South Africa: BBBEE Amendment Act And Its Impact On BEE In Mining

Last Updated: 8 March 2012
Article by Matthew van der Want

Parliament has passed several pieces of legislation since 1994 to promote black economic empowerment ("BEE"). The foundation of BEE is the Broad-based Black Economic Empowerment Act 53 of 2003 (the "BEE Act"), and the Codes of Good Practice promulgated under it ("the BEE Codes"). The BEE Act and the Codes are administered by the Department of Trade and Industry ("DTI").

The BEE Act and Codes of Good Practice employ a balanced scorecard to assess an entity's compliance with BEE. The scorecard assigns various weightings to each element of BEE and an entity's BEE compliance is scored according to those weighted scores.

Historically, there has been some debate as to whether the BEE Act and the BEE Codes apply to the mining industry, especially since the BEE Act requires every organ of state and public entity to give due consideration to the BEE Codes when issuing licenses, concession or other authorisations. However, in the mining industry, the generally accepted position is that BEE, particularly BEE in relation to companies which hold rights granted and issued under the Mineral and Petroleum Resources Development Act, 2002 ("MPRDA") lies not within the jurisdiction of the DTI, but rather within that of the Department of Mineral Resources ("DMR").

In this regard, section 100(1) of the MPRDA required the Minister of Mineral Resources ("the Minister") to publish Codes of Good Practice for the Minerals Industry ("Mining Codes") within 5 years of the entry into force of the MPRDA and section 100(2) of the MPRDA required the Minister to publish a broad-based socio-economic empowerment charter for the mining industry ("Mining Charter") within 6 months of the entry into force of the MPRDA.

The Mining Charter was duly published in August 2004 and the Mining Codes were promulgated in April 2009. The Mining Charter was reviewed during 2010 and in September 2010, the Mining Charter was amended by proclamation in the government gazette ("Revised Mining Charter").

The Broad-Based Black Economic Amendment Bill, 2011 ("the Amendment Bill") was published by the Department of Trade and Industry for public comment on 9 December 2011. The period for public comment ends on 8 February 2012. Section 23(1) of the Amendment Bill provides that: "If any conflict relating to the matters dealt with in this Act arises between this Act and the provisions of any other law save the Constitution and/or any Act expressly amending this Act, the provisions of this Act will prevail;"

Section 23 of the Amendment Bill has created some uncertainty as to the effect of the BEE Act and Codes on the Mining Charter and the Mining Codes, should the Amendment Bill be passed.

The Revised Mining Charter and the Mining Codes, while containing certain similarities to the BEE Act and the Codes of Good Practice, and drawing from certain of the concepts contained in them, can be distinguished in numerous respects from the latter Act and Codes. The most important of these for present purposes is that, in relation to equity ownership and management control, the Mining Charter and the Mining Codes require, as an absolute, that mining assets be beneficially owned by Historically Disadvantaged South Africans as to 26% by no later than May 2014 and that all levels of management of mining companies be constituted as to 40% by 2014.

In respect of equity ownership, in assessing whether or not to grant an MPRDA right to an applicant, the DMR applies this criterion strictly.

While equity ownership is a consideration in assessing an entity's BEE compliance under the BEE Act and the BEE Codes, equity ownership under that legislation is scored on a weighted basis and a company not complying with the full 26% requirement will not be automatically judged as non-compliant. Under the Revised Mining Charter and the Mining Codes, there is an 'all or nothing' approach in the sense that an entity must comply completely with specifically the ownership and management elements and is not weighted on its degree of compliance.

The BEE Codes, and in particular the generic codes issued in terms of section 9 of the BEE Act, also contains certain concessions to so-called multinationals. No such concessions are provided in the Revised Mining Charter and the Mining Codes.

Moreover, the Revised Mining Charter and the Mining Codes contain numerous further requirements which are either not contained in the BEE Act or Codes of Good Practice, or the requirements in relation to them are more stringent.

We understand that the Chamber of Mines is currently making submissions on behalf of mining companies in respect of the proposed amendments. These amendments create uncertainty as to the application of the BEE Act, the BEE Codes and the MPRDA and Mining Charter. Mining companies are well advised to consider and make representations on the proposed amendments in order to prevent a possible shifting of targets as well as to prevent uncertainty regarding the application of this proposed legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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