South Africa’s new president, Cyril Ramaphosa’s move to resolve an impasse in the mining sector over the controversial mining charter is not only good news for the country’s mining companies, but also for the country as a whole, ratings firm Moody’s says.<\/p>\n
In a research note published on Monday, Moody’s said that Ramaphosa’s announcement that he would resolve the matter and focus on the country’s mining industry was viewed as credit positive.<\/p>\n
“Ramaphosa emphasised the need for agreement to a charter that would grow the mining sector, a vital part of South Africa\u2019s economy,” the group said, adding that a\u00a0resolution of the issues around the revised mining charter would be good news specifically for AngloGold Ashanti Limited, Gold Fields Limited\u00a0and Sibanye Gold Limited.<\/p>\n
Net investment in South Africa\u2019s mining sector has declined 57% over the past decade, it said, highlighting a need to reverse these fortunes.<\/p>\n
The mining charter, spearheaded by mineral resources minister Mosebenzi Zwane, has been a sticking point for the country’s mining companies, demanding that\u00a0South African mining companies increase black shareholders\u2019 equity holdings to 30% from 26%, and requiring holders of new mining rights to pay a minimum of 1% of annual turnover in a given financial year to these empowerment shareholders.<\/p>\n
The charter was rejected by the South African Chamber of Mines, and faced a massive legal challenge.<\/p>\n
The presidency announced on Monday that this court challenge would be postponed, and the parties would again head back to the negotiation table to find a solution.<\/p>\n
Moody’s noted that, even though some platinum and palladium mining companies were adversely affected by a stronger rand, the fact that Ramaphosa’s influence on the currency since rising to power has seen it appreciate by 11.5% is seen as a positive, pointing to investor optimism around the new president.<\/p>\n
The ratings firm is currently the only one to hold South Africa full above junk status (one notch on both the local and foreign currency debt), though the rating is on review for downgrade.<\/p>\n
Much of South Africa’s ratings future lies in the budget speech scheduled for Wednesday this week (21 February), where the finance minister will outline the country’s plan to plug a R50 billion-plus tax gap, and get state-owned companies under control.<\/p>\n