Owen Murphy, Africa Desk Leader at BDO SA
The Minister of Mineral Resources, Mr Mosebenzi Zwane released the country’s third edition of the Mining Charter on 15 June 2017 amidst a wall of protest from the Chamber of Mines that it had not been adequately consulted.
As expected the most contentious provisions are the new requirement for mining companies to achieve a 30% level of black shareholding within the next twelve months. This will apply to structures that already meet the current 26% threshold as well as companies that achieved it previously, but have since had the ownership diluted by the black shareholders selling these shares. It seems that these companies will now have to top up their existing level of shareholding and that no credit will be given for these historic levels of shareholding.
As expected, the Charter has increased levels of participation by blacks in a number of key areas governed by the Charter:
- The targets for employment equity have been increased upwards in most work categories and at board and executive level.
- Funding the establishment of a Ministerial Skills Development Trust Fund and a Social Development Trust
- New targets for procurement of goods and services
The Chamber of Mines has issued a press release and the Chamber of Mines President Mxolisi Mgojo has noted inter alia the following:
“The lack of meaningful engagement with the industry, and collective engagement with all stakeholders, has been most disappointing.
The industry is committed to transformation and would have been happy to negotiate with government and other stakeholders on new terms and targets for the period ahead. Transformation should be implemented in a way that is sustainable, with practical and rational targets. Transformation and competitiveness goes hand in hand.” It is also worth noting that in a press release issued on 17 June 2017 the National Union of Mineworkers stated that
“We have held six or more formal consultations with the Department of Mineral Resources since the April 2016 gazetting of the draft mining charter, we're both parties that reflected and exchanged various ideas and proposals on a transformed mining industry.”
This begs the question as to why the Chamber of Mines was not granted a similar opportunity to engage the Department of Mineral Resources?
The Chamber has stated that it will be challenging the charter in court via a review process and will seek an interdict to suspend the implementation of the charter.
Some commentators have speculated that the charter represents an attempt by government to demonstrate that it is indeed implementing policies that reflect the “radical economic transformation” that it has been promising the electorate.
The charter is certainly radical in that it contains measures that will be extremely difficult for the industry to meet. As noted above the Chamber of Mines believes that transformation must be implemented in a manner that is realistic and sustainable. Unilaterally imposed targets are unlikely to be able to be implemented by the mining industry if the mining industry is not a part of the consultation process.
The recently published charter has once again demonstrated that government is unwilling to negotiate any form of compromise with leading industry players and investor confidence in the South African mining industry, already at a low ebb, will no doubt be lowered further.
The Minister has the power to cancel a company’s mineral rights for non-compliance with the Charter, so the implications of this would be far-reaching and could have the effect of threatening the industry’s economic viability
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