It has taken Lonmin Plc a decade to cut the Bapo ba Mogale community a 3.3% slice of the company that mines platinum on its land. In the same period, Lonmin has served up an ownership share more than five times bigger to Shanduka Resources – a black empowerment company founded by ANC stalwart Cyril Ramaphosa – and sauced it with a series of loans and dispensations to keep it fresh.
It was well past the eleventh hour when Lonmin, the world’s third-largest platinum producer, confirmed last week that it had achieved the 2004 Mining Charter threshold of 26% black empowerment.
The announcement added some missing detail to the known elements of a contested R646-million royalty-to-shares conversion agreed with leaders of the Bapo community, the original owners of the platinum-bearing farms in North West province, near Rustenburg.
“I am pleased that we have reached this important milestone,” Lonmin chief executive Ben Magara said in a statement on November 26 outlining new details of the deal that brought his company to the finish line with a month to go. “Our employees and host communities now have (a) shareholding and a shared vested interest to see Lonmin succeed for their own benefit and that of our shareholders.”
What the Bapo host community got was 2.4% of the London-listed listed company and an interest-bearing loan to take that stake up to 3.3%. The community living nearest to the site of the 2012 police massacre of 34 Lonmin miners at Marikana was given a loan to buy another 0.9% of Lonmin, which will fund a development trust. Employees were given a further 3.8% of the company, which will be held in a third trust.
The transaction took the portion of Lonmin owned by historically disadvantaged South Africans (HDSA) from the 18% controlled by Shanduka to the required 26% threshold nine years and 11 months after the target was set in 2004 – and one month short of the December 31 deadline.
The completion of the deal was announced in a Facebook post by the Office of the Kgosi – the titular head of the Bapo traditional community – a few days earlier with confirmation that the conversion of the Bapo’s 40-year-old royalty to shares in the company had been approved by the ministers of Mineral Resources and of Rural Development and Land Reform.
“The Office of the Kgosi is ecstatic to announce this great milestone and achievement,” the community’s traditional authority said. “Although a small grouping in the community, led by a Jewish cartel whom in the past benefitted unduly from the previous lack of governance, did their best to fight this opportunity, once again we see good triumph over bad.”
The “Jewish cartel” was not identified, but could refer to lawyers acting for community factions in previous legal disputes concerning leadership and the right to access its accumulated wealth.
In counterpoint to all this glee, however, a group calling itself the Bapo ba Mogale Liaison Committee has begun to distribute a pamphlet seeking support for action by the Legal Resources Centre to take the alleged community endorsement of the deal on review. a deal with Lonmin,” the committee said. “But we want a good deal. We want an honest deal, a fair share, an open negotiation.”
A spokesman for the group, which has elected representatives from the three communities living on the farms that Lonmin mines, said they had given the go ahead to the LRC to challenge the deal and try to force Lonmin to fully reveal all details of the proposal and then restart negotiations with the 35,000-strong community.
In initial responses to the LRC, Lonmin has insisted the deal approved by the Bapo Traditional Council was properly negotiated and has refused to publish the 10 agreements that make up the transaction.
Lonmin’s announcement that it had achieved its Mining Charter target did, however, include a glimpse of parts of the package not previously made public. Together with a previous notice to shareholders in London, the Lonmin release reveals:
- The Bapo ba Mogale have surrendered their life-of-mine right to a 12% share of the pre-tax profits on platinum taken from the Eastern Platinum and Western Platinum mines;
- the community has handed over its 7.5% share in the Pandora Joint Venture with Lonmin and outgoing joint venture partner Anglo Platinum;
- Lonmin gets the right to use the surface of the Bapo land for mining purposes; and
In return, Lonmin has given the Bapo R664-million in cash, an open-ended loan at 85% of the prevailing prime lending rate to buy a further 0.9% of the unlisted Eastern Platinum and Western Platinum operations, and a promise of tenders worth R200 million.
The Bapo undertook at a mid-week Kgotha Kgothe or community meeting on July 29 to use R564-million of the cash to buy 1.13 million Lonmin Plc shares, which they promise to hold unencumbered for at least 10 years. The remaining R100 million will be paid over the next five years to fund the general management and administration – though not, apparently, the development – of the Bapo community.
The undiscounted price of the shares was set when a portion of the community voted at the July meeting to approve the deal. Since then, the share price has plunged more than a quarter, so the community makes its debut on the London Stock Exchange on December 3 with a portfolio of shares already worth R150 million less than it paid for them.
The latest Lonmin statement confirms that two economic development trusts – one for the Bapo community and one for the ravaged Marikana community – will be funded by dividends from small stakes bought with Lonmin loans. But the statement reveals also that the promise made at the July meeting to guarantee a minimum R5 million a year for the Bapo development trust comes at a price: If Lonmin has to top up the earnings from the Bapo shares, it will add that cost to the loan.
The Bapo have not been as lucky as Shanduka, Lonmin’s main HDSA partner. Though Ramaphosa’s Shanduka share was estimated to be worth R2.2-billion when he sold out recently, the company accepted a $304 million loan from Lonmin to buy just over half of Lonmin’s Incwala empowerment vehicle in 2010 and has so far failed to make any repayments with its own money. Lonmin has since then jumped through several hoops to keep the empowerment deal afloat as Shanduka’s debt has soared to $399 million. In November, the company declared an $80-million “impairment” – a provision for a possible loss – because Shanduka, now without Ramaphosa, no longer holds enough shares to cover its debt.
The Bapo ba Mogale have traded their entire inheritance on terms still not fully disclosed to them for their 3.3% of Lonmin. Shanduka, with no link to the host community, continues to hold five times that stake, thanks to the continuing indulgence of the company that just keeps on giving.
This article was initially published on 4 December, 2014 on GroundUp.