Regulation leaves investors uneasy
The Chamber of Mines is painted as an obstructive force in the racial transformation of SA’s mining industry in Mineral Resources Minister Mosebenzi Zwane’s rebuttal of arguments in an interdict to stop the third version of the Mining Charter.
The Chamber of Mines is painted as an obstructive force in the racial transformation of SA’s mining industry in Mineral Resources Minister Mosebenzi Zwane’s rebuttal of arguments in an interdict to stop the third version of the Mining Charter.
In a replying affidavit, Zwane outlines the distrustful relationships between the department and the chamber, particularly around assessments of compliance with the first two charters.
“The constant and continued failure in the mining industry to give effect in real terms to the objects of the [Mineral and Petroleum Resources Development Act] has been a major factor motivating the 2017 charter,” Zwane says.
“The chamber, rather than constructively engage on how the [act’s] objects can be met, has sought to put up one technical objection after another, it would now seem to undermine those objects,” he says.
In 2016, the department and chamber discussed a proposal to give eight mining companies written confirmation they had achieved their 26% empowerment targets, using the chamber’s “once empowered always empowered” contention.
“But when the chamber recanted and suddenly produced over a hundred companies, this defied the very basis for that negotiated compromise.
“More importantly, it subverted the very basic principles on which the parties had agreed and the mechanisms to give effect to those principles in the mining industry on the parties appeared to have also reached agreement,” Zwane says.
“Furthermore, the proposed list of eight companies illustrated that these companies actually owned more than 130 mining and prospecting rights. This changed the position for an exemption materially.”
Far from being a department that bulldozed through the third version of the charter without consulting the chamber, Zwane says, it had “bent over backwards” to accommodate the industry body, giving it latitude and opportunity for input during 17 meetings that other stakeholders did not have.
Zwane describes the chamber, the members of which mine 90% of SA’s annual mineral output and which accuses Zwane of acting beyond the powers granted to him, as a group advancing its own interests.
“The chamber’s conduct speaks louder than its words. The chamber advances arguments … that are so obviously incorrect and demonstrably implausible that they reveal the chamber’s true agenda. Despite the chamber’s professed commitment to transformation, the chamber raises every and any conceivable argument to impede the implementation of the 2017 charter.
“The chamber is clamouring to avoid black ownership in the mining industry, so much so that it advocates that a rights holder should be able to off-set the entire 30% HDSA [historically disadvantaged South Africans] ownership target,” he says.
The department is “flexible and sensitive” when dealing with rights holders struggling to meet charter obligations Zwane insists are legally enforceable, but which the chamber disagrees with, describing them as mere guidelines.
Zwane rejects the chamber’s interpretation of the “once empowered, always empowered” issue that lies at the heart of the shattered relationship between the two sides, with mining companies claiming ownership credits from historical deals, while the department insists empowerment levels must be topped up perpetually to maintain ownership levels.
Nedbank’s Paul Miller says the minute the department moved the ownership level to 30%, from 26%, it created an awareness that this would be a constantly changing target, unsettling investors who would never know regulatory certainty when it comes to what was expected of them to keep their mining licences.
In talks to draw up the first charter, the department proposed 51% ownership, a figure that wiped billions of rand off the value of listed companies. “The HDSA ownership requirement was watered down to 26%,” Zwane says. “The final version of the 2004 charter was a result of a compromise with the mining industry and other relevant stakeholders for 10 years within which the mining industry was granted an opportunity to meaningfully and substantially achieve the incremental objectives set out in the charter for that period.”
It is this upward revision of targets, not just ownership, that unsettles investors who need regulatory certainty for huge investments over decades.
THE CHAMBER’S CONDUCT SPEAKS LOUDER THAN ITS WORDS. IT ADVANCES ARGUMENTS THAT ARE INCORRECT