Mining firms cause logjam as they rush to comply
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The Department of Mineral Resources this week extended its six-month moratorium on the receipt of new prospecting rights applications by a month to the end of March and, in the case of Mpumalanga, to the end of September.
The extensions are a sure indication that the department is sitting with a big problem in Mpumalanga particularly, and elsewhere potentially.
In coal-rich Mpumalanga, the prime problem has been identified as mining in environmentally sensitive areas, alongside the issue of overlapping rights. Mineral Resources Minister Susan Shabangu last year identified other nationwide problems including non-compliance, illegal drilling and concerns that rights holders weren’t serious about mining.
Centre for Environmental Rights executive director Melissa Fourie said there continued to be so many prospecting applications that the moratorium might as well not have happened. “All the people involved on the ground with public participation processes are as busy as ever,” she said. “We are not experiencing any relief.”
The Minerals Department review of prospecting and mining licences is indeed what may be sending many producers scuttling to get their houses in order and set in motion the public participation processes that have been required all along by the National Environmental Management Act.
They are also trying to bring their applications for water use licences up to speed.
Although many deny it, mining houses have for some time largely ignored legislation around environmental and water issues. But those days are now past as the department attempts to clean up the mining rights application process, as well as make it more transparent by rolling out a new database and application process.
The department said it needed more time to complete this, as well as its review of the 26 000 prospecting licences it had received since 2004. One can only imagine how many of those failed to meet their environmental obligations.
Did the Economic Development Department underplay its hand or did Wal-Mart and Massmart overplay theirs?
Suddenly a deal that seemed to have been “in the bag”, apart from the making of a few “vague and general” undertakings, could now be up for grabs.
The department seems to be irritated with the behaviour of Wal-Mart and Massmart. Its submission to the Competition Tribunal frequently refers to the merging parties’ unwillingness to provide the sort of information needed to undertake a useful analysis of the likely impact of the transaction; it also frequently refers to Walmart’s unwillingness to give any but the most vague of commitments.
There is a sense from the submission that the department feels it was “led up the garden path” by the parties; that it was encouraged to believe Wal-Mart/Massmart would give some important commitments; and then it was unceremoniously abandoned as soon as the commission gave the deal the nod.
Many might say it should have known that that is how the world of business operates; that is how companies get to be the size of Wal-Mart.
But there will be some who accept the department was doing the right thing; that it had persuaded Wal-Mart of what might be needed to do business in South Africa; and that Wal-Mart had accepted it needed to adjust its modus operandi. As the department tells it, Wal-Mart will not willingly make that change.
It looks likely the Competition Tribunal hearings could be the setting for a battle between the largest company in the world and the newest government department in South Africa.
The former will be fighting to continue growing without constraint, the latter will be fighting to enforce its obligations to protect the “public interest”.
The change in Brait’s business model from a manager of private equity funds to an investment company means life probably just got a whole lot easier.
John Gnodde, the new chief executive at Brait, said raising capital on the public equity markets was more efficient. Previously it took about 18 months to raise funds compared with about three months to raise money on a stock exchange.
But it is not just about raising money, the tricky part is exiting these private equity investments.
In a deal announced yesterday Brait will buy a significant stake in Pepkor and Premier. Brait’s private equity funds already had stakes in these businesses and now Brait will have a large direct stake.
So this takes care of any difficulties of exiting these investments, a view taken by some commentators. But Gnodde said this was an incorrect perception as there were a number of ways to exit Pepkor. Instead Brait wanted to retain a significant exposure to Pepkor, which along with Premier, presented great possibilities related to their sizeable distribution networks.
However, the outlook for Pepkor, which targets low-income consumers through Pep and Ackermans – at least in the short-term, is possibly muted. Pepkor, which delisted in 2003, has not released a lot of information on its operations.
But Chris Gilmour, an equity analyst at Absa Investments, said: “I would have thought they have done exceptionally well until very recently.”
He elaborated that Woolworths, which caters for high-end consumers, was the first to go into the recession and the first to come out as its customers, who would have had high levels of debt, were first hit with high interest rates and then would have benefited from sharp interest rate cuts.
Lower-income consumers would have been harder hit by job losses, a situation that has not yet turned around. Another possible risk in the months ahead is food inflation, which could affect lower-income consumers harder as a greater proportion of their income is spent on food. page 3
Edited by Peter DeIonno. With contributions by Ingi Salgado, Ann Crotty and Samantha Enslin-Payne.