‘Once empowered, always empowered’ rings untrue

THE results of the 10-year review of the Mining Charter and the squabble between the Chamber of Mines and the Department of Mineral Resources have brought up a key question about broad-based BEE, and whether the policy can sustainably transform the ownership profile of the economy.

The question of “once empowered, always empowered” is central to the success of broad-based BEE and remains unresolved, perhaps for good reason.

Is it fair for a white-owned mining company to sell 26% of its equity to black shareholders, often at a sizable discount and great cost to its shareholders, as well as practically finance the deal, only to end up with zero empowerment credentials when the black shareholders settle their debt, sell and move on?

On the other hand, can a mining company claim to have transformed an industry if it does not measure its transformation by taking a snapshot of its share register, at any given time, and see black shareholders owning more than 26%?

And what about the right to sell? Surely the unencumbered black shareholders have the right, like any other investor, to realise their investment and do as they wish with their returns?

The Chamber of Mines calls the charter ambiguous on this issue. I think it means that it finds it unfair, not unclear.

The charter states: “To increase participation and ownership by historically disadvantaged South Africans (HDSA) in the mining industry, mining companies agree to achieve 26% HDSA ownership of the mining industry assets in 10 years by each mining company.”

A layman’s reading would expect a measure that would value the total mining industry and compare that to the value of mining industry shares owned by black people. Apparently it is not that simple.

Former mineral resources minister Ngoako Ramatlhodi tried arguing this. He was unsuccessful and eventually capitulated, leaving it up to the courts to decide. According to him, he and the chamber could not agree on the “principles applicable to assessing the ownership element” of the charter and therefore agreed to take the matter to the high court for a declaratory order. “to guide on the correct interpretation”. It seems he was happy to be bound by the interpretation of the courts, but not the chamber. It insisted on keeping the window open, and to appeal the decision, if it didn’t favour the chamber.

I don’t blame the chamber for this stance. If the court found against it and its 72 members, which represent more than 90% of mineral output, its members would need to do new broadbased BEE deals or face losing their mining rights.

But the charter goes into great detail outlining its principles and intentions, specifically in relation to ownership. With respect, the chamber’s issue is not and has never been about the principles. Ask any economically active South African what broadbased BEE is trying to achieve, and they will tell you it’s about trying to get black people into the mainstream economy, and that’s the principle.

When the government and the industry couldn’t take the public criticism of going to court to argue empowerment, they decided to attempt settling the matter out of court. Ramatlhodi was “reshuffled” and so entered new minister Mosebenzi Zwane.

The outcome of these offline discussions was mining companies being temporarily exempt from the provisions in the Broad-Based Black Economic Empowerment Act,which means that they, at least for the next 12 months, are governed by the Department of Trade and Industry’s codes of good practice and not the Mining Charter.

This is meant to be a temporary measure while the Mineral and Petroleum Resources Development Act and its underlying Mining Charter are being reviewed.

It’s taken the whole year for the government and the industry to agree on what they signed 11 years ago, and there’s still no agreement. I suspect the industry has pulled one over the government and created room for further extensions of this exemption. This will strengthen its leverage in having the provisions it wants in the revised mining charter.

While all parties will keep fighting for their positions, the key issue of “once empowered, always empowered” remains unresolved. I think this important question alone could mark the beginning of the end of broad-based BEE in its current form. Perhaps that is not a bad thing.

Khumalo is the chief investment officer of MSG Afrika Group and presents “POWER Business” on POWER 98.7 at 5pm, Mondays to Thursdays

I suspect the [mining] industry has pulled one over the government