Listing shares internationally often carries unwelcome regulatory and compliance risks. This was recently highlighted by the SFO’s corruption probe into the London-listed Kazakh miner ENRC, shortly to be delisted, as well as probes into Indonesia miner and London-listed Bumi plc, and most recently by the SEC’s investigation of South Africa’s Gold Fields, which has a secondary New York listing.
The Gold Fields investigation is connected to a 2010 Black Economic Empowerment “BEE” transaction. The BEE program was launched to redress the inequalities created and perpetuated by South Africa’s Apartheid regime.
The main allegation concerns the propriety of a financial stake granted by Gold Fields to the ruling ANC party chairwoman. But the allegation really forms part of a wider controversy as to whether the benefits of the BEE program have been too narrowly restricted to those with political and government connections. Presumably, those alleged connections have given rise to the SEC’s investigation of Gold Fields.
Johannesburg’s Business Day succinctly described the controversy as follow:
At the core of the problem is a series of laws ostensibly intended to reverse the effects of discrimination against black people during apartheid by promoting affirmative action and the redistribution of wealth. Whether by design or unintended consequence, these have ended up favoring an elite group of politically connected individuals, and the government has strongly resisted attempts to amend them to include the masses of ordinary black South Africans.”
Business Day, commenting on the absence of any domestic regulatory interest in the BEE transaction, asked of South Africa’s own regulators: “Have they, too, become inured to deals that set off loud alarm bells in other jurisdictions?”
Consequently and irrespective of the outcome, the SEC’s investigation may well provide a valuable reality check for the future operation of the BEE program. At the same time, it may also discourage a large number of companies from seeking an international listing in jurisdictions where regulators might be regarded as being less nuanced than those back home.
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Alistair Craig is a commercial barrister practicing in London.
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