MICHAEL AVERY: Thirty years of the ANC eating the golden goose

In sport and business there are few nations South Africans enjoy beating more than Australians. My late friend David Gleason had T-shirts printed declaring his support for SA and any team playing Australia.

He was an Anglo man through and through, raised in the Zambian copper fields and working for the firm until he eventually left as Gavin Relly’s right hand. I wonder what he would make of the Ozzie barbarians bashing down the gate, and what it means for SA’s mining industry 30 years into democracy.    

It feels like a tome has already been written about what is shaping up to be the mining deal of the decade. BHP CEO Mike Henry making an audacious and opportunistic bid for Anglo has enough subplots and narratives to fill a Guy Ritchie script. BHP, the firm that was cobbled together by former Anglo insider Brian Gilbertson, coming full circle to finish the job. The interwoven history of Anglo and SA. The Financial Times on SA being Anglo’s “poison pill”. On that last point I’m not so sure.  

The Oppenheimer family’s umbilical cord to the motherland was severed years ago through the Minorco transaction in the late ’90s and the primary listing on the London Stock Exchange. Yes, the platinum group metal (PGM) assets in Anglo Platinum (Amplats), the iron ore assets in Kumba and the De Beers diamond operations remain, but the Oppenheimer billions have long since left SA.  

Strip out the jingoism clearly stoking some sleeping national pride, and the mining industry has seen its golden age of easy gains and high commodity prices fade into a more complex, strategic era.  

Mining companies must respond to demands from policymakers for rapid decarbonisation, and the metals that will get us there, copper in particular, are in short supply. Those who know Henry are impressed by his attention to detail and say he’s been planning this deal for Anglo’s copper assets for some time.  

Investment in new mines has been limited by cautious management and shareholders with long memories who recall previous commodity cycles when mining leaders were accused of ill-disciplined capital allocation, playing fast and loose with the company balance sheet and pursuing favourite projects at the expense of dividends. So, other than efficiency gains, mining companies are left with few options but to chase ounces through acquisition. 

Mineral resources & energy minister Gwede Mantashe can bark all he likes, but this will come down to price. There is no controlling shareholder, no Oppenheimer call, and little regulatory power given that Henry isn’t interested in the SA assets, just price. 

It’s unsurprising to see Anglo’s rebuttal and several top 20 shareholders calling the bid opportunistic and underwhelming given Anglo’s long-term potential, especially in critical commodities such as copper. 

Noah Capital’s Rene Hochreiter said last week the 17% premium was well below his calculations, and with the share price rallying almost 20% since the announcement the market seems to agree. Hochreiter believes R800 is closer to fair value, 29% higher than Friday’s closing price.  

I’m certain Henry will sweeten the pot, but doubt he’ll overpay, as shown by walking away from a bidding war for Canadian miner Noront Resources when Australia’s richest man, Andrew Forrest, entered the fray through investment company Wyloo.  

There has been speculation that BHP’s bid will awaken other barbarians, with Glencore and Rio Tinto’s names first on the list. Hochreiter advised clients in a note on Friday to buy on speculation that future offers will be higher. 

In Anglo's defence, isn’t the entire objective of a diversified miner to better negotiate the cycle and the regulatory flows of many jurisdictions over time? Picking the commodities eyeballs out at a specific point in the cycle appears predatory. But that is the creative destruction of free enterprise. One certainly can’t fault BHP for passing up on the SA assets.  

The deal will encourage reflection, given the recent anniversary of 30 years of freedom and the looming national election, on just how much damage the ANC has done to our mining industry, once the bedrock of our economy. Luthuli House always thought “we” had our mining companies, which were collectively the “mining industry”; that they would always be there to be bullied and berated. Always tugging at their forelocks, saying “yes sir, please sir”. 

Meanwhile, they were just protecting their sunk capital. In their unguarded moments, CEOs say they won’t invest growth capital here. So, a dismemberment of Anglo in far-off London and an unbundling of Amplats and Kumba will have zero effect on SA. The world redlined us as a mining investment destination years ago.  

Obviously, the usual push factors (disastrous mining regulation, unreliable power, violent extortion by local community thugs, collapsed rail and dysfunctional ports) are big reasons for this. But I think the approach of the Competition Commission, recently articulated in its public interest guidelines, is likely to be a factor, too.  

Kumba already has black ownership of about 20% and an employee share ownership plan. Imagine the conditions the commission would load into a merger approval to increase the level of black ownership and increase the percentage shareholding in the scheme. This is despite the fact that the existing scheme has delivered and will continue to deliver benefits for existing employees. And shareholders who provide the risk capital would pay.  

There is no end to the ANC’s avarice. You can see from President Cyril Ramaphosa’s remarks at last week’s employee share ownership “conference” that the intention is to bake these requirements into codes, which will in effect make BEE compulsory for any company in SA (rather than a benefit companies can elect to use). 

This deal is just one example of global investors voting with their feet and taking steps to avoid costly and protracted merger conditions here. One corporate adviser I spoke to said they see structuring happening all the time to avoid purchases of SA subsidiaries or to shift SA-based sales out of the businesses being bought. “And even previously acquisitive local clients, who would previously make two to three acquisitions a year, are now avoiding SA operations and are looking elsewhere on the continent.” 

That is the legacy the ANC has to own, and no amount of smoke and screeching of tyres from Mantashe will be able to spin it any other way.  

• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at Badger@businesslive.co.za.