South Africa’s mining industry has been effectively stagnant in terms of employment levels and ore mined for almost a decade. A big reason has been regulation, which became progressively submerged in a catastrophe of poor choices. Many of those poor policy choices were cloaked in a veneer of black economic empowerment (BEE) transformation but, in effect, they were little different from a shakedown of the existing industry for purposes of quick enrichment by a select inner circle.

The result has been a stand-off between the industry and the government, which culminated in two court cases, one of which has been suspended to allow a new administration and new minister the opportunity to try and salvage the situation. Judgment in the other case was handed down on Wednesday in favour of the mining industry, as represented by the Chamber of Mines.

The option would be to lock in shareholders for the full term that the mining right is granted or to allow them to sell only to other BEE shareholders

The critical question in this case concerns the notion of once empowered, always empowered, which the government has rejected in more recent BEE legislation concerning industries other than mining. However, the mining industry is in a different position, partly because it negotiated a deal with the government before the more general application of BEE legislation was codified in law.

The dynamics of the problem are easy to see. The industry obviously wants to avoid a situation in which mining companies have to embark on a series of new BEE deals, which are enormously expensive, every time existing BEE shareholders cash in their shares. The option would be to lock in shareholders for the full term that the mining right is granted or to allow them to sell only to other BEE shareholders. Neither is particularly attractive because they diminish the rights of ownership. The court on Wednesday effectively made that rule explicit, mainly on the basis that to require mining companies to constantly top up their BEE shareholding would amount to changing the rules retrospectively.

The question now is how influential will this decision be as new talks for a third version of the Mining Charter begin? There are good reasons for the government not to challenge the court decision. Effectively, since the mining charters have come into effect, the industry has lost about 200,000 jobs. Mining has always been the industry that underpinned the South African economy and solidified its balance of payments. This decline happened in the context of a massively expanding global mining industry. By any objective measure, the charter process has been a disaster for SA. Any sensible administration would recognise this crisis and have some sympathy for the 200,000 people whose jobs have been decimated.

It need not have turned out this way. The Chamber of Mines surveyed its members in 2017 and found the estimated planned capital spending in the mining sector of R145bn could increase by R122bn, or 84%, in a more stable and conducive environment. Yet politics being what it is, this is going to be a tough battle because the government is absolutely committed to interventionist schemes aimed at racial transformation — for understandable historical reasons.

The question is the best method to achieve that end, and in this sense the court finding is helpful because it creates a precedent that the government now needs to answer. The big problem is that for the existing industry it might be a weatherable blow to support and finance large-scale BEE deals, partly because existing mines long ago amortised much of their capital spending. But for prospective new mines, the inclusion of a big chunk of new shareholders who make no contribution to the balance sheet makes the hurdle to new projects extremely high. This is one reason why so few new mines have been built in four years and why big miners have tended to hive off their South African holdings from their other international investments. The government needs to decide who is more important: BEE moguls or working miners. The court has pointed out the right direction.