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AMN - Truly certain empowerment can support industry – comment by Yolanda Torrisi

Yol headshot May 2011

Legally-mandated economic empowerment transactions are a way of ensuring black South Africans can be involved in businesses in their communities. South Africa’s new Mining Charter has set a clear direction for how the nation’s new 30% black empowerment target can be reached for new projects, but a new challenge from the South African Minerals Council is providing a sensible rationale for stricter changes that apply to more groups.

The Minerals Council is arguing key reforms fail to respect black empowerment transactions and will end up discouraging investment in South Africa’s mining industry. The council has argued some of the changes are unfair and contribute to an environment of uncertainty. But let’s unpack some specifics.

An April court order ruled the new target of 30% ownership only applies to new projects, not old ones that had reached the previous 26% target. The council believes this creates an atmosphere of confusion. It’s certainly inconsistent to have some companies and projects targeting one goal and not another. The council views this as a dampener, which is understandable when one thinks of effort involved in continually tracking which rules apply and to whom.

The council has argued the Mining Charter changes don’t respect a key principle — valued by many — that once a company is empowered it should stay empowered. Once an empowerment stake has been reached it should not be eroded through things such as subsequent sell-offs.

The council’s CEO Roger Baxter said, “The charter does not fully recognise the continuing consequences of previous empowerment transactions, particularly in respect of mining right renewals, and transfers of these rights remain untenable. Not only does this provision have a severely dampening effect on the attractiveness of mining in the eyes of investors, but it is also, in our view, a breach of the declaratory order on the matter issued by the North Gauteng High Court in April.”

The need for legal interpretation of how wide, or narrow, the new rules are contributes to uncertainty in the current investment climate. It's easy to understand why critics of chartered reform want to see a 30% target for all and an extension to compliance time to just a year, not a generous five years.

Clear rules contribute to certainty as organisations make investment decisions and assessors calculate that grey area of sovereign risk. We need to do all that we can to contribute to investor certainty across Africa, no matter how difficult the path is towards correcting generations of racial inequality.

While it’s unfortunate South Africa’s Minerals Council has felt compelled to challenge parts of the 2018 Mining Charter changes, resolving the uncertainties that exist now will bring greater clarity to the industry, and help support final investment decisions for a range of development projects.

Violent protests, closed mines and community disempowerment; these are the real results of disempowered decision making and reforms that do not go as far or as wide as they should. Let’s do better.

Let us move forward with greater certainty on the continent and support efforts to standardise reforms so we can get on with the business of mining, discovering and developing new mines, while we also must value and involve the communities that so benefit from the prospect of a job and the wealth a vocation creates.

- 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