Searching for the light in the tunnel to transformation.

The mining sector has shown increasingly diminishing returns since 1986, falling from 13% of GDP to just 7%. Many industry experts attribute the consistent downward trajectory to a legislative framework that wards off investors, and pushes South African housed industries to seek work abroad.

Many have raised concerns over the urgent need for resource exploration. In contrast, industry powerhouse, De Beers, have cut their yearly exploration budget to zero. The Mining Charter Three stands as the largest deterrent to further exploration.

The Mining Charter, which Zwane published June 15, would require mining assets in South Africa to be 30 percent black-owned, up from 26 percent currently, and previous deals from which black investors have since sold out are not given full credit, raising concerns about dilution for existing investors.

The Chamber of Mines has most recently filed an application in the North Gauteng High court, to have a judicial review and setting aside of the Mining Charter. Moody’s characterised the Charter as “credit negative” , whilst the Chamber of Mines has warned that its implementation would destroy the mining industry. Minerals Minister Mosebenzi Zwane has suspended the controversial  Charter pending judgment on the case brought by the industry.

One of the stated aims of Mining Charter 3 is to provide policy and regulatory certainty in order to seek investment for the development of the mining industry. In this, it has failed miserably. With share prices having plummeted within the hour of the Minister’s briefing, one wonders whether true transformation is possible in an industry where investor confidence is rocked to this extent.