Mines and state3 set for battle over charter
R4.1bn THE AMOUNT OF ADDITIONAL COSTS THAT THE DRAFT CHARTER HAS CREATED, ACCORDING TO THE CHAMBER OF MINES
The Chamber of Mines of SA has fired a warning shot to government that it is ready to fight aspects of the revised mining charter, which it deems unacceptable.
Roger Baxter, CEO of the Chamber of Mines, said the industry was concerned that this, the third revision of the mining charter – following those of 2004 and 2010 – could add billions of rands in extra cost at a time when the local sector had suffered R47 billion in losses over the past two years.
Baxter identified at least R4.1 billion in extra annual costs created by the draft charter, including a research and development sum of R600 million a year and a multinational suppliers’ charge, which would add R1.5 billion to its annual spend.
Another concern cited by Baxter was the loss of control of R2 billion for skills spending.
“We are greatly concerned about the viability of the sector,” he added.
Baxter said policy uncertainty had affected investment and growth in the sector over “the past year or so”, and the charter would further detract from mining investment.
He took issue with the way the third charter had been negotiated as it contrasted with the other two versions, which had involved consultations with multiple parties before its ratification.
In April, the department of mineral resources blindsided the industry when it released a draft of the revised charter. The department is expected to release a final version in December.
Tebello Chabana, the chamber’s senior executive for public affairs and transformation, said it had asked for the latest revised copy from the department in October, to no avail.
“We are extremely concerned that the department has not taken on our comments,” Baxter said.
“We could challenge the charter in various ways,” he added, without specifying further.
Ayanda Shezi, spokesperson for the mineral resources department, said the department would in due course be issuing a statement in response to the chamber.
Baxter said the industry had not been given enough recognition for the “tremendous progress” it had made regarding transformation.
Chabana said the chamber disputed the issue of ownership, as defined by the charter – in particular, the requirement of 26% ownership by empowerment players in perpetuity.
The chamber interprets the principle of “once empowerment, always empowered” to mean that once empowerment deals are signed and ownership of local mines reaches 26%, the requirement for empowerment is fulfilled. The department differs, claiming the mining sector has achieved well below the 26% target – because the department does not accept empowerment deals where the empowerment partners have sold their shareholding, or where the deals failed because of declining commodity markets.
Another requirement of the charter is that multinational suppliers to the mining industry contribute 1% of annual turnover to an as yet undefined “mining transformation development agency”.
“What is this agency?” asked Chabane, adding that levying a 1% charge over two and a half years was “punitive” as it would equate to R2 billion in extra cost for the sector.
Baxter said a gross revenue charge was “very regressive” and would hit not only the sector but lossmaking companies too, forcing them out of business.