AMN - Draft charter an improvement but still some concerns – comment by Yolanda Torrisi

The third iteration of South Africa’s new mining charter is an improvement on previous versions and will remove some of the uncertainty that clouds the country’s mining industry, which is to be welcomed. However, there are still areas of concern for Minerals Council South Africa, formerly the Chamber of Mines.

The charter was released by the government last Friday and there has been a further month of public comment, which will include a summit proposed for July 7 and 8. Mineral Resources Minister Gwede Mantashe has since stated that the summit would not convene with a view of changing the charter but improving its modalities.

He said the draft charter seeks to address the transformation of the mining sector and upliftment of mining communities while maintaining the stability of a sector, which has seen declining profits for some years and in the last quarter.

Mantashe said he hoped that within 30 days the charter would be referred to Cabinet and later gazetted. It would serve as a policy guide for the mining sector. “Once we have finalised the draft it will be subjected to government impact assessment. It will be submitted to cabinet for approval once all the processes will be concluded the final mining charter will be gazetted.”

The draft charter retains the 30% ownership target introduced in the previous charter by former mineral resources minister Mosebenzi Zwane, an increase from 26%, but includes major concessions to the industry on recognising past deals, provided that the partners left voluntarily.

These include extending to five years from one year the time that existing mining permit holders will have to meet the new black ownership requirement.

Mantashe said that the redraft drew on best practices from other mining countries, including Botswana. He said: “We are hoping that there won’t be too many changes proposed because we’ve engaged everybody in this process. But ...we will listen.”

Mantashe said that the department wanted communities, employees and black entrepreneurs - who are assured a 30% stake in mining companies - to use their ownership to grow their shareholdings in mining companies to racially transform the traditionally white-owned industry.

The Minerals Council said that although the new version was a “material improvement” over Zwane’s charter gazetted in June 2017, it was still deeply flawed.

It said: “The Minerals Council believes that much more work needs to be done to create a Mining Charter that promotes competitiveness, investment, growth and transformation for the growth and prosperity of SA.

It has labelled parts of the charter as unconstitutional, in violation of company law and anti-growth.

The council said in a statement that the raised target was never agreed as a recommendation and was a surprise inclusion. “The Minerals Council does not support this top up, as it prejudices existing rights holders that secured their rights on the basis of the 2004 and 2010 Charters.”

Other proposals include a ‘trickle dividend’ in which new mining rights holders must pay 1% of core profit, or EBITDA, to employees and communities in circumstances where a dividend is not declared in any 12 month period.

The council said this was also a surprise addition and was not agreed upon as a recommendation.

It has also stated that it is against a requirement that 10%, or a third of the 30% black ownership target, for new mining right applicants be granted for free to communities and qualifying employees, dubbed “free carry”.

Mantashe said that this clause was designed to give communities around mines and all employees, regardless of race, a stake in mining companies, bringing a sense of ownership and hopefully quelling unrest around mines by those living nearby and feeling exploited by the mines.

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