The third proposed Mining Charter is highly controversial. It was gazetted in June 2017 by then Mineral Resources Minister Mosebenzi Zwane, but the Chamber of Mines, which represents the majority (90%) of the mining industry, took the matter to the high court. Their objection was that they had not been adequately consulted and that the charter had flaws that put jobs in the industry at risk and would drive many companies out of business.
One of the first steps taken by new President Cyril Ramaphosa, was to speak to the Chamber to get it to agree to temporarily suspend legal action, and to engage in further talks with government about the new charter. Ramaphosa also replaced Zwane with Gwede Mantashe, a mining industry veteran and leader of the National Union of Mineworkers (NUM).
Mantashe, as the new mineral resources minister, set an ambitious timeline of May, to finalise the Mining Charter. His main priority is to ensure policy certainty, with the aim of improving investor confidence.
The Mining Charter
All mines follow the Mining Charter’s guidelines in terms of B-BBEE ownership. The new charter seeks to reform the ownership of the industry and allow increased participation of black South Africans into the sector. Investors have raised their concerns and this uncertainty has deferred investment into a sector that accounts for 8% of GDP.
A key aspect of the charter is to increase black economic empowerment shareholding of all mines from a previous 26% to 30%. In addition, 50% of all board members and executive management at mines must be black, while 70% of all mining goods and 80% of all services in the mining industry must be procured from B-BBEE entities.
Further Court Action
On 4 April, the Chamber asked for a declaratory order to determine whether mining companies were required to perpetually “top up” the black shareholding of mines to 30% if existing black shareholders sell out. The North Gauteng High Court in Pretoria granted the order on the “once empowered always empowered” principle for B-BBEE ownership transactions, contained in the first and second Mining Charters. The judgement also questioned the legal power of the Mining Charters.
The Department on Mineral Resources has claimed that the declaratory order severely limits the reach of the charter and if it stands, meaningful empowerment cannot be achieved. They have since lodged an application for leave to appeal against the ruling. By contesting the ruling there’s little chance of meeting Mantashe’s self-imposed deadline.
Mantashe has rejected the idea of scrapping this third charter and starting afresh, instead committing to using the controversial draft charter as a basis for negotiations to amend and correct contentious issues. When the charter is finalised, the industry will be legally required to follow its targets and regulations.
His vision for the final charter is transformation, with meaningful participation, management, control, and ownership by the black majority in the industry. Transformation, according to Mantashe, must benefit workers, producers, communities and the South African economy as a whole.
To rebuilt trust between stakeholders and the Department on Mineral Resources, Mantashe has formed two task teams, one to focus on transformation and the Mining Charter, and the other to engage on issues of growth and competitiveness.
The mining industry needs a solid foundation with strong stakeholder relationships in order to attract investors. To achieve this, policy uncertainty must be eliminated and trust rebuilt, to create an enabling environment for new investment.
Signa Group’s Standpoint
South Africa’s greatest benefit in terms of job preservation, wage parity and community development, will arise from greater investment in the mining sector and the ultimate beneficiation of minerals.
There is no doubt that a major hindrance to investment in the mining sector is policy uncertainty around B-BBEE requirements and black ownership targets. There are multiple examples of successful business models around the world, where mineral rights are owned by the country and its people, and where mining companies, through reliable policy certainty, can operate sustainable and profitable mines.
The longer it takes for the Mining Charter to be finalised, through a transparent and fully inclusive process, the longer it will take for all South Africans to benefit from the wealth that is contained in our earth.
Signa Group strongly supports an engagement between business, labour and government to find each other through a consultative process that will bring about long-term policy certainty.