7. Mine ownership
As has been discussed earlier in this section, a country can follow an economic policy that either promotes private sector development of the mining sector, or nationalises development of natural assets, including minerals. Sometimes there is a mix of these approaches. For example, a country can have a state-owned enterprise (SOE) that is responsible for holding government equity shares in private sector mining companies.
Case study: State participation in the mining sector in Zambia
Previously run as a state owned, operational mining company, the Zambia Consolidated Copper Mines (ZCCM) company has been transformed into an investment company. The country has privatised its mineral resources, but has retained a share of equity in the mines, and manages these investments through the reconstituted ZCCM-IH.
Other countries create a state-owned company to undertake exploration activities or to be responsible for mining strategic minerals. The setting of boundaries relating to the degree of state involvement in a country’s mining sector is a matter of policy.
A further issue to be determined by policy is whether ownership of mining companies should be held by a group or section of society. Some countries decide to include social requirements for companies and these have financial implications for both companies and countries.
Case studies: Shared ownership in the mining sector in South Africa and Zimbabwe
In South Africa, a Black Economic Empowerment (BEE) component to mining licencing was introduced in the Mining Charter. The Mining Charter was negotiated with the participation of the mining industry, government and organised labour. The Mining Charter requires companies to share ownership of their mines with local BEE companies. When BEE companies do not have the financial resources to purchase an equity share (usually 26%) of an operating mine, mine owners can be required to assist in accessing funding. This may include underwriting loans, or developing long-term pay back schemes.
In Zimbabwe, there is a more demanding BEE component where companies are required to cede 51% of the ownership in a mine. This can be problematic for a mining company that does not want to give up operational control of an investment of several hundred million dollars, for example. There has been significant controversy over the attempts of government to include requirements for companies to give up part of their ownership of mines. Mining financing is notoriously difficult to obtain and these types of local ownership requirements can affect the ability of companies to secure financing. However, there may be policy reasons for governments to institute these measures.
In South Africa, historically, black people were denied full participation and ownership in the mining sector. The South Africa minerals policy seeks to redress this past, and so has introduced “socio-economic engineering” efforts through the SLP and the Mining Charter. The government of Zimbabwe has had a somewhat different motivation. It has increased government share in the mining sector, moving more closely to a nationalised mining sector from one that has been private sector driven. This reflects the government’s overall economic development policy.