South Africa Mine Laws "not to blame for low investment"

Posted 23 November 2006 @ 02:46 pm EET     Print     Reprint     E-Mail     Comments

LONDON (Reuters) - South Africa's Department of Minerals and Energy will collaborate with the Chamber of Mines to identify why investment in the country's mining industry is falling, the DME said on Thursday.

The department rejected the Chamber's claim that delays in granting mining rights was discouraging investment in the sector even as metals prices were close to record highs.

The Chamber of Mines said earlier this month that South Africa's mining sector was losing 5-10 billion rand yearly as companies held back investment because they lacked legal title.

"I don't accept the Chamber of Mines' argument, it is simplistic and reductionist," DME director-general Sandile Nogxina told reporters. "We have agreed on a process...to see what may be the cause of the so-called lack of investment," he said.

The DME, along with representatives of mining companies, has been giving presentations to investors in London on latest developments concerning South Africa's mining charter. Nogxina said a number of potential factors could explain why investment in South African mining has dropped.

Abiel Mngomezulu, deputy director general for mineral policy and promotion, identified the waning influence of gold mining, the industry-wide trend to buy other mining companies rather than spend on mining and exploration projects, and the fluctuations of the South African rand's exchange rate as possible reasons for the slowdown in investment.

South Africa's government has taken over as custodian of all mineral rights and companies must reapply for mining and prospecting licences.

The new rights are demanded under South Africa's mining charter, which seeks to give more ownership tp the black majority under the black economic empowerment (BEE) plan.

REVOLVING DOOR

Nogxina admitted that 'revolving door syndrome' whereby individuals acquire shares in mining companies under BEE measures then quickly sell them on could become a problem, but ruled out passing laws to prevent it.

"From our point of view, we wouldn't like to see the situation where you come in and get out," he said.

BEE laws were intended to promote participation by the black majority in the mining industry, and quick sales of shares gained under those laws would defeat that purpose, he said.