No BEE targets for exploration, says Gwede Mantashe
Minerals Council SA chief Roger Baxter hails Mantashe's reforms as a game-changer, but one executive says it’s a move from hell to purgatory, not heaven
Mineral resources minister Gwede Mantashe has moved to undo one of the most damaging elements in his predecessor’s version of the Mining Charter, releasing exploration companies from onerous black ownership conditions that the industry partially blames for a drop in activity to levels not seen in about five decades.
Mosebenzi Zwane, Mantashe’s predecessor who was closely linked to the Gupta family at the centre of state capture allegations, issued a third version of the charter in June 2017, obliging prospecting companies to have 51% black ownership, effectively bringing already volatile levels of exploration to the lowest level since at least the 1960s.
Reviving exploration is essential to develop new mines in SA, where the mining sector contributes about 8% to the economy and employs more than 460,000 people.
Mantashe gazetted a fresh version of the third charter on September 27. However, it still created uncertainty in the sector about what it meant for exploration companies.
Asked specifically about this at the Joburg Indaba mining conference on Wednesday, Mantashe said prospecting rights fell outside the obligations laid out in the charter for mining rights.
“Why should we put a target on prospecting because for prospecting you are just looking,” he said. “You haven’t started creating wealth … once you have discovered something, then the BEE requirement must kick in,” he said, referring to the requirement for 30% empowerment ownership and other obligations.
Roger Baxter, CEO of the Minerals Council SA, said the country was attracting just 1% of the $8.4bn spent on exploration globally, compared with 14% for the rest of Africa and a similar amount for Australia. “We should be at least 5%,” he said.
The steps Mantashe had taken to improve the environment and create “a much better enabling framework to get those venture capitalist companies back in SA, both domestic and foreign … is a game-changer”, Baxter said.
Regulations and policies needed to be embedded for up to 15 years to give industry certainty.
An analyst said that after a decade of hiatus in prospecting in SA, there was finally positive news for exploration.
But once a deposit was under development it was subject to the obligations of the charter and this would make it an expensive exercise for the company.
It would have to effectively fund 100% of the project, including the 30% for empowerment partners, making it unlikely there would be a flood of new mines in SA, with only the best deposits clearing investment hurdles.
Mantashe declined to be drawn on whether the charter would be changed again after five years, but he committed to no further changes over that period for the document, which was first implemented in 2004 and amended in 2010 before Zwane’s iteration in 2017.
However, one senior mining executive cautioned against excessive optimism over the new charter.
“We all think we’re in heaven, but we’re not. After being in hell for so long with Zwane, we’ve moved into purgatory and have made the mistake of thinking we’ve arrived.
“There’s still a very long way to go,” the executive said.
Baxter conceded there were areas of deep concern for the council’s members, including the need for mining rights under renewal to comply with the new charter instead of falling under the continuing consequences of meeting the ownership target of 26% of the first two charters.
The charter’s requirement that renewed mining rights meet the revised ownership obligations could fall foul of a declaratory court order that once the department was satisfied a company had met its empowerment obligations, it was not obliged to restore or top up those ownership levels.
The council would hold talks with Mantashe and his team on this and other points of concern in the charter, said Baxter, referring to the 60-day period since the gazetting of the charter to negotiate and draw up implementation guidelines for the document.