Empowerment evolves

Shareholders in Coeur d’Alene Mines may be considerably relieved that their company has abandoned its takeover bid for Wheaton River Minerals. Wheaton remains independent but looking; Iamgold has made the deal it wanted with Gold Fields; Coeur and Golden Star still have their cash; and the audience is filing out from the Auction That Never Was.

But the product of the whole business — the new Gold Fields International — has a few things to say about where the mining industry might be headed over the next few years. With this deal, Gold Fields squares the circle of being both a South African landmark and an international force in the gold business.

Gold Fields obviously hopes to see the assets it put into Gold Fields International rated on the equity markets at Canadian multiples. That translates, of course, into a more valuable share portfolio for the South African parent.

It also means access to the North American equity markets, and, if the plan works out, a lower cost of capital for the whole organization. Other South African companies may find reason to envy Gold Fields if the company’s Canadian foray brings benefits like these.

Similarly, the past week saw the completion of a merger deal between Hunter-Dickinson company Anooraq Resources and new South African mining house Pelawan Investments, creating the first black economic empowerment company with a primary listing in North America.

We’ve suggested before that offshore companies — particularly Canadian and Australian junior explorers — could find deal-making in the new South Africa much easier as a result of the empowerment rules. An offshore junior coming into South Africa can hammer out its own deal; a company with existing projects, on the other hand, will have its own empowerment benchmarks to meet, but will have risked its capital beforehand.

And connections like the one forged by Pelawan and Anooraq provide another advantage to the empowerment companies — that of a window to financing outside South Africa. If empowerment is really going to be a partnership, its main concern will have to be access to capital.

In fact it’s fair to say that none of the empowerment that has happened so far would have happened without access to capital. Black economic power wasn’t conjured out of the ashes of apartheid: it already existed, in pupal form, in the savings of non-white South Africans.

The world (perhaps, especially, the mining world) may have watched empowerment moved along by legislation and government action, but at the same time, insurers and pension funds (whose holders were mostly non-white) had mobilized that money with the goal of putting it to work in the South African economy.

Don’t forget that non-white South Africans were better off economically than most other Africans of the post-colonial period, even as they were enslaved by the political system and shortchanged by an unequitable division of wealth and income. As bad as their lot was, they still lived in a wealth-generating capitalist society, not one of the socialist dystopias that post-colonial leaders worked so hard to create. (Anti-imperialist ideologues would protest that South African economic progress rested on exploitative staples in a resource-rich area, not on capitalism; the one-word answer to that is “Congo.”)

Doubtless as an unintended consequence of the old system, but as a consequence nonetheless, the old South Africa created a relatively large non-white business and professional class, who are among those best placed to benefit from the redistribution of the country’s wealth. (So, too, are the politically powerful, and we’ve seen some of that already.)

Thus we have well-financed “empowerment” enterprises such as Mvelaphanda and Pelawan acting less like collectives or state enterprises and much more like everyday businesses, with transactions that trade value for value. And if they find that going global is to their advantage as a business, guess what they’ll do — to the benefit of their shareholders?