The new “top-up” provision incorporated into the newly Gazetted Mining Charter may prove to be unconstitutional and will likely lead to further legal action by the industry.
The latest Mining Charter, which was Gazetted today (15 June 2017), has raised the targets of black ownership of a mining company to 30% and has excluded the concept of ‘once empowered always empowered’, which many in the industry argued was incorporated in the 2010 Mining Charter.
Instead, it introduced a new, controversial “top-up” provision, in which mining companies will not only have to ensure their corporate structures include black entrepreneurs, employees and communities, but they will also have to re-empower their corporate structures as and when black shareholders sell their stake in the company.
The mining industry has been at odds with the government, arguing that previous BEE deals should be included in the ownership calculation. Government remains of the view that such transactions should not be included, meaning that companies are then obliged to top-up the BEE portion which usually comes at a discount, if not free carry.
It is highly arguable that this new top-up provision is unconstitutional as it attempts to impose retrospective obligations on already existing mining right holders. There are general presumptions against interpretations that favour retrospective application. People should be able to conduct their affairs knowing what the law is at that given time and not be unfairly prejudiced down the line due to changes to the legislation.
In other words, where mining right holders have been granted mining rights in terms of the current provisions of the Mineral and Petroleum Resources Development Act (MPRDA), additional obligations cannot be retrospectively imposed on them. The Charter, together with the latest Mining Charter redraft, remains a non-binding policy guideline and cannot be elevated to sub-ordinate legislation that obliges a mining right holder to maintain a specific Black ownership level.
Even if the Minerals and Petroleum Resources Development Act (MPRDA) was amended to incorporate reference to the Charter -- which appears to be the direction government is taking -- the argument that the retrospective nature of the impact of the amendments would be unconstitutional still stands.
The practical difficulties of the top-up provisions have also not been adequately considered by government. In particular, if one looks at listed companies, the whole purpose of this legal entity is that the shares of such company can be freely traded on a regulated securities exchange. As such, it may be practically and legally difficult to implement policing mechanism to ensure the black ownership shareholding does not drop below the specified level on a freely traded exchange.