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AMN - Mining Charter draft approved by SA cabinet – comment by Yolanda Torrisi

Yol headshot May 2011

South Africa’s cabinet has approved the draft of the long-awaited and much-discussed Mining Charter and in doing so has eased a number of the more controversial provisions. All that is needed now for the charter to become part and parcel of the country’s mining industry is for it to be gazetted, which is likely to occur by November.

The new draft seeks to provide policy certainty and ease investor concerns … and it is certainly about time, although it remains to be seen what the industry’s response will be.

Mineral resources minister Gwede Mantashe said that while holders of new mining rights must still give employees a 5% stake in the assets, they could choose to offset another 5% for nearby communities by investing in community development instead.

The free carry, which was included in a June draft and means the respective groups do not have to buy their shares or pay their way, was heavily criticised by the industry as likely to make new projects much tougher to finance.

Another difference from the previous draft is that holders of new mining rights will no longer be required to pay workers and communities 1% of core earnings in years when they do not declare a regular dividend.

The Minister said: “Communities are not going to wait for dividends, they want development in their communities. If an equivalent of 5% of the company is channelled towards the development of communities, that will be recognised."

The new rules also raise black ownership requirements to 30%. Mantashe said producers who secured mining licences when the requirements were for 26% ownership would not be forced to immediately comply with the new rules, but would have to comply upon renewing the mining right. He said pending applications for rights to mine would equally be given a transition period.

Mantashe, who was appointed in February by President Cyril Ramaphosa, has spent most of the year to date in talks with companies, unions and mining communities on an update to the charter after a version published in 2017 by his predecessor drew strong opposition and legal challenges from mining companies and others involved in the industry.

The Minerals Council SA, which has led the charge in opposing the Mining Charter and challenged the requirements for free-carried interests, said it would provide formal comment when the charter was gazetted.

It appears likely that the council will seek clarity on community development programs and how these would differ from those already provided for through their social and labour plans.

In another indication of the government’s intentions, the cabinet also approved a plan to withdraw the long-delayed Mineral and Petroleum Resources Development Amendment Bill. Amendments to this were passed by parliament four years ago but the draft law was sent back to lawmakers by former president Jacob Zuma in 2015 due to concerns over whether they were constitutional.

The bill would have allowed the mines minister to require that a portion of extracted resources be processed domestically and not be exported in raw form. Minister of Communications Nomvula Mokonyane said that the bill had been withdrawn to allow for adjustments, particularly relating to gas and oil.

Offshore Petroleum Association of SA (OPASA) chairman Sean Lunn told Reuters the group would support a separate Act governing the upstream petroleum industry “that will encourage and unlock investment.”

While these moves by cabinet will not be popular with everyone, the concession of a few points will enable the process to move forward. Rather than having a black cloud hanging over it, the industry will be able to move forward with a little more certainty … and this is long overdue.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact:yolanda@yolandatorrisi.com