Wider sanctions coming for mining companies
Government’s headache associated with untransformed mining companies could be a thing of the past, according to the department of mineral resources’ deputy director-general, Mosa Mabuza.
Mabuza, who was speaking on the sidelines of the IHS Energy SA Coal Exports Conference in Cape Town this week, said the amended Mineral and Petroleum Resources Development Act would give his department tougher tools to deal with “grossly noncompliant” miners in terms of BEE targets.
The amended act, which is likely to be finalised during the course of this year, allows the department to impose fines up to 10% of a company’s turnover to punish the most errant mining houses.
“I don’t think our intention is to introduce a bigger stick, but for the industry to think twice before they proceed with grossly noncompliant [practices],” said Mabuza.
“Some of the time, we were told by some of the companies that, actually, it’s cheaper to pay the [R500 000] fine than to be compliant – and when you think about it, they were not wrong. And so we think it is a Panado for that kind of headache.”
According to the department, 90% of weighted mining companies – a measure that gives more weight to bigger companies – meet the 26% empowerment target figure.
But in dealing with the remainder, Mabuza said the department needed a more nuanced range of sanctions. “Before, we were moving from R500 000 to taking your licence away, and we think it was too much of a quantum leap from the fine to a section 47 [the revocation of a licence],” he said.
“We’re just normalising the grading scale. We are not saying, ‘you are noncompliant, so we are going to hit you with a 10% fine’ – there are mechanisms that increase all the way to 10%. For you to be fined 10%, you’ve got to be grossly negligent and not worthy of the mining right we have given you.”
However, one of the most contentious issues MINIMUM BEE REQUIREMENT FOR MINING COMPANIES of the amended act is the principle of “once empowered, always empowered” and whether companies that previously concluded acceptable BEE deals but are now less than 26% black-owned should be penalised.
Roger Baxter, CEO of the Chamber of Mines, said: “The 26% that was agreed to in the Mining Charter in 2002 was agreed on the basis of creating a critical mass of BEE that would become self-perpetuating – it would feed off itself.
“The fact that you may have some black entrepreneurs who saw that the share price was right, sold out and went into hospitality or retail or banking, shouldn’t make the existing mining companies victims of the mining industry promoting the success of black entrepreneurs,” he said.
“If the company has done nothing on transformation, then that’s one thing. But if the company achieved 26% and then the BEE shareholder sold out, that company acted in good faith, and that company should not be penalised for doing so.”
Last year, the department and the Chamber of Mines approached the courts to ask for a declaratory order on this question. The case is expected to be heard this year.
Until then, however, several coal analysts have said the policy uncertainty around BEE has been hurting investment in mining.
Contributing to this uncertainty is the fact that while the act requires 26% ownership, power utility Eskom has made it clear it will only engage in contracts with companies that are more than 50% black-owned.
Department spokesperson Martin Madlala assured delegates at the conference that Mineral Resources Minister Ngoako Ramatlhodi was focused on getting the act finalised as soon as possible so that the industry could have clarity on the issue and plan its investments accordingly.