London, England — MININGREVIEW.COM — 16 August 2010 – Mining giants Anglo American Plc and Lonmin Plc “’ who employ 100 000 people in South Africa “’ say the government has deprived them of mine rights, threatening investment and job creation in the country’s biggest export industry.
Bloomberg News reports that the disputes over the rights, some of which are now in the hands of former government officials, add to investor concern that their investments in South Africa aren’t safe. The ruling African National Congress is preparing to discuss mine nationalisation at a September congress.
“These could be the first indications of a worrying trend,” said Chris Melville, an analyst at London’s Menas Associates. “The key question is whether the government looks to resolve this uncertainty and close the loopholes, or whether we begin to see politically connected individuals and companies systematically exploiting them.”
South Africa, which boasts the world’s biggest platinum and chrome deposits, is already struggling to attract foreign investment as laws to redress the inequalities of apartheid compel the sale of stakes in mines to black South Africans, increasing investment costs, says Bloomberg. Canada’s Fraser Institute, a research agency, ranks the country ahead of only the Democratic Republic of Congo and Zimbabwe in terms of the ease of mining exploration investment in Africa.
The ANC’s youth wing and labour unions, the groups that propelled Jacob Zuma to the presidency last year, are calling for the country’s citizens to benefit more from mineral resources, valued by Citigroup Inc. at more than US$2.5 trillion (R18.75 trillion). At stake is investment in an industry that employs 491 000 people and accounts for 5.2% of the country’s gross domestic product, according to Statistics South Africa.
The disputes have arisen as companies renew mining rights to comply with laws that stipulate targets for black ownership, the employment of black managers and women, and the economic development of communities near their operations. They form part of legislation designed to compensate for the use of cheap black labour during white rule in the country’s mining industry.
“It’s a piece of legislation that’s still being tested in application,” said Sandile Nogxina, director general of the government’s Department of Mineral Resources, in an interview. “I don’t believe it should frighten investors away as we have courts of law in the country to deal with disputes.”