformation charters to the new BEE legislative framework, in the form of the broad-based BEE Codes of Good Practice, the resources sector will be left untouched by this call. This is partly due to the painful experience that marked the premature introduction of the mining charter back in 2002. A leaked charter draft document caused panic on the markets and wiped out a significant chunk of value as share prices of JSE-listed mining operations plummeted.
Since then regulators have learnt to tread carefully in dealing with the sector. A response by a senior government official that the FM asked about whether there are plans to align the mining charter with the codes is telling: "That is a no-go area."
Thus the mining charter, which is linked to the Minerals & Petroleum Resources Development Act (MPRDA), will continue to reign supreme in guiding BEE implementation in the mining sector. This is despite the fact that the mining-focused transformation document has some gaping holes when compared with the much evolved general BEE legislative framework.
That is not to say all is well in the mining sector.
Emotions still run high when the BEE subject is brought up. That is mainly because BEE credentials can be a matter of life and death for mining businesses. BEE is supposed to play an important part in the issuing of new order mining rights, something that every company operating in this sector faces. The MPRDA ushered in a whole new regulatory regime, which removed mining rights from all private companies and placed them in the hands of the state. Now every entity that seeks to run a mining operation in SA is required to apply for new order mining rights and must show fair BEE credentials. Though this phenomenon has been generally accepted by the private sector, this process has not been running smoothly since inception in 2004. That is largely due to bureaucratic inefficiencies in the department of minerals & energy (DME).
The department has been in and out of court as a result of dissatisfaction with the way it has handled many applications for mining licences. The main source of frustration is the time it takes the department to process applications. Entities that have taken the department to court after a long wait for a licence include mining giant Anglo American. But the London-listed group was set to earn its rights on March 31 this year, to the relief of new CEO Cynthia Carroll. In a single strike Anglo American reached a mining rights agreement with the DME that touched all its SA mining operations including platinum, coal, iron ore and base metals.
"I am delighted with the progress that we have made towards our goal of establishing significant and meaningful black economic empowerment across all our businesses in SA and that agreement has been reached regarding Anglo American's new order mining rights," said Carroll in an announcement. "This is a landmark achievement for the group and for the many black empowered businesses with which we are partnered. It provides our business with greater certainty in SA and enables the group to continue to make a strong contribution to SA's prosperity and economic growth," she added.
The same announcement quoted DME director general Sandile Nogxina as saying: "Anglo American is the largest mining company in SA and has been at the forefront of creating sustainable black economic empowerment over many years. I welcome the strong spirit of co-operation between Anglo American and the DME and look forward to a continued relationship, which is both positive and productive."
But at the time of going to press, many other mining houses were still awaiting their rights from the DME. These included high-profile BEE coal and base metals producer Exxaro Resources. Recently, at the release of the group's results for the year ended December, Exxaro CEO Sipho Nkosi said the group held a workshop with the department in July 2007 as part of the conversion process to clarify the progress of the applications for new order mining rights. Discussions are continuing.
Companies like Exxaro and the whole mining sector of the JSE came under the microscope in the 2008 Top Empowerment Companies (TEC) survey.
Exxaro, which was created out of a merger between BEE mining group Eyesizwe and assets bundled out of the former Kumba, produced a total BEE score of 43,9 in the TEC survey, giving it 70th position in the overall rankings. The group scored maximum points of 20 on the ownership element of the BEE scorecard and 6,2 out of 10 on management. That led it to claim a spot (eighth) within the Top 10 resources-focused TEC list. The resources list features giants like Sasol, Anglo American, AngloGold Ashanti, and Kumba. None of these giants, excluding AngloGold (sixth), is featured in the Top 10 list.
The resources-focused TEC list is led by small mining house Merafe Resources. The Royal Bafokeng Administration (RBA) controlled mining house produced a total BEE score of 79 points and was ranked as the second-most empowered entity on the JSE within the parameters of the TEC data.
Second on the mining list is diamond miner Trans Hex Group, which has the Tokyo Sexwale-led Mvelaphanda Resources as a BEE shareholder. Trans Hex produced a total BEE score of 61,5 and was placed 31st in the overall TEC rankings. The rest of the Top 10 mining list is made of Trans Hex Group, Petmin, The York Timber Organisation, Hulamin, AngloGold Ashanti, African Rainbow Minerals, Exxaro Resources, Sasol and Harmony Gold.
