Wesizwe plays waiting game in BEE muddle

[miningmx.com] – IN THE bun fight over which mining firms have sufficient black economic empowerment (BEE) credentials, Wesizwe Platinum presents a unique case because its partner, the Bakubung-Ba-Ratheo community, sold a portion of its shares in the firm, but still has the proceeds.

The issue of BEE looms large in the mining sector because South Africa’s High Court may give an adjudication next month on whether the principle of ‘once-empowered, always-empowered’ should be recognised by the recently audited mining charter.

The South African government contends that mining firms with lapsed BEE partners should be forced to re-empower themselves whereas the mining firms argue that previous BEE deals should be recognised.

They argue also that government has tacitly recognised any mining firm’s BEE credential in the award of a new order mining licence.

In the case of Wesizwe Platinum, however, the Bakubung-Ba-Ratheo was advised by a private equity firm to sell a portion of its stake in the platinum firm and use the proceeds to invest in other sectors in order that the community diversify its interests from platinum.

Conceptually, this was not bad advice given the poor performance of platinum from 2008, some four years after Wesizwe Platinum’s initial deal with the community.

The problem is that there’s a dispute over ownership of the monies earned from the divestment. It’s worth noting that the community has not always been a homogenous, discrete whole.

Earlier this month, protests among the Bakubung, situated near Ledig in the North West province, turned on what happened to some R12m loaned by Wesizwe to the community’s royal family.

DJ Phologane, chairman of the community investment firm, Bakubung Economic Development Unit, said the disputes were a smokescreen perpetrated by the family in order to reflect away from important questions about the R12m.

Wesizwe responded that the R12m was loaned to the family to help it fight litigation regarding the whereabouts of the funds realised from the sale of shares.

Meanwhile, the clock is ticking on Wesizwe Platinum’s BEE credentials, especially given that the company is building the R10.7bn Bakubung Platinum Mine which is slated to produce 420,000 ounces a year of platinum group metals.

The investment, backed by China’s Jinchuan Group, is a healthy chunk of change to lose in the event of Wesizwe paying the ultimate price for failing its BEE test: the loss of its right to mine – although, to be fair, that’s not an immediate threat.

Hamlet Morule, executive of corporate affairs for Wesizwe, said that the Department of Mineral Resources (DMR) is assisting the community in identifying the monies, estimated to be between R500m to R700m, whilst a legal process is also being followed.

Until then, Wesizwe Platinum has to wait for a decision although Morule adds that it would make economic sense for the Bakubung-Ba-Ratheo to reinvest in Wesizwe now given the fact the value of shares has sunk massively in value from their 2004 level.

“We have not proclaimed we were once-empowered and therefore should always be empowered,’ said Morule. “We have not made that request to the DMR because the circumstances are different.

“Our circumstances are that the community is still “empowered’ and that is still important. It also has the capacity to be empowered; there are still funds that would allow them to re-enter,’ he said.

“Let’s see to what extent the government assists the host community in re-tracing those assets, and to what extent they are able to facilitate the re-empowerment in Wesizwe,’ said Morule.

“Right now we don’t comply [with the mining charter]. We sit at about 16%. We could have corrected that gap but when we presented to the DMR we said that poses a risk until issue of the assets of the community have been conclusively dealt with.’