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.

Finweek English Edition - - CONTENTS - Ed­i­to­rial@fin­week.co.za

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.

Chris Stevens

Di­rec­tor at Werks­mans At­tor­neys

Jonathan Veeran

At­tor­ney at Web­ber Wentzel

Ni­cola Jack­son

At­tor­ney at Fasken Martineau

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