EDITORIAL: Kumba finally extracts rights

Kumba Iron Ore and its parent, Anglo American, have fought a very long, arduous and costly eight-year battle for the 21.4% of the Sishen Iron Ore mining right that they didn’t already own. They have finally won, with the Department of Mineral Resources agreeing to award the stake to Kumba.

Coming at a time when the battle over state capture is raging around the person of the finance minister and around the public protector’s efforts to probe it, the Sishen decision is an unexpectedly good piece of news. It demonstrates that victories are possible — but they are far from easy or certain, and strong institutions such as the courts and strong support for those institutions, are crucial to the outcome.

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The Sishen drama has been so lengthy and turgid that it might be easy to forget that this was one of the earlier examples of alleged state capture and rent-seeking by Gupta-linked entities.

Historically, Kumba owned 78.6% of the Sishen Iron Ore Company (SIOC) while ArcelorMittal SA owned the rest. When mining companies had to convert from old-to new-order rights by 2008-09 in terms of the Mineral and Petroleum Resources Development Act, Kumba did so but ArcelorMittal SA inexplicably missed the deadline.

Though Kumba had a pre-emptive right over the stake, its application to the Department of Mineral Resources was trumped by a last-minute application by ICT, an unknown company with links to the Guptas, amid questions about the way ICT had even come by the information it used in its application. Kumba challenged the department in the high court and won.

The state then appealed all the way to the Constitutional Court. In 2013, the Constitutional Court ruled that, indeed, Kumba’s subsidiary SIOC was the only company that was entitled to apply to own that residual 21.4% of the mining right.

Three years on, the Department of Mineral Resources has finally given effect to the court’s decision by amending SIOC’s existing mining right to include in it the residual 21.4%. Kumba eventually had to resort to an internal appeal process to force the minister to sign the right over to it.

One could point to the negative signal it sends investors when the department takes so long and makes it so difficult for a company to exercise a right that the highest court in the land has upheld.

Or one could point to the positive and urge support for strong institutions that combat corruption rather than efforts to erode their power.

That at least is what Anglo American CEO Mark Cutifani and Kumba’s leadership are doing. "The institutions do work, if you back them and go through the processes," he said on Thursday after Kumba’s announcement. "We will do everything we can to use institutions in the appropriate way — that is the only way we can fight corruption."

It is an important message at a time like this, and a call for business and those in the state who care about the national interest to fight hard to preserve the integrity of institutions such as the courts and to ensure that their decisions are given effect.

We trust Cutifani and others will keep up the pressure. Ironically, of course, while Anglo may have won on Sishen, it had already put up Kumba for sale as part of its global restructuring.