The labour-government tug of war
As frustration mounts and the mining charter dispute is brought to the High Court, resolutions for the industry remain unclear.
attorneys specialising in mineral law have questioned the wisdom of taking a dispute about the mining charter to the High Court, but an industry source told finweek the application was borne of exasperation with the department of mineral resources (DMR).
The Chamber of Mines sought to win a declaratory order from the High Court in Pretoria regarding the controversial issue of “continuing consequences”, better known as the “once empowered, always empowered” principle.
The DMR contends that mining companies have to re-empower themselves should their original transaction either fail or the partners sell their shares in the mining company. In terms of the mining charter, promulgated in 2004, mining firms had 10 years to sell 26% of their shares to black-owned companies.
There were a number of other stipulations in the charter regarding employment equity and procurement, labour and social plans, and training, but it’s the question of ownership that is causing the dispute between government and the sector.
As a result, the chamber and government jointly took the matter to court in order to get the clarity that investors in the sector crave. Government later pulled out of the court process on a legal technicality and has since offered to settle the dispute out of court.
Attorneys think taking the matter out of court might be the best solution. “A settlement would be preferred,” said Jonathan Veeran, an attorney with Webber Wentzel. “Not to mention it would result in the expeditious settlement of the issue and avoid long drawn-out court proceedings which would only add to regulatory uncertainty at a very sensitive time for the industry,” he added.
Unfortunately for the chamber, a separate “joinder” application has been brought to the High Court by Hulme Scholes of Malan Scholes Inc., which is seeking for the mining charter to be declared unconstitutional. He believes the charter is policy and not law. The application to the court, though, was to have his motion consolidated with that of the chamber’s declaratory order.
Linking to two applications would have serious implications for any out-of-court settlement. “It would be better for the industry for a settlement to be reached,” said Chris Stevens, a director at Werksmans Attorneys. “Obviously, if the Hulme Scholes application is ultimately successful then any mediation between the chamber and the DMR becomes moot,” he added. Stevens believes the Scholes application will be granted.
Other joinder applications could also be added, said Nicola Jackson, an attorney with Fasken Martineau. “What the Chamber of Mines application has done is bring government and industry to the table,” she said.
“That said, with Hulme’s joinder application, the threat of joinder applications is now a reality and will most certainly delay finality of the matter. We can’t lose sight of the ultimate objective here; we need to get the industry back on its feet and boost investor confidence,” she added.
However, a senior industry executive, who only agreed to an interview with finweek provided he could be anonymously quoted, said the sector was at the end of its tether with the DMR and that the only viable solution was to have a court decision.
“The industry gets bullied. There’s not a single example where there’s been a consultation with the DMR in which we have met in the middle. There’s also the inefficiency in dealing with the DMR. They don’t have the paperwork or they don’t understand the commercialities,” he said.
There was also the issue of treating shareholders correctly. “We [as executives] are personally liable. We have made representations to shareholders about certain things and we would be sued to high heaven if we broke those,” he said, referring to promises that shareholders would not be diluted more than the 26% as required in the 2004 mining charter.
“We get more credibility in the industry by standing up for shareholders. They are fed up with the lack of shareholder support so I don’t think we are adding to any risks by embarking on a court process,” he said.
Bruce Falcon, an attorney for Falcon Hume Attorneys Inc., said: “The fact that these issues have landed up in court is, to my mind, a function of the exasperation and desperation of the business side of industry looking for some form of resolution and direction on these issues and using the only avenue left open to it.”
“The labour side of industry uses its only remaining avenue – labour disruptions – to advance its agenda. The government side of the industry uses its available avenue – policy and regulation adjustments,” he said. “And they’re each pulling in different directions, or, in some cases, are paralysed and not pulling in any direction at all.”
The DMR contends that mining companies have to re-empower themselves should their original transaction either fail or the partners sell their shares in the mining company. In terms of the mining charter, promulgated in 2004, mining firms had 10 years to 26%sell of their shares to blackowned companies.
Director at Werksmans Attorneys
Attorney at Webber Wentzel
Attorney at Fasken Martineau