Mining charter delay extends uncertainty in struggling sector

THE Department of Mineral Resources has yet again backtracked on its promises by delaying the long-awaited draft mining charter, which was set to be released on Friday.

The charter, which has been reviewed, amended and revised since 2004 when it was first introduced, continues to fuel uncertainty in a sector that has shrunk. Mining’s contribution to GDP dropped to 7.3% in 2016 from 8.06% in 2011, according to the Chamber of Mines.

In a statement released on Thursday, the Department of Mineral Resources said: “The reviewed mining charter is currently in the process of being finalised, following extensive consultations with stakeholders, as well as consultations with cabinet.”

The delay in releasing the mining charter did not surprise industry commentators, who said that the department’s moves were expected.

Peter Major, an analyst at Cadiz Corporate Solutions, said foreign investors were put off by South African mining a long time ago.

“There hasn’t really been foreign investment here in 17 years. They cannot do anything to scare off foreign investors, they’ve been scared off long ago.”

Major added that he wished the charter would be delayed for at least another two or three years, because by then he hoped “there will be a regime change”.

But Ajay Lalu, MD at Blacklite Consulting, said the delay in the release of the charter was not only stopping foreign investment but holding back existing investors from making black economic empowerment deals in place of those that had expired or are to expire soon.

“What do they do? Do they apply the old mining charter? They can’t, because the minister effectively repealed it. It creates a legislative vacuum in terms of BBBEE in the mining sector,” Lalu said.

Miners interested in bidding for Anglo American coal assets, for example, faced difficulties in making a decision without certainty from the regulatory perspective of what the requirements are or are going to be, Lalu said.

“One of the core objectives of the National Development Plan (NDP) is to create regulatory certainty to attract foreign investment. This goes against that plan,” he said.

Paul Miller, an investment banker at Nedbank, said the delay in the charter makes it seem as though “uncertainty has become the new normal” — which will only perpetuate more uncertainty.

Last year the Department of Mineral Resources shocked the market and released a draft of the new charter that fuelled anger in the industry, particularly because it had not been consulted by the department. The most contentious issue in the revised draft charter was the stipulation that every miner should always have a 26% BEE shareholding.

The Chamber of Mines in 2015 took the department to court to seek clarity on the charter, specifically asking for a declaratory order on the consequences of continuous ownership targets. But the chamber has not yet applied to the deputy president of the high court to set down this application, which would effectively provide a court date.

The chamber was still engaging with the department on the

The delay was not only stopping foreign investment but also holding back investors from BEE deals

matter and said until an outcome was achieved it would not withdraw the application.

Chamber of Mines spokesperson Charmane Russell said while it was important for the charter to be finalised soon for certainty to be restored in the industry, it preferred that the department fully considered all the inputs and submissions of every stakeholder involved.

“The South African mining industry remains fully committed to transformation undertaken in a manner that sustains and supports the industry, and does not undermine the laudable goals of the MPRDA [Mineral and Petroleum Resources Development Act] and the mining charter, and to meet the vision of the NDP,” Russell said.

Lalu said: “I have no doubt that the current political instability is a significant contributing factor to the delay of the reviewed mining charter.”

Even if the charter were released today or next week it would make no difference if it had not been changed — the industry would still be upset.

“Plus it’s more harmful to have regulatory uncertainty than to have regulation that people don’t like,” he said.