South Africa’s Reviewed Mining Charter: The Battle Continues

On 15 June 2017, the Minister of Mineral Resources, Mosebenzi Zwane, rocked the mining industry with the publication of the Reviewed Broad Based Black-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2017. The Charter introduces significant increases in black economic empowerment (BEE) targets for mining companies, some of which are listed below. First, the required BEE shareholding of all mining companies rose from 26% under the 2010 Mining Charter to 30% under the 2017 Reviewed Charter. Second, the boards and executive management of mining companies must be constituted of 50% black representation. Third, BEE entities must produce 70% of all mining goods and provide 80% of services in the industry. Forth, mining rights awarded after implementation of the Charter are subject to the payment of 1% of revenue to BEE shareholders prior to any shareholder distribution. Another contentious issue is the Charter’s definition of “Black Person”. It aims to include naturalised citizens of the Republic who otherwise qualify as black (i.e. Africans, Coloureds and Indians).

The publication of the 2017 Charter has led to growing tension between the Minister and the Chamber of Mines. On 13 September 2017, the Minister was forced to issue an undertaking not to implement the provisions of the 2017 Mining Charter, pending the outcome of a court case in December 2017. On 13 and 14 December, a full bench of the North Gauteng High Court will hear arguments from the Minister and the Chamber of Mines respectively, in an application brought by the Chamber to review the Mining Charter.

The Minister’s abovementioned undertaking not to implement the provisions of the 2017 Mining Charter is juxtaposed with his comments made a week earlier, at the Africa Down Under Conference held in Perth, Australia from 6-8 September 2017. Addressing the international mining community at the conference, the Minister stated that the 2017 Charter is “law”, requiring mining companies to implement the Charter’s provisions within twelve months. This statement led to great uncertainty in the industry. It contradicted a previous undertaking by the Minister not to implement the provisions of the Charter. The Minister issued this first undertaking in July 2017, pending the outcome of the court case between the Minister and the Chamber of Mines. Following the Minister’s contradiction of this first undertaking during his statement at the Africa Down Under Conference, the Chamber of Mines insisted that the second undertaking, made in September, be noted by the Court.

The Chamber’s objection to the 2017 Mining Charter is two-fold. First, the objection relates to the content, as set out above. The Chamber affirmed its commitment to transformation of the industry – an assertion strongly challenged by the Minister. However, the Chamber argues that, in its current form, the Charter threatens the sustainability of the mining industry, due to the unfeasible BEE targets set by the Charter. Second, the Chamber is objecting against procedural shortcomings, specifically the lack of consultation with industry stakeholders prior to the publication of the Charter. The Chamber has not had sight of the 2017 Charter before it was published by the Minister. It only saw an earlier iteration, which was published in April 2016, differing significantly from the 2017 Reviewed Charter.

As MLiA reported in May 2016, a dispute regarding the interpretation of the 2010 Mining Charter remains unresolved. The dispute relates to the once-empowered-always-empowered principle, also known as the continuing consequences principle. The 2017 Charter was therefore published in an already volatile and tense environment.

The Chamber is not the only party objecting to the 2017 Charter – it was met with widespread criticism. The Institute of Race Relations (IRR) warned that the 2017 Mining Charter would mainly benefit the state-owned mining company, African Exploration Mining and Finance Corporation, as well as a small elite. The IRR is particularly concerned about the inclusion of naturalised citizens as beneficiaries of the BEE initiatives. Naturalised citizens, who were not South African citizens during apartheid and, therefore, did not experience the negative impact of discrimination, can still benefit under the 2017 Charter. This conflicts with the purpose of the MPRDA and BEE initiatives.

The South African Communist Party rejected the Charter outright. It stressed that the country needs ‘true radical economic transformation’, not token initiatives that benefit the political elite and aid the looting of public coffers. The Bench Marks Foundation noted the lack of consultation with mining communities, concluding that these communities will not benefit from the 2017 Charter. The Association for Savings & Investment SA objected to the lack of stakeholder consultation during the drafting process, highlighting the negative message this sends to investors in the industry. Speaking to the media after its NEC lekgotla in July, ANC secretary-general Gwede Mantashe, acknowledged how critical the mining industry is to South Africa’s economy. He emphasised the importance of engagement with stakeholders to promote investor certainty. The trade union, Solidarity, bemoaned the lack of consultation and its exclusion from the drafting process. This contrasts with the National Union of Mine Workers’ assertion that they consulted with the Department of Mineral Resources regarding the 2017 Charter on six occasions and are in support of the new Charter.

Previous Mining Charters were the result of constructive engagement and consultation between the Department of Mineral Resources and industry stakeholders. Only once agreement was reached were the Charters released to the public. However, the publication of the 2016 Draft Charter and the 2017 Reviewed Charter points to a breakdown of cooperative relationships in the industry. Investor confidence continues to wane due to the uncertainties surrounding the implementation of the 2017 Charter. It is in everyone’s best interest for the dispute between the Chamber of Mines and the Minister of Mineral Resources to be resolved as soon as possible.

Written by Louie van Schalkwyk.