charting a new course
Finally, some certainty for SA’s minerals sector
The mining charter, finally gazetted last week, offers some policy certainty in the sector. But it remains to be seen whether all stakeholders can get behind it
The Cyril Ramaphosa-led government has moved swiftly to deliver a mining charter that will provide long-sought policy certainty for investors. It has also been advanced carefully to ensure it is a policy document that all stakeholders "can live with", as mineral resources minister Gwede Mantashe has said.
But with the document finally gazetted last week, the question remains whether they can.
The charter is a mixed bag, with concessions handed out to all stakeholders, though some have got more than others. For example, the new charter has amended and even excluded some of the more controversial provisions that the industry lobbied against. Others, however, remain.
The industry has won over the government on the important question of "once empowered, always empowered". Under the new charter a holder of an existing mining right who has already achieved a minimum 26% black shareholding will be deemed compliant‚ even if the empowerment partner has since exited.
This win for the industry was not surprising, given that a high court declaratory order, handed down in April, recognised the continuing consequence of previous BEE transactions, and the department resolved not to challenge it.
This recognition is for the duration of the mining right but is not applicable upon renewal or transferable upon sale.
A new mining right must have a minimum 30% BEE shareholding. For pending applications lodged and accepted prior to the new charter coming into effect‚ mining-rights holders have five years to get their empowerment shareholding to 30%. The charter now allows a transition period for companies to meet new employment equity and procurement requirements.
Under the ownership requirements, 20% must be owned by a BEE entrepreneur, while a 5% stake must be given to employees and 5% to communities. This can take the form of an equity equivalent stake, such as a trust or a similar vehicle.
It’s important to have the voice of the community represented at [board] levelMamokgethi Molopyane
The industry did not support this provision — previously dubbed a free-carried interest — as companies would have to carry the cost. The charter now refers to the stake simply as a "carried interest", and says the development of the asset will pay the cost of these stakes over time.
The council also opposed a "trickle dividend" of 1% of earnings to be paid to communities and employees in years in which no dividend is declared. This has been scrapped.
It was only on Wednesday that the Minerals Council SA, representing employers, broke its silence on the charter. In a statement, the council said it broadly supports the intentions and content of the policy document, but remains concerned over key issues. Specifically, these relate to the limited applicability of continuing consequences of past transactions on disposal of BEE shareholding, the treatment of renewals of mining rights as new rights, the practicality of the local content targets for procuring mining goods and the targets for services, and the turnover threshold for junior miners (less than R150m a year).
The council said it will engage Mantashe on these unresolved issues and hopes greater clarity and certainty will be obtained in coming weeks, as the guidelines for implementation are developed.
But just because the charter has been published doesn’t mean its provisions are set in stone, says Patrick Leyden, a director at law firm Herbert Smith Freehills. "Certainly there will be no more discussion. You would have to go the legal route to change it."
There may be scope to challenge the legality of the policy based on procedural irregularities.
This is in line with a high court declaratory order that says the mineral resources minister, in terms of the Mineral & Petroleum Resources Development Act (MPRDA), is arguably not empowered to publish charters after the first one, which came into effect in 2004.
"It may not go to spirit and purpose of the charter to challenge its validity, but I am sure various parties will consider if they are not happy with it," Leyden says.
While the charter remains fundamentally the industry’s, communities have had some important victories and been involved at a higher level than ever before, says Robert Krause, researcher at the Centre for Applied Legal Studies at Wits University.
Krause says there are improved provisions in relation to the trust vehicle for proper management of community shares, and to ensure that returns are used to address the needs of the community and that community-based organisations must be part of a community trust.
What it means
The charter has amended and excluded some provisions industry lobbied against; others remain
Mining and labour analyst Mamokgethi Molopyane says: "The government must redefine who the community is. For me that is critical." She adds that the government must continue to engage and ensure segments of communities are not locked out.
Another win, says Krause, is that changes to social and labour plans now cannot be done without consulting communities. However, previously mooted community representation on company boards is absent from the gazetted document, Krause points out.
In Molopyane’s opinion, this is the policy’s weakest point. "It’s important to have the voice of the community represented at that level … For the sustainability of the mining industry, it’s important they [companies] begin to engage with the communities."
But for mine-hosting communities, challenging the charter does not appear to be the next step. Rather, they take issue with the withdrawal of the MPRDA Amendment Bill, which Mantashe has formally requested.
This is a larger issue for communities, which feel their concerns are being ignored. "The act doesn’t protect the rights of communities in terms of whether there should be mining. Communities have been told time and time again the MPRDA is the right place to deal with consent," says Krause.
"The amendment process was a poten-tial window the department seems now to have closed."
*The print version of this article did not reflect the Mineral Council SA’s response to the mining charter. The council’s statement was released after the FM’s print deadline.