DIGGING FOR CLARITY
The third mining charter, gazetted earlier this year, caused outrage. If the application for a judicial review of it is granted, consultation might have to be started all over again
Mineral resources minister Mosebenzi Zwane has dug in his heels on the latest version of the mining charter imposed on the industry, but has ended up with no charter at all while the legal process takes its course.
The Mineral & Petroleum Resources Development Act (MPRDA) requires mining companies to comply with the charter in order to get new mining and prospecting rights or retain existing ones.
Vanessa Jacklin-levin of legal firm Dentons says the charter is a policy document. It doesn’t have the force of legislation, but because the mineral resources department uses it in assessing applications for mining and prospecting licences, it has an “extensive and material” effect.
The third charter was gazetted earlier this year. Its contents caused an immediate outcry and a sell-down of local mining shares. The Chamber of Mines launched an urgent application for an interdict, which will be heard on September 14 and 15, pending a full judicial review. One of its main arguments is that there was not sufficient consultation.
If the judicial review supports the mining industry, the minister may be required to start the process of consultation from scratch.
Herbert Smith Freehills partner Peter Leon says a new mining charter should be agreed by, or at least represent the views of, all parties in the mining sector — government, business and labour. It should not reflect a top-down approach. The new charter should be clear, concise and unambiguous, contain realistic time frames and recognise historical empowerment transactions, as security of tenure is of paramount importance to mining companies and investors.
A new charter should include a methodology for calculating beneficiation offsets against the ownership requirements, but this is lacking in all three charters, Leon says.
Warren Beech, global head of mining at Hogan Lovells, says key changes to the transformation requirements of the two earlier charters include the latest charter’s requirement of a minimum 30% black shareholding to obtain a new mining right (it was previously 26%). Those rightholders must pay at least 1% of annual turnover to black shareholders, before and in addition to any other distributions.
The new charter has only limited recognition for historical transactions where the black shareholders have since sold out. Where past deals at 26% are recognised, they have to be topped up to 30% within 12 months of the enactment date of the charter.
The chamber, which had previously launched a legal challenge to nonrecognition of historical transactions (a principle called “once empowered, always empowered”) and then put the challenge on hold, has now reinstated its application for a declaratory order. This hearing has been set down for November 9 and 10.
Zwane argues in court papers that if mining companies’ BEE ownership drops to less than 26%, the original objectives of the charter will not be met. The obligation to review charter achievements every five years makes it obvious that 26% black ownership has to be maintained, he says.
Beech says: “While minister Zwane has labelled the legal challenge as being antitransformation, the Chamber of Mines and other bodies representing mining interests have consistently expressed the position that the industry is committed to transformation.”
The chamber argues in its affidavit that the targets in the charter must be achievable and sustainable, and that the time frame should take into account the reality of the economic situation the industry faces. It says the transformation clauses in the new charter are designed to benefit a select few.
“On a positive note, stakeholders across the spectrum, including the largest, recognised trade unions in the industry, have spoken out against the actions of the minister and there have been widespread calls for his resignation or sacking,” Beech says.
In the meantime, progress on the longawaited MPRDA Amendment Bill, which Zwane promised would be enacted by the end of June, appears to have stalled again.
Asked whether Zwane could be holding back the bill with the idea of turning some of the new charter requirements into law, Jacklin-levin says it is possible, but would require a lengthy parliamentary process. Should Zwane try to do this, it would probably be challenged and taken to the constitutional court.
The chamber has already pointed out that the imposition of a new levy on the industry to fund a mining development agency is not within the power of the mineral resources ministry but lies with the finance ministry.
Whatever the courts rule, it will take a long time, possibly longer than Zwane’s tenure as minerals minister, given the internal upheavals in the ANC.
What it means: The Chamber of Mines says the transformation clauses in the new charter are designed to benefit of a select few