Picture: BLOOMBERG/NADINE HUTTON
Picture: BLOOMBERG/NADINE HUTTON

SA eased some of the more controversial provisions in the final version of the Mining Charter as the government seeks to provide policy certainty and ease investor concerns.

While holders of new mining rights must still give employees a 5% stake in the assets, they can choose to offset another 5% for nearby communities by investing in community development instead, mineral resources minister Gwede Mantashe said on Thursday.

The long-awaited charter was approved by the cabinet on Wednesday. Separately, the cabinet also approved a plan to withdraw the long-delayed Mineral and Petroleum Resources Development Amendment Bill, he said.

The charter is a set of rules aimed at distributing the industry’s wealth more widely among South Africans to make up for racial discrimination during apartheid.

The free carry — which was included in a June draft and means the respective groups do not have to buy their shares or pay their way — was heavily criticised by the industry as likely to make new projects much tougher to finance. Another difference from the previous draft is that holders of new mining rights will no longer be required to pay workers and communities 1% of core earnings in years when they do not declare a regular dividend.

Mantashe, who was appointed in February by President Cyril Ramaphosa, has spent most of 2018 in talks with companies, unions and mining communities on an update to the charter after a version published in 2017 by his predecessor drew strong opposition and legal challenges from producers.

Community development

"Communities are not going to wait for dividends, they want development in their communities," Mantashe said. "If an equivalent of 5% of the company is channelled towards the development of communities, that will be recognised."

The Minerals Council SA, which represents most producers and has challenged the requirements for free-carried interests, said it would comment once the charter was gazetted.

Mining and labour analyst Mamokgethi Molopyane said the council was likely to seek clarity on community development programmes and how these would differ from those already provided for through their social and labour plans.

Peter Leon, a partner and mining lawyer at Herbert Smith Freehills, said while the compromise was pragmatic, it is yet to be seen whether it would deal with the industry’s concerns around the notion of a free carry as a whole.

The new rules raise black ownership requirements to 30%. Producers who secured mining licences when the requirements were for 26% ownership would not be forced to immediately comply with the new rules, but would have to comply upon renewing the mining right, Mantashe said. Pending applications for rights to mine would equally be given a transition period, he said.

Leon said this was "very significant" as it was a major area of contention with the industry.

"It certainly assists in terms of protecting security of tenure."

The minister appeared to have conceded a few points for the sake of moving forward, Molopyane said.

"For now it will have to do, the charter cannot be this sword of Damocles that is hanging over the sector. It’s not going to please everybody, but it’s time they finalised it."

With Bloomberg