MINING CHARTER: Breaking the deadlock
Next week a full bench of the high court will hear the Chamber of Mines’ arguments against, and mineral resources minister Mosebenzi Zwane’s defence of, the disputed third draft of the mining charter, which Zwane sprung on mining companies last June.
It will be an expensive three days for both sides. Yet it may be unnecessary, since deputy president Cyril Ramaphosa indicated at Davos that he was keen to find a way to break the deadlock. At the time of writing, there had been no further discussions between government and the mining industry about the charter but clearly Ramaphosa has had other priorities.
Key requirements of the disputed charter are that applicants for new prospecting rights must have over 50% black shareholding; applicants for new mining rights must have 30% black shareholding; and holders of existing rights complying with 26% black shareholding have to raise this to 30% within 12 months. At least 70% of mining companies’ procurement must be local and 80% of local spending must be from firms that are at least 51% black-owned. An additional 1% of annual turnover must be distributed to black shareholders above their share of dividends.
It also requires 2% of mining companies’ payroll to be held on behalf of communities in a new Mining & Transformation Development Agency, entirely free from oversight.
In its 227-page affidavit, the chamber describes the charter as "an unmitigated disaster". It says it is unconstitutional because it usurps the powers of parliament, for example where the minister replaces "historically disadvantaged person" with his own definition of "black person".
The Mineral & Petroleum Resources Development Act makes it clear that the charter is a policy guideline, not legislation.
The chamber argues that the third charter imposes obligations retrospectively on holders of mining rights and in several respects is so confused and contradictory that it is impossible to implement. It is also discriminatory, for example by insisting that black shareholders earn a return above the dividends that other shareholders are paid.
The minister responded in a 1,250-page affidavit, accusing the chamber of defending vested interests and the status quo. He insists there was proper consultation with the chamber over the various charters and that though the charter is not an act of parliament it is still law.
Clearly, the charter’s original ideals have degenerated into a shambles and that is partly the fault of the increasing tensions over the years between mining companies and a succession of naive mining ministers blinkered by outdated Marxist ideology and political rhetoric.
So why bother with a charter at all? If legislation were sound, everyone would have known exactly where they stood.
Frans Baleni, former general secretary of the National Union of Mineworkers, who was involved in the drafting of previous mining charters, says there has to be a mining charter because human beings require enforcement in order to act. Before the Mine Health & Safety Act, over 1,000 people a year were being killed on the mines. The act has focused CEOs’ attention and the number of fatalities has dropped to 110-120 a year, though this is still too many.
Baleni says the third charter is "a strange document". It should be withdrawn and there should be fresh discussions about the transformation of the industry, focusing on why it has failed to meet targets.
Asked if he believes the minimum black shareholding in mining companies should be increased from 26%, he says increasing it to 30% is not a lot to ask, but perhaps the industry should be given time to phase it in.
John Kane-Berman, policy fellow of the SA Institute of Race Relations, sees no need at all for a mining charter. He says legislation is needed to enforce reasonable environmental and safety standards but it is more important to have a policy environment that allows the mining industry to develop and grow to its full potential.
"There is a huge opportunity cost from political interference in the form of charters, corruption and dilatory awarding of exploration and mining rights," Kane-Berman says.
A spokesman from the Chamber of Mines says a charter is a useful mechanism to agree and drive transformation of the industry. But simply updating the previous charter is not appropriate.
"The industry believes it is important to review what worked, what did not work, to re-imagine what a transformed industry would look like, and to develop such a charter from there.
"The industry also believes that it is important to be more inclusive — that is why, for example, it has undertaken extensive discussions with a wide range of stakeholders in recent months, including representatives from NGOs and civil society," he says.