Min­ing Char­ter III may be prob­lem­atic

The Star Early Edition - - BUSINESS NEWS - Di­neo Faku

WHILE the trans­for­ma­tion im­per­a­tives in the gov­ern­ment’s Min­ing Char­ter III, which was gazetted last month, were laud­able, its un­in­tended con­se­quences are prob­lem­atic.

Ste­lio Zakkas, the man­ager at Mon­i­tor Deloitte, yes­ter­day un­packed the six com­pli­ance ar­eas of the char­ter dur­ing a dis­cus­sion on the strate­gic im­pli­ca­tions of it. It was hosted by le­gal ex­perts from Deloitte and Web­ber Wentzel and held in Sand­ton, Jo­han­nes­burg, yes­ter­day.

He told the 186 mem­ber au­di­ence com­pris­ing min­ing ex­ec­u­tives that own­er­ship, one of the six el­e­ments which had at­tracted the most con­tro­versy, was the need for right hold­ers to have a 30 per­cent plus one black per­son share­hold­ing within a year.

The 30 per­cent tar­get is split be­tween an 8 per­cent for em­ploy­ees through share own­er­ship schemes, 14 per­cent for black en­trepreneurs and 8 per­cent for min­ing com­mu­ni­ties.

The shares is­sued to a com­mu­nity must be held in a “com­mu­nity trust”, which must be cre­ated and man­aged by the yet to be con­sti­tuted Min­ing Trans­for­ma­tion and De­vel­op­ment Agency (MTDA).

Zakkas ar­gued that the MTDA should be a non-profit com­pany, which was es­tab­lished as a Na­tional Gov­ern­ment Busi­ness En­ter­prise un­der the Public Fi­nance Man­age­ment Act, 1999.

“De­pend­ing on the rights ac­cru­ing to the shares held by the com­mu­nity trusts, the as­sign­ing of con­trol of a plethora of com­mu­nity trusts to the MTDA may re­sult in a vi­o­la­tion of the Com­pe­ti­tion Act, 1998,” Zakkas said.

“In our view, the MTDA pa­tro­n­is­ingly de­prives com­mu­ni­ties of the abil­ity to man­age their as­set for their own ben­e­fit and, in fact, con­tra­dicts Min­ing Char­ter III’s ob­jec­tive of “re­dress­ing his­tor­i­cal, so­cio-eco­nomic in­equal­i­ties and en­sur­ing broad based and mean­ing­ful par­tic­i­pa­tion of black per­sons in the min­ing and min­er­als in­dus­try”, he said.

In terms of black em­pow­er­ment en­trepreneurs, “BEE en­tre­pre­neur” was de­fined as a black-owned com­pany or a black per­son who ac­quires an equity in­ter­est in a holder through a BEE trans­ac­tion.

“While this is a seem­ingly good de­vel­op­ment, in our ex­pe­ri­ence, the De­part­ment of Min­eral Re­sources (DMR) does not view all ‘es­tab­lished’ black­owned com­pa­nies as BEE en­trepreneurs.

“Fur­ther, while this pro­vi­sion may have pro­vided an ef­fi­cient segue to the De­part­ment of Trade and In­dus­try’s (dti) Black In­dus­tri­al­ist Scheme, it is un­clear if the DMR and dti have con­sid­ered the pos­si­bil­ity of jointly broach­ing this is­sue, lead­ing to yet an­other in­stance of non-co­he­sive pol­icy de­vel­op­ment,” he said.

New tar­get

In terms of pro­cure­ment, the new tar­get for man­u­fac­tur­ing is that 70 per­cent of min­ing goods and 80 per­cent of pro­cure­ment of ser­vices should be from em­pow­er­ment en­ti­ties.

He also said the im­po­si­tion of lo­cal pro­cure­ment re­quire­ments, and in par­tic­u­lar the lo­cal man­u­fac­tur­ing re­quire­ment, might amount to a breach of South Africa’s obli­ga­tions un­der the Gen­eral Agree­ment on Tar­iffs and Trade, the Gen­eral Agree­ment on Trade-Re­lated In­vest­ment Mea­sures and the Gen­eral Agree­ment on Trade in Ser­vices.

Other fo­cus ar­eas of the char­ter are em­ploy­ment equity, hu­man re­source de­vel­op­ment, stan­dard and liv­ing con­di­tions and sus­tain­able de­vel­op­ment

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