Chamber rebels over charter’s BEE quota
Industry body to go to court over 30% black ownership, saying its input was ignored
THE Chamber of Mines will stick to its plans to challenge the new Mining Charter, which was gazetted on Thursday, saying its views were again not taken into consideration.
The chamber plans to seek an immediate interim court interdict to suspend the charter from being implemented and take it under review.
The chamber is particularly aggrieved that the new charter stipulates that the minimum requirement for black ownership is 30%, from 26% before, and that miners have 12 months to comply.
The chamber said it would not be forced to sign a charter that it did not agree with and that continued to put the industry in a negative investment position. It also said that given that the industry had been shrinking in the past years, with South Africa’s slow economic growth being a huge factor, the new charter was not sustainable.
The charter means that regardless of prior BEE deals that mining companies have done, and in which black investors have since sold their stakes, the 30% BEE shareholding has to be adhered to.
This means that the “once empowered, always empowered” rule that the chamber has been advocating does not apply.
Mineral Resources Minister Mosebenzi Zwane said on the sidelines of a press briefing in Pretoria that “if companies are not in line with the BEE requirements, and it gets to a point where it is serious, we won’t give [mining] licences”. But the industry is incensed. Chamber of Mines CEO Roger Baxter said that none of the industry’s views — as far as the chamber had gone in reading the charter — had been included.
However, Zwane said that on some aspects of the charter the industry’s views had been included. People had to understand that the charter was not for an individual or a group of people but for all the people of South Africa. Therefore, not all the views of the industry would be included, he said.
The Department of Mineral Resources and the chamber had agreed on ownership, Zwane said, “except that they wanted 29% and we wanted at some point 35%. But our Mining Charter, as we gazetted it in April last year, it was 30%. So in the field of stability and even in a number of issues with ownership, we are agreeing with them.”
The chamber said it was confident of the result it would get in court, although it added that it was willing to negotiate once again with the department about the charter and that it did not believe that the relationship between the two parties had broken down.
Steve Phiri, the CEO of Royal Bafokeng Platinum, said the chamber was willing to subject itself to the rule of the law even if it meant the “matter being decided by the highest court in the land”.
The new charter also requires companies to pay 1% of annual revenue to communities and its BEE shareholders.
“This charter is bad for the industry,” chamber chairman Mxolisi Mgojo said. “Just even taking on the 1% has a significant impact. For us, [there is] the fact that there are so many new issues that are being raised. This goes beyond the mining industry. This is serious; we have to ensure that we do it in a manner that transformation can happen in a sustainable way.”
An analyst who did not want to be named said the industry was struggling and now had a massive overlay of additional obligations, some of which appeared irrational, which included the 1% of turnover being paid to BEE shareholders ahead of all other shareholders.
Ajay Lalu, managing director of Black Lite Consulting, said the fact that the industry now had a charter meant there was some certainty. People might not like it, but certainty was the one big positive of having a mining charter that had been gazetted, he said.
Lalu said the mining sector was different to those of other sectors of the economy because the applicable legislation held that it was not required of the government to negotiate. But the government had opened up the charter process for
Charter not for an individual or group of people but for all the people of South Africa
public comment and all it had to prove was that it had considered all the comment. Whether it had done so or not was another matter.
“Whether that is right or wrong, I agree that that can’t be the way you build trust between the industry and the government,” Lalu said.
Warren Beech, a partner at Hogan Lovells, said that 12 months for companies to increase their BEE shareholding was too short. These types of BEE deals took about 18 months to complete.
This would become a long road, Beech said. If mines challenged the charter it would probably be in two phases. The first would be an urgent application to suspend the effective date, and the other would challenge specific details of the charter, which could take years.
“The parties don’t have a choice but to sit down and have a talk. There are a lot of consequences from the charter, so they need to talk.”
The JSE Africa Mining Index declined by 3% on Thursday and the rand took a 2% dip as the charter was expected to alarm investors.