It all became clear when Anglo American, Old Mutual and Investec listed on the London Stock Exchange (LSE) that South Africa will only be a place where these companies will make lots of money and hive it off to London, thereby bolstering the UK economy.
Anglo American, regarded as a South African company through and through, moved its primary listing in 1999 to the LSE, saying this would allow it to expand globally. It was followed by Old Mutual, which listed on the LSE during the same year. Investec listed on LSE in 2002.
London calling
By virtue of listing on the LSE, these companies basically became foreign firms with operations in South Africa.
So, when these companies rightfully took the bulk of the money they made in South Africa to London where their head offices are, it became clear that South Africa was not that important to this firms anymore.
The three companies make most of their earnings in South Africa, where they have a primary listing. This caused consternation among many analysts and politicians with many saying South African companies should not be allowed to list on the LSE anymore. But this debate did not go anywhere. However, some new phenomenon has emerged and it has made South African politicians unhappy. This trend has left many politicians believing South African companies that have operations here are really not committed to the country.
striking a blow
Several mining companies are now planning to hive off their South African businesses from their operations while others ponder restructuring and asset sales. The reason for this could be the volatile labour relations in the country, particularly considering that the mining industry experienced a five-month long wage strike which left the affected platinum companies financially crippled.
One of the companies that planned to hive off their operations is the JSE-listed gold miner, AngloGold Ashanti.
AngloGold Ashanti planned to create a London-listed company aimed at taking care of AngloGold Ashanti’s global assets. The South African assets of the company would then remain at AngloGold Ashanti, making two focused firms, it claimed. But shareholders of AngloGold Ashanti rejected the company’s strategy to spin off its global operations into new London-listed firm and pursue a $2.1 billion rights issue. This prompted AngloGold Ashanti to cancel these plans. But other mining firms like BHP Billiton and Gold Fields ring-fenced their South African operations and turn them into distinct firms while holding onto their global exposure.
However, a number of shareholders at AngloGold Ashanti expressed concerns about certain aspects of the proposed transactions. AngloGold Ashanti decided not to proceed with the restructuring and capital raising.
Identifying perpetrators
Late last year, South Africa’s minister of mining, said he was preparing a detailed retort to what he sensed was the pulling out of certain firms from the country. “I don’t want to bury my head in the sand and pretend this thing is not happening. We must be clear: there is an issue to be dealt with,” he told Business Day.
Despite all this, there are other companies that still find South Africa to be attractive but they do not create jobs and therefore their impact on the South African economy is minimal. For instance, Wal-Mart, the US-based general retailer, acquired Massmart, the JSE-listed general retailer with operations in a number of African countries, but this did not come with the creation of jobs. South Africa still has a little over 25 percent jobless rate.
