New Mining Charter aims to bring stability, says Gwede Mantashe
Holders of mining rights will have up to 30 years’ stability on their Mining Charter obligations, says Mineral Resources Minister Gwede Mantashe.
The third iteration of the charter, released on Friday, keeps the 30% ownership target introduced in the previous charter by former mineral resources minister Mosebenzi Zwane but includes major concessions to the industry on recognising past deals, provided that the partners left voluntarily.
The department had drawn in the redraft on best practices from other mining countries including Botswana, Mantashe said on Sunday.
The Minerals Council SA (formerly the Chamber of Mines) said that although the new draft version, which is open for comment for 30 days, was a “material improvement” over Zwane’s charter gazetted in June 2017, it was still deeply flawed. “The Minerals Council believes that much more work needs to be done to create a Mining Charter that promotes competitiveness, investment, growth and transformation for the growth and prosperity of SA,” it said. The council labelled parts of the charter as unconstitutional, in violation of company law and antigrowth.
There would be a summit on July 7-8 for all stakeholders to discuss the draft charter as part of the 30-day feedback period, Mantashe said.
Mosa Mabuza, CEO of the Council for Geosciences and one of the key negotiators for the Department of Mineral Resources, said the new charter would provide the sought-after stability to mining companies by guaranteeing them a single set of rules by which to abide during the tenure of the mining rights — up to a maximum of 30 years, after which the agreements would be renegotiated.
“We need to provide for long-term stability of the industry,” Mabuza said on Sunday.
“In the main, that is the stability and predictability that we have been asked for and we believe we have responded to in line with international best practice. Any changes would kick in at the time of renewal.”
Since the first charter was implemented in 2004, outlining companies’ obligations about empowerment, 26% black ownership, employment criteria and procurement, the document has been regularly changed, with amendments in 2010 and 2017 in the heavily criticised charter issued by Zwane.
Mantashe said that the department wanted communities, employees and black entrepreneurs — who are assured a 30% stake in mining companies — to use their ownership to grow their shareholdings in mining companies to racially transform the traditionally white-owned industry.
For new mining rights issued under the present charter, a 10% free-carry stake is granted and split equally between communities and employees — a new clause in the charter compared to the earlier version drawn up under Zwane exactly a year ago.
Mantashe said that the clause was designed to give communities around mines and all employees, regardless of race, a stake in mining companies, bringing a sense of ownership and hopefully quelling unrest around mines by those living nearby and feeling exploited by the mines.
As the Minerals Council opposes the free-carry clause, Mantashe said he had asked the industry lobby group to make an alternative suggestion on how this could be implemented if not on a share ownership basis. Nothing had been received yet, the minister said.
A 1% trickle dividend to be drawn from the operating profit line and accruing to the holders of the 5% free-carry stakes, would become effective in the sixth year of the mining right. It must be repaid once dividends are declared and distributed to all shareholders, ensuring that no-one is disadvantaged, Mabuza said.
The council said the trickle dividend in the draft charter had come as a surprise and had not been discussed in the past eight weeks of negotiations.
The biggest and most positive change in the charter was the recognition of past empowerment transactions, which meant if an empowerment partner had voluntarily left the scheme that percentage would still be recognised. Companies that had achieved the 26% ownership target in the past would be required to set up another transaction for 4 percentage points in a five-year period to meet the new 30% target.
The council said that the top-up requirement was a surprise and it did not support it, while the department’s concession towards past deals did not go far enough.
The top-up “prejudices existing right holders that secured their rights on the basis of the 2004 and 2010 charters. Despite a high court declaratory order judgment and an agreement with the [department], the issue of recognising the continuing consequences of previous BEE deals on existing rights, including for renewals, has not been properly captured in the Mining Charter,” it said.
On the point of requiring the empowerment partners to have 50% representation at board level, Mantashe said this was to be a “tool to co-determine the future”.
The minister also defended the clause that allows junior mining companies that regard the charter as being too onerous for their business to communicate with the department about exemptions from certain elements of the document.