Gwede’s bold bid to ease mine doubts

Minister meets June deadline, scraps contentious empowerment rule

● After a battle between the mining industry and the Department of Mineral Resources, the release on Friday of the revised Mining Charter could lay to rest a long-running feud and provide the signal for muchneeded policy certainty that investors and rating agencies have been calling for.

The release of the revised third Mining Charter draft by Minister of Mineral Resources Gwede Mantashe includes the once empowered, always empowered principle, which was scrapped by Mantashe’s predecessor, Mosebenzi Zwane, crippling the relationship between the industry and the government.

The new Mining Charter states that a mining company that has a black economic empowerment deal and achieved a 26% BEE shareholding but whose BEE partner has since exited the transaction, “shall be recognised as compliant and must within a period of five years from the date of coming into operation of the Mining Charter, 2018, supplement their BEE shareholding from 26% to a minimum of 30%”.

Zwane’s charter was regarded as making the mining sector uninvestable and resulted in mining stocks on the JSE shedding R51billion of their value.

Mining companies, through the Chamber of Mines — now called the Minerals Council South Africa — went to seek an urgent court interdict against the Department of Mineral Resources when it scrapped the once empowered, always empowered principle.

The chamber sought to get clarity from the courts on whether mining companies could be recognised for their previous BEE deals or whether they would have to continuously top up their 26% ownership levels when BEE shareholders sold their stakes.

Earlier in the year the High Court in Gauteng ruled in favour of mining companies. However, the department appealed the decision, arguing that each company’s BEE deal should be weighed on its own merits.

The minister also appealed on the basis that the court had regarded mining charters I and II as invalid, which the minister disputed. Zwane’s version of the third charter had also included new sticking points, such as that 1% of turnover be given to BEE shareholders, and a clause that recognised naturalised citizens as BEE candidates, which was considered to have been included to help the Gupta family access mining deals.

Although some of these contentious points have been scrapped in the latest version of the charter, Mantashe does include that mining companies should pay a minimum dividend of 1% — referred to as a trickle dividend — to employee and community empowerment partners from the sixth year of a mining right until dividends are paid by the companies.

In a 12-month period that companies don’t declare dividends after the six-year period, the trickle dividend will kick in.

Zwane had increased the BEE requirement for mining companies from 26% to 30%, which would have to be achieved within a year.

In the new version of the charter, released on Friday, the 30% BEE ownership remains as all stakeholders agreed to it.

The increase to 30% in the new charter stipulates that communities and employees will equally hold 8% of the companies, with five percentage points of that termed a “free carry”. Free carry is when companies give shares to shareholders without any financial obligation to pay for the shares.

The Minerals Council South Africa said it would need time to study the document and consult membership in order to formulate a comprehensive view.

The council said it “notes the areas of consensus achieved in what has not been an easy task undertaken by the Department of Mineral Resources”.

It said: “As previously explained, the industry does not favour a requirement of 10% ‘free carry’ on new mining rights as part of the proposed 30% BEE equity ownership target, as it would render uneconomic a significant proportion of potential new projects, and would undermine and constrain any prospects for growth in the sector and indeed the economy as a whole.”