Leadership required in SA platinum industry
12 October 2010
Extracts from a speech by Niall Carroll, Chief Executive Officer, RBH
A call for leadership in the South African platinum mining industry transcending vested interests, was made today by Royal Bafokeng Holdings (RBH) CEO Niall Carroll.
RBH is the wholly-owned investment vehicle of the Royal Bafokeng Nation (RBN), a 300 000-strong, Setswana-speaking community with substantial land holdings in the platinum-rich Rustenburg area of South Africa. The company holds and manages the community’s investments in platinum and chrome mining and other sectors, currently worth more than R30 billion.Carroll’s call was contained in a presentation he delivered today at the Southern African Institute of Mining and Metallurgy’s International Platinum Conference in Sun City.
“As a significant investor and participant in the platinum industry, RBH is committed to playing a constructive role in the ongoing transformation and development of the mining sector. “However, we cannot do it alone and would hope that the leading producers move quickly from a “tick the box” compliance mentality to embracing and engaging with the realities of South Africa today, in a spirit of generosity and inclusivity.”
Carroll outlined some of the RBN’s experiences within the PGM sector and some of the issues that it has had to contend with in its relationship with the South African platinum majors, and successive South African Governments.
“I believe that there are some major unresolved strategic issues facing the industry and that…the industry will require a radically different mind-set if it is not to have a draconian solution imposed on it by Government.
He noted that through a combination over many decades of strong and wise leadership, vision, determination and a large element of luck, the RBN and by extension RBH, is different from many other BEE groups. It has:
- private title to the land on which the world’s major platinum operations are located;
- a community governance system which ensures transparent and democratic accountability to beneficiaries;
- the ability to invest community capital, which reduces its reliance on corporate hand-outs or aggressive use of debt to fund its acquisitions;
- the ability to take long-term investment views;
- reasonable skills and experience; and
- income from investments which is invested in clearly defined community projects and programmes that enhance human dignity and contribute to individual economic self-sufficiency.
“While many black-owned businesses enjoy some of these attributes, we are not aware of any who have all of them. Another distinguishing feature of the Bafokeng is the relative scale of operations. While the commercial asset base of R30 billion is relatively small in the context of corporate South Africa, the community’s annual social development budget of R800 million, funded from investment income, makes it the country’s largest private sector funder of communal infrastructure and social development programmes.
“While we are only too aware of how much still needs to be done and how small our resources are relative to the sea of need in the region, we are proud of what has been achieved. One would have thought, with this sort of track record, resource base and commitment to community development, that our experiences in dealing with the major mining companies operating on Bafokeng land would have been relatively straightforward. If only they had been.”
Carroll referred specifically to the offer recently made by Impala Platinum Holdings Limited (Implats) to purchase the Bafokeng Rasimone Platinum Mine (BRPM), a joint venture between Royal Bafokeng Platinum (RBPlat), in which the RBH has a 75% stake, and Anglo Platinum.
Said Carroll, “Given our significant shareholding in Implats and the contiguity of BRPM to the Impala Lease Area, there was clear logic for a combination of these two assets and a consolidation of RBH’s equity interests into one platinum producer.”
This offer has, however, been rejected, as indicated in a statement made by RBPlat yesterday, 11 October 2010. Carroll revealed that, while RBH was supportive of the offer, Anglo Platinum was able to veto it on the basis of an underlying clause in the JV agreements.
Said Carroll, “As RBH, our objective is unashamedly to create value for our shareholders. One route to do that is clearly through the IPO process. This unexpected offer from Implats would, however, have allowed us to significantly advance our strategic agenda and in turn would have enabled the RBN to accelerate spending on its social development programmes .”
“In short, we believed that:
- the offer was credible;
- the premium price offered the chance to unlock substantial value for the BRPM shareholders;
- it enabled us to accelerate the Bafokeng’s social spending agenda by switching shares in a growing, capital hungry business into shares in Implats, which is a more mature, dividend paying company;
- it advanced transformation within the sector; and
- it was in the national interest through optimising the development of the Styldrift resources.
“We are frankly disappointed that the industry leader, which has dominated the PGM landscape for decades, has chosen to frustrate our legitimate aspirations, even as a minority shareholder in a significant black-owned entity. ”
RBH seeks to grow wealth on behalf of its shareholder, the RBN Development Trust, the beneficiaries of which are the current and future generations of the Royal Bafokeng Nation. Income from the current asset base managed by RBH is not distributed as dividends to individual members of the community, but rather is used to fund infrastructure and other regional development programmes. The Bafokeng have built 49 schools, six clinics, 24 reservoirs, 530km of water reticulation, 2 000km of electrical reticulation, 700km of tarred roads, municipal buildings, a shopping centre and sports facilities. There are also significant community development programmes in the areas of education, health, social services, job creation and sports. The bulk of RBH’s assets are invested in the platinum group metals (PGMs) industry and its various equity holdings make it, by value, one of the world’s top five investors in the industry.
Full transcript of the speech delivered by Niall Carroll at the Southern African Institute of Mining and Metallurgy’s International Platinum Conference Sun City, 12 October 2010 (http://www.bafokengholdings.com/m/news/2010/news_12oct2010.asp)
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