World’s biggest sovereign wealth fund snaps up shares in Patrice Motsepe’s crown jewel

The Norwegian sovereign wealth fund has acquired over 5% of the total issued shares of Patrice Motsepe’s African Rainbow Minerals (ARM). 

Revealed by ARM on 13 May, this marks a vote of confidence in the company from one of the world’s largest asset managers, which is traditionally heavily exposed to the American stock market. 

ARM advised shareholders that it has received formal notification from Norges Bank that it now holds shares that amount to more than 5% of the total issued shares of the mining giant. 

Norges Bank is Norway’s central bank, which oversees its Government Pension Fund Global, more commonly known as the country’s sovereign wealth fund. 

Formed after Norway discovered oil in 1969, the fund aims to manage the country’s oil revenues to smooth out its impact on the local economy. 

Apart from shielding Norway’s economy from the wild swings of oil revenue, it serves as a financial reserve and a long-term savings plan for the nation’s population.

The first transfer to the fund was made in 1996 and, with careful investment in global stocks, bonds, and real estate, it has grown into the largest sovereign wealth fund in the world. 

Sitting on over $2 trillion, the fund is not allowed to invest in Norway to avoid distorting the local economy and ensuring diversification. 

While the fund invests all over the world, holding shares in around 7,200 companies, many of its investments are skewed towards the United States. 

However, it is an active player in South African equities, with it holding stakes in most members of the JSE top 40, albeit in relatively small amounts. 

The increased investment from the fund in ARM comes amidst improving sentiment towards South Africa’s mining sector after a strong run in precious metals prices. 

Crucially, ARM appears to be improving operationally, with it sealing a deal with Swedish giant Boliden. This will enable it to restart its Nkomati nickel mine. 

This places the company as one of the major nickel producers outside of Russia and the Far East as the race for critical minerals heats up. 

The concentrate from ARM’s Nkomati mine is set to be shipped for processing at Boliden’s smelter in Finland, from where it will be used in electric vehicle batteries and steel-making. 

ARM’s founder and chairman, Patrice Motsepe, has also been significantly more positive regarding South Africa’s mining sector in recent months. 

Motsepe told Bloomberg that the country’s mining sector is regaining its competitiveness through public-private partnerships. 

These partnerships tackle structural bottlenecks, such as a lack of logistics capacity, and regulatory issues which prohibit exploration and investment. 

“They’ve done very well over the last few years in ensuring South Africa becomes a destination for investments,” Motsepe said

“Part of what should take place in those partnerships is for the CEOs of the mining industry to keep telling the government what the changes, the improvements and the areas that will ensure that South Africa is a globally competitive destination.”

The end of rotational blackouts and improvement in transport logistics have put South Africa in a better place to capitalise on higher commodity prices.