Paul Janisch

RMB division to oppose Mittal deal (like Sanlam Investment Management)

This is a Blog It post (somewhat edited in Typepad)

“RMB Asset Management is supportive of broad-based economic empowerment, as we consider it critical in ensuring long- term sustainable shareholder returns for any company participating in the South African economy. When considering matters pertaining to economic empowerment, we consider, amongst other factors, the following three questions: Firstly, is the proposal in the best long-term interest of shareholders (our clients)?

“Secondly, is the BEE proposal sufficiently broad based as to be consistent with the national imperative to correct the economic imbalances brought about by the inequitable policies of SA’s past? Finally, does the nature and spirit of the proposal resonate with the core values of RMB Asset Management?

“We find that, in accordance with these general principles, we are unable to vote in favour of the proposal currently before us,”

via www.businessday.co.za

It would very surprising if this deal (Ayigobi/AMSA) flies. This corporate dissent is exactly what South Africa needs. I'll list the three requirements again

1. Firstly, is the proposal in the best long-term interest of shareholders (our clients)?
2. Secondly, is the BEE proposal sufficiently broad based as to be consistent with the national imperative to correct the economic imbalances brought about by the inequitable policies of SA’s past? 
3. Finally, does the nature and spirit of the proposal resonate with the core values of RMB Asset Management?

The conclusion that they aren't willing to accept the deal is left open to the reader.  I somehow think the third requirement was overwhelming.

India watches (and waits - that's for Ian)

Typepad has this amazing feature called Blog It which is an app that allows you to highlight text on a page and then send it through to your blog.  It also allows you to post the same content to Facebook and Twitter.  My blogging has gone up as a result of this.  But sometimes you just need to type a blog.

The Business Standard / New Delhi published an analysis of their own mining industry.  It was written by R K Sharma  - Secretary General, Federation of Indian Mineral Industries and  entitled "Should locals get 26% of mining profits?".  The analysis talks about India's own issue with redistribution which is aimed at

displaced people in addition to providing employment and other assistance in accordance with the rehabilitation and resettlement (R&R) policy of the state government

The proposition is that 26% of the profits of each mine should be redistributed to these beneficiaries.

However there is a strong move away from this thought because they have learned from our own DMR

If 26 per cent of the net profit is allocated for local development, a firm may not have enough of a cushion to invest in future exploration, which is required to enhance its mining operations. It is worth noting that ever since the 26 per cent scheme for Black Economic Empowerment (BEE) was enforced in South Africa and Namibia — which the present recommendation has copied — no significant investment has come into the mining sector in these nations; instead, there has been a flight of private capital.

Sharma, speaking on behalf of the Federation of Indian Mineral Industries (FIMI), suggests royalty-linked contribution as the best way to achieve the government’s objectives of providing long-term economic security, raising living standards and providing better hygiene, health and education to the families of those whose land has been taken over for mining.

Kind of inspired by the new charter but with a stronger and perhaps more enforceable focus on community development.  The single flaw in this argument is that the state needs to manage this royalty in the form of a trust.  We as South Africans would steer clear from this - especially if the DMR in its current guise is involved.

But the sentiment remains that

If 26% of the net profit is allocated for local development, a firm may not have enough of a cushion to invest in future exploration, required to enhance its mining operations

Peter Leon would not disagree with this.  Read the article it is very balanced.

 

 

Peter Bruce » Blog Archive » If Radebe wants the “people” to own the mines, hand over to communities now

Then  one of the papers yesterday quoted fellow  miner Bridgette Radebe saying she’d be happy  to have her mines nationalised so they could  become the property of something called “our  people”. Her brother, Patrice Motsepe, has  also indicated in the recent past that he’d be  open to the prospect of nationalisation.

With all that kind of money and clout  behind him it is no wonder Malema feels he  can do pretty much as he pleases.

Still, I don’t understand why Radebe (or  any other beneficiary of empowerment in the  mining industry) would think like this. BEE  has been good to her. In fact she’s the epitome  of BEE success — a woman, connected, clever  and black . If ever you objected to this kind of  thing, you were a racist or a coconut. Like all  miners she would have had her ups and  downs, but to try and have herself bought out  during a “down” like now at taxpayers’  expense is just breathtaking.

Business is always hard and always  unforgiving. If you don’t like waking up in the  morning with a knot in your stomach then do  something else. If we are genuinely trying to  grow an entrepreneurial class of black people  in SA then Radebe’s reported remarks in Durban set the worst possible example.

via blogs.businessday.co.za

I have isolated the most significant paragraphs. Please read the whole article - this is a VERY different spin on mine nationalisation that seems to follow a certain perverse logic.

Business Report - Home - Davies warns on BEE 'tenderpreneurism'

Davies said BEE needed to be moved away from "the perversions" of "tenderpreneurism" which he described as a form of fronting. This involved waste disposal or engineering service companies going to white companies and getting them to do "the actual work" and then adding 20 percent on the price to government, he said. Another perversion was entirely black-owned companies having to go to a BEE verification agency to supply another company, which was not legally necessary.

via www.busrep.co.za

Nice words Rob

The FlaminGods - Don't know my name (new MP3)

Every Thursday the FlaminGods (this is the name I chose today - it is not easy naming a band) get together and interupt the sanctity of Parkhurst.  This song is the product of our experimentation.  The song is a collaboration between all three of us - Ryan Fisher (vocals), Ian Carpenter (guitar) and me (Paul Janisch - bass and a bit of guitar). 

I am immensely proud of this and I'd love to hear your opinion.  Feel free to download and distribute it.

The FlaminGods - Don't know my name (KevinMix1)

Right click on the link and save the MP3.

BusinessDay - Investment loses out to equity fetish

The best part of the new system is that it has been, essentially, consensual between the mining industry and the state. It has been conceived of in a programmatic, long-term way. What remains is a general notion of a negotiated system, and at the broadest level, a target of 25% equity ownership by previously disadvantaged South Africans by 2014. In these times, when talk of nationalisation is rife, that alone is a big positive.

via www.businessday.co.za

I was a little harsh on the DMR (slash ANC) in my last post where I spoke about arrogance. The mining charter was largely agreed upon - but it does not seem that everything was agreed upon.

The Business Day editorial from the 14th of September concluded with this
"Just as industry needs to find a way of addressing the spirit of the agreement, so the department needs to stop threatening to haul out the big stick and try to understand why investment and job creation in the mining sector are so poor."

Mining Charter – or more correctly “The Broad Based Socio Economic Charter” for the South African Industry

My numerous and (in some cases) somewhat sycophantic requests to numerous players in the minerals industry for an advance copy of the minerals charter fell on deaf ears. So I. like everyone else who is not in the industry had to wait for the document to be published. I got my copy off the Business Day this morning. (Thanks to Leila Munda and Thinus Kruger who sent me copies this afternoon – it is very appreciated).

The launch of this document drew attention from far and wide. We had Peter Leon claiming that it would probably not make it past the constitutional court

The most far reaching change is that non-compliance with the revised Mining Charter will amount to a breach of the Mineral and Petroleum Resources Development Act, 2002 (the MPRDA) resulting in the suspension or cancellation of licences granted under the Act. Clothing the Mining Charter with the force of law may well not withstand constitutional scrutiny, in addition to vitiating its consensual nature. In addition, the Minister of Mineral Resources is now entitled to amend the Charter unilaterally, thus perpetuating the problem of overly broad administrative discretion.

To the San Francisco Chronicle that dramatically announced S. Africa May Revoke Mine Licenses to Enforce Charter.

The question is how does it measure up? It certainly is a lot more detailed than the last one, but then the targets are infinitely steeper than the last one. If you had to actually calculate how much it would cost to implement this it might not be worth your while to mine in this country. I was expecting something a lot less punitive, especially after the ICT/Kumba and Lonmin scandals (those are only the high profile incidents – there are countless others that never make it to court or the press).

I'll go through some of the things that make for interesting reading.

1. The charter is NOT issued under section 9 of the B-BBEE Act, it's issued under section 100(2)(a) of the MPRDA. Perhaps this is why it is still called the "The Broad Based Socio Economic Charter". It has now drawn a fair amount of inspiration from the standard DTI-type scorecard, with its own little twist (more twisty than a string of DNA).
2. There is a scorecard, but ownership is not a scorecard item – it's an absolute (along with reporting). This is where things get a little murky – we know that ownership will always be an issue but is non-compliance with the scorecard also a breach? Paragraph 3 says

   Non compliance (sic) with the provisions of the Charter and the MPRDA shall render the mining company in breach of the MPRDA and subject to the provisions of Section 47 read in conjunction with Section 98 and 99 of the Act.

3. A very nice feature of the scorecard is that the targets are ramped up over a four year period. This makes the targets more palatable (but does not detract from the sheer ridiculousness of those targets).
4. HDSA is still used in the definition but they've been a little cleverer with the new definition

   Historically Disadvantaged South Africans refers to South African citizens, category of persons or community, disadvantaged by unfair discrimination before the (current) Constitution came into operation which should be representative of the demographics of the country.

   In other words – you can include white women but only to the extent that they are demographically represented. A question springs to my lips – do you now need to structure deals so that all HDSA's are included and to the exact percentage (as Mpho Nkeli would have us do it).

5. BEE transactions must now include workers and communities – nice move.
6. I'm not going to speak about the ownership requirement – I'll leave that for the rest of the fourth estate. However the beneficiation requirement allows companies to set off 11% against their ownership targets. Only 11%!!!! They should be given 100% ownership credits.
7. You should feel sorry for multinational suppliers of capital goods – they have to contribute 0.5% of revenue generated from local mining companies (not NPAT) towards socio-economic development of local mining communities. This must be paid into a social development fund. It is thought that the DMR will manage this fund. I can't see anyone contributing to this fund if the beleaguered DMR is going to be managing the money.
8. Procurement is punitive. By 2014, 40% of all capital goods must be purchased from BEE entities (70% of goods and services). And a BEE entity is a company that is 25.1% black owned. The cynic in me cannot but laugh at this requirement. They are trying to extend the possibilities for the ANC and its cronies – they'll now go to the major manufacturers and suppliers and state that they must do a deal with them otherwise the mines won't buy from them. Couldn't they just be a little more subtle?
9. The skills development targets are a joke – 3% ramping up to 5% in 2014. This is SPEND on training – you don't have code 400 to fall back on here.

Otherwise there is a strong focus on staff and community welfare.

I was speaking to a mining guy yesterday who told me that this is still a discussion document – if it goes through in this form then Malema will get his mines because many will just stop mining here and head for West Africa.

I was hoping that the time must be approaching where the ANC drops its arrogant stance towards private and foreign investment and starts collaborating more. However a document like this would indicate that they are still a fair way away from this.

JSE BEE study misleading: BMF - Times LIVE

The Black Economic Empowerment (BEE) study of the top 100 companies listed on the Johannesburg Stock Exchange indicating that direct shareholding by BEE companies was as much as 8.0 percent is misleading, the Black Management Forum (BMF) said on Tuesday.

via www.timeslive.co.za

What did I fucking tell you! Only now jungle reckons he is an authority on calculating ownership. Pity you couldn't convince the Norwegians jungle, I think they saw what the rest of the world (other than the BMF) sees in you.

A draft mining charter is doing the rounds at the moment. If anyone has a copy please can you send it to me.

BusinessDay - Fund calls for BEE model that creates new businesses

National Empowerment Fund (NEF) chairman Ronnie Ntuli has called for a new form of black economic empowerment (BEE) based on the creation of black-owned companies rather than simply the transfer of equity stakes in existing enterprises.

A paradigm shift is needed to identify gaps in economic sectors to create new capacity and develop true black entrepreneurship, he said in the organisation’s annual report tabled in Parliament last week.

His comments add to the growing chorus of discontent with the model of empowerment that focuses exclusively on black shareholding , which suffered a sharp decline in value as a result of the global economic meltdown.

“BEE policy should create the platform for black people to build sustainable businesses and become leading players in their chosen industry sectors,” Mr Ntuli said.

“We need a new generation of black entrepreneurs who add genuine value to the economy and who are creators of wealth.

“Gone must be the era of vendors whose entrepreneurial vocation is to obtain shares in existing white- owned businesses, and passively watch and wait for their appreciation in value without operational involvement and contribution to economic growth or transformation.”

via www.businessday.co.za

There is a new move towards ED. This is so overdue. I love this quote
"A paradigm shift is needed to identify gaps in economic sectors to create new capacity and develop true black entrepreneurship."