Johannesburg - The department of minerals' decision to award exploration rights over Kumba's existing Sishen mine to an unknown empowerment company with close ties to the ANC, has been denounced as a bad advertisement for investors wanting to do business in South Africa.
International investment bank Macquarie First South, a specialist in the global mining and resources market, said in a note to its clients on Friday that the merits of and justification for the department's decision to award a prospecting licence need to be questioned.
Macquarie said potential investors in South Africa will be put off by the dubious decision, and this would without doubt lead to a heightened discount rate (which is used to determine potential investment yields, taking account of risk) and an increased cost of doing business in South Africa.
Despite an application by Kumba for mining rights over the remaining 21.4% of Sishen that it does not already hold, the department has thought it fit to grant exploration rights to an unknown company, Imperial Crown Trading 289. Mining has taken place at Sishen for the past 30 years and, according to law, it is highly improbable that a mining licence could be granted to Imperial.
From data in the Companies and Intellectual Property Registration Office (Cipro) it appears that Imperial 289 is not much more than a shell company. The company was registered in September 2008 and is one of about 130 companies entitled "Imperial Crown Trading", with only the numbers behind it differing.
The company's registered street and postal address in N1 City, Goodwood, is shared with various other companies, including Keep the Dream 231, Global Pact Trading 712, Exclusive Access Trading 457 and Shock Proof Investments 164 - also shell companies, but with other directors.
Kumba is currently appealing the department's awarding of the prospecting licence.
The wisdom of the department's decision is further in question because Kumba and ArcelorMittal - which originally held the 21.4% right but neglected to apply for conversion to a new-order right - are currently involved in a dispute about these rights and the validity of a dirt-cheap iron-ore contract, which Kumba claims is attached to these rights.
It would appear that Imperial is attempting to take advantage of new legislation for its own benefit. There will be no benefit for the country, but one gets the impression that the objective - should the shell retain the rights - is to conclude an agreement with Kumba or ArcelorMittal for its own profit. Macquarie's note labeled this situation a disgrace.
Although it is still unclear who the Imperial directors are, its board includes Gugu Mtshali, who previously worked at Luthuli House as a personal assistant to treasurer-generals Mendi Msimang and Mathews Phosa.
Last year Mtshali was in the news after being romantically linked with Deputy President Kgalema Motlanthe.
Mtshali serves on various other boards, including that of Vuna Coal Holdings, together with former Minister of Agriculture Lindiwe Hendricks's husband Andrew.
Another director is Archie Luhlabo, a senior official at the Mineworkers' Investment Company, the investment arm of the National Union of Mineworkers.
According to McGregor BFA's database of companies, neither Mtshali or Luhlabo have any interest in Imperial Crown Trading. The third director is Monica Ripepi, who would appear to be someone who registers and sells shell companies.
- Sake24.com
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