BEE imbroglio to inform charter debate

[] — SANDILE Nogxina, minerals resources director-general, tells me the redrafted mining charter is complete and is likely for circulation to industry in late January or February.

It’ll be interesting to see how discussion regarding that document progresses if only because the latter months of 2009 have seen some quite spectacular scraps among empowerment investors in the mining sector, and their company managers.

I’m uncertain whether the imbroglio at Wesizwe Platinum, and yet more trouble at Simmer & Jack Mines (Simmers), are a direct function of inherent weakneses in the mining charter. But I am certain they will lift the room temperature when the Chamber of Mines and the mineral resources dept (DMR) meet to discuss future BEE legislation in mining in 2010.

The BEE mining codes, published by the DMR earlier this year, may be an indication of how the discussion may shape up. One clause in the code said empowerment credits could not be awarded to a mining company if its BEE partner was indebted two years after deal consummation.

This suggests to me the DMR may want the industry to consider different financing models, perhaps a free-carry for the empowerment grouping with government stepping in to provide financing, or guarantees, or some such support that has previously been missing.

Until now, empowerment interests find themselves so enormously indebted that they can’t participate in the profitability of their investment, or worse: they are heavily diluted when unable to follow their rights on capital investment and the like.

That’s why many empowerment groups, those without lock-in agreements, trade freely out of mineral holding positions – another aspect of empowerment that I know Nogxina can’t abide.

I suspect it was this fear of dilution that no doubt played in the collective mind of the Bakubung-Ba-Ratheo when it mandated Musa Capital Advisers to reinvest some of its shares in Wesizwe Platinum.

Mike Solomon, the recently reappointed CEO of Wesizwe Platinum, should never have allowed the Bakubung-Ba-Ratheo to grant Musa those privileges, although I’m not sure what he could have done about it. Perhaps he should have kicked up a public fuss as he’s doing now?

The outcome is that the Bakubung-Ba-Ratheo has swapped its shares in Wesizwe Platinum, while the remainder is marooned – and was very nearly encumbered – in Wesizwe itself, a company with no operations, no funding, and no immediate prospect of reviving developments even should the economic climate improve. It’s sad.

As for Simmers: good grief Gordon (Miller, CEO of Simmers), this tit-for-tat with Vulisango has been rolling on for years without apparent resolution!

Vulisango Holdings has no confidence in Miller and wants control of the board, and some of their claims are valid in my opinion. I always doubted how well Miller could run two fully-fledged companies, a task not made any easier by the fact he lives nearly full time in Toronto, while the operations of Simmers and First Uranium, the other firm he manages, are in South Africa.

The common thread of Simmers and Wesizwe, meanwhile, is that there’s little evidence of black interests being served.

All I can see is the very pale-faced Valence Watson, CEO of Vulisango pitching for control of Simmers’ board against an equally blanched Miller; while at Wesizwe, its Musa Capital’s Antoine Johnson, an American, fighting for control of the board against Solomon.

Motsepe, political savant

Tim Cohen, a freelance journalist, marvelled in Business Day earlier this week at Patrice Motsepe’s apparently careless approach to the mines nationalisation debate. Motsepe said he was in favour of nationalising the mines if it was to the country’s benefit.

For those who have dealt with Patrice, this was classic Motsepean ambivalence in which he appears to broach matters of national importance while saying absolutely nothing. Of course, the comment begs the question: would nationalisation of the mining industry be beneficial? To which, I suspect, Patrice would deliver another deft fade to the left (or right, no political pun intended).

Yet notwithstanding all his infuriating soft-peddling, Motsepe has presided over another dividend payment to his empowement scheme. This was the R7.6m dividend paid to the broad-based black economic empowerment trust of African Rainbow Minerals (ARM BBEE Trust) last week.

Since 2007, some R41m has been paid to the ARM BBEE Trust which includes a women’s upliftment trust, a teachers’ union, Nehawu (National Education, Health and Allied Workers Union) among others.

Nogxina should also be mindful, amid the debate on new mining legislation, that there are many mining empowerment deals that are working well. ARM, clearly a well constructed, expertly managed organisation, is one of them.