WHAT WILL IT CHANGE?

INTRODUCTION

On Friday 15 April 2016, South African Minister of Mineral Resources, Mosebenzi Zwane (the Minister) published a “draft Reviewed Mining Charter” for comment. It is the third iteration of the broad-based black economic empowerment (BBBEE) charter specific to the mining sector in South Africa.

While it was widely accepted that ‘Mining Charter III’ would be released in 2016, it was expected that industry stakeholders would be consulted and included in its preparation, as they had been for the first and second versions of the Charter in 2002 and 2010 respectively.

Instead, parties interested in the implications of Mining Charter III are confined to making comments on the draft already published by the Minister by no later than 31 May 2016.

LEGAL STATUS

The Minister proposes to promulgate Mining Charter III under section 100 of the Mineral and Petroleum Resources Development Act, 2002 (MPRDA), but it only empowers the Minister to develop a policy, rather than a set of binding rules, and to do so only once, within six months of the MPRDA’s effective date (May 2004).

It is thus doubtful whether the Minister is empowered to introduce Mining Charter III at all (whether viewed as a new Charter or an amendment of the first Charter), and accordingly debatable whether it is legally binding on the mining industry. A 2013 Bill amending the MPRDA aimed to address this by elevating the Charter to the status of legislation and giving the Minister the power to amend it.

However, deeming this change (among others) “likely unconstitutional”, President Jacob Zuma sent the Bill back to Parliament in January 2015, where the process of correcting this and other identified deficiencies is still underway, fifteen months later. The legal position thus remains, in our view, that the Minister can neither amend the Charter nor make it binding on the industry.

SIGNIFICANT IMPLICATIONS

The published draft of Mining Charter III would significantly alter every element of the mining industry’s empowerment framework:

  • It maintains the ownership quota at 26% of voting shares, butrequires that-
    • the quota be applied per mining right, rather than per mining company;
    • the empowerment stake be housed in a single special purpose vehicle for black entrepreneurs, workers and communities (with each constituency controlling at least 5% of the ultimate 26%);
    • empowerment partners be “black people” as defined in the BBBEE Act of 2003, rather than “Historically Disadvantaged South Africans” (HDSA) as defined in the MPRDA, which included white women;
    • the 26% quota be met perpetually, meaning that any stake transferred by an empowerment partner to a non-empowered party can no longer count.

It preserves the opportunity to offset up to 11% of the 26% ownership quota against the value of mineral beneficiation, but still offers no formula for this.

  • It raises the quotas for procurement from empowered suppliers and requires that their goods be locally manufactured and their services locally based.
  • It increases employment equity thresholds across all levels of management, requiring greater representation of black people (rather than HDSA), at least half of whom must be black women. Black people with disabilities must make up at least 2% of the total employee population.
  • It introduces new financial obligations towards human resource development, mine community development, and workers’ housing and living conditions.

Existing mining right holders are given a maximum of three years to comply with Mining Charter III, failing which they will be deemed in breach of the MPRDA and thus exposed to suspension or cancellation of rights or even criminal prosecution.

SIGNIFICANT CHANGES 

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