There was no backing away from the newly gazetted third iteration of the Mining Charter, which increased black ownership levels to 30% for mining rights, and 50% plus one for prospecting rights, taking into account the wishes of a broad range of stakeholders, Mineral Resources Minister Mosebenzi Zwane said on Thursday.

A new aspect introduced in the charter is the demand for companies to pay 1% of their annual turnover to the 30% black economic empowerment (BEE) structure before any distribution to all shareholders — a clause that is sure to cause considerable consternation among mining companies.

Releasing the charter, which maps out the obligations for the transformation of the mining sector to address historical racial imbalances, Zwane said the latest iteration of the charter was an “instrument for radical change”.

One of the most contentious issues is that there is no recognition of past empowerment deals in which the black participants had cashed out, meaning all mining companies had to bring their ownership levels up to 30%, he said, giving a 12-month window for companies to top up their empowerment levels.

One of the most contentious issues is that there is no recognition of past empowerment deals

“Importantly, the 30% ownership requirement also applies to holders who claim historical BEE transactions,” Zwane said.

Companies can offset a maximum 11% of their BEE requirements by being involved in beneficiation if the involvement started before 2004.

A legal challenge is likely to be mounted almost immediately against the charter, which was gazetted on Thursday.

“This is certainly heading to court as well as freezing any further investment in the South African mining industry. What an own goal by the DMR [Department of Mineral Resources],” said Peter Leon, a partner at Herbert Smith Freehills.

Mining lawyer Hulme Scholes, who is seeking to declare the first two charters null and void and unconstitutional, has said he will probably interdict the third charter.

The Chamber of Mines, which boycotted the release presentation of the new charter after a last-minute invitation from Zwane, had stalled a court process seeking a declaratory order on the continuing consequences of past deals.

On a number of occasions, Chamber CEO Roger Baxter has said the group — which represents 90% of SA’s mined mineral value — was keeping its legal options open around the charter, citing a lack of consultation and negotiation in the formulation of the document.

Zwane said the department had spent more than 12 months since the draft of the third charter was gazetted in April 2016, consulting more than 60 stakeholders, and it couldn’t just reflect the views of a single stakeholder in the document — which he said reflected the wishes of the people.

“We have listened to the people of SA, who have indicated that many of the structures for the inclusion of black shareholders in the industry have been nothing more than debt-laden arrangements, with no real direct economic participation,” Zwane said.

Among the changes are the requirement that holders of prospecting rights have 50%-plus-one-share black ownership with voting rights; and mining rights require 30% black ownership spread among employees, communities and black entrepreneurs.

Employees should hold 8% of companies, communities around mines 8% and entrepreneurs 14%.

At board level, 50% of directors must be black, and 25% of directors women. Junior management must be 88% black, middle management 75% black and senior management 60% black.

At least 70% of procurement of goods must be from black-owned companies and 80% of services.

Read the full Mining Charter document below:

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