‘Onerous and problematic’ procurement provisions in the newly gazetted Mining Charter have raised concern among industry analysts. The Mining Charter, as outlined by Minister of Mineral Resources Gwede Mantashe last week, requires that a minimum of 70% of mining goods must be manufactured or assembled in South Africa and of this, 21% needs to be supplied by black businesses.
Secondly, 80% of procured services, whether professional or technical, must be local. To confirm local content, goods must be procured in line with a standardised product identification coding system being developed by the Department of Trade and Industry. Soria Hay, head of corporate finance at Bravura – an independent investment banking firm specialising in black economic empowermentownership transactions – pointed out that for some goods and services, these limits were impractical and unworkable.
“An understatement here would be to say that there is a dearth of local companies able to produce the capital goods required for the mining sector. Nearly all capital equipment is imported at this point. Building manufacturing know-how and capacity would take time, but if companies are not compliant with this, in terms of the prescriptions, their mining rights could lapse or be withdrawn,” she warned.
Hay said it seemed as though Mantashe had not considered the major unintended costs and even safety consequences of a blanket requirement such as this. She added that while “some positive progress has been made, striking the delicate balance between growth and transformation remains elusive”.
Hay said that while it was good for the sector to finally have certainty, the ownership aspects of the new Charter could also have a major impact. The financial impact of compliance with the new ownership levels have yet to be tested.
