South Africa: What You Need To Know About The Draft Reviewed Mining Charter

Last Updated: 28 April 2016
Article by ENSafrica Mining Department

Most Read Contributor in South Africa, September 2018

On 15 April 2016, the Minister of Mineral Resources, Mosebenzi Zwane (the "Minister"), unexpectedly published the draft Reviewed Broad Based Black-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2016 ("draft reviewed Mining Charter").

The timing of its publication means that the fate of the Chamber of Mines' current High Court application now hangs in the balance. The Chamber has asked the court for a declaratory order relating to the application of the 2010 Mining Charter, and the "once empowered, always empowered" issue in particular.

There may be many reasons (legitimate or not) for the "surprise" nature of the revised draft. The one less controversial reason relates to the need to avoid conflict between empowerment in the mining industry, the provisions of the Broad-Based Black Economic Empowerment Act, 2003 and the DTI Codes (collectively referred to as the "DTI Laws").

The draft reviewed Mining Charter, published under Notice 450 of Government Gazette 39933, is open for public comment by interested and affected parties until 31 May 2016. Below is a summary of its key provisions.

Ownership

Every holder of a mining right must achieve a minimum target of 26% ownership. No less than 5% of that 26% must be held by an Employees Share Ownership Scheme, black entrepreneurs and the community, respectively, with this stake housed in a special purpose vehicle.

Where a black economic empowerment ("BEE") partner or partners have exited, the BEE contract has lapsed or the previous BEE partner has transferred shares to a non-BEE company, the mining right holder must, within the three-year transitional period from the date of publication of the draft reviewed Mining Charter, review its empowerment credentials to ensure that they are consistent with the Mining Charter.

The question of whether the law currently requires the continuing obligation to replenish any diminution of the 26% black empowerment shareholding is, as mentioned above, currently the subject of litigation between the Chamber of Mines (on behalf of mining companies) and the Department of Mineral Resources.

Procurement

The thresholds for how many goods are to be procured from BEE companies have increased across capital goods, consumables and services. In addition, thresholds have been included that give preference to smaller BEE-compliant businesses over larger ones.

Socio-economic development

Each year, multinational suppliers of goods must contribute 1% of annual turnover generated from local mining companies towards a social development trust fund established by the Minister for socio-economic development of local communities and capacity building for BEE suppliers. This is an increase compared to the 2010 Mining Charter, which required a 0.5% contribution. The establishment of the trust is an innovation that did not previously exist.

Employment equity

  • executive management must have a minimum of 50% black employees with exercisable voting rights (as opposed to the 40 % requirement in the Mining Charter 2010), 15% of which must be black females.
  • senior management must have a minimum of 60% black employees, of which 30% must be black females.
  • middle management must have a minimum of 75% black employees (as opposed to the 40% requirement in the Mining Charter 2010), 38% of which must be black females.
  • junior management must have a minimum of 88% black employees (as opposed to the 40% requirement in the Mining Charter 2010), 44% of which must be black females.

A new requirement of 2% of black employees with disabilities has been introduced.

Human resource development

The requirement to invest 5% of the annual payroll has not changed; however, holders are now required to invest 15% of the aforementioned 5% in a ministerial skills development trust fund. Exemptions may be obtained in very limited circumstances.

Mine community development

The draft reviewed Mining Charter requires a holder to annually contribute a minimum of 1% of annual turnover towards local community development and labour-sending areas.

Housing and living conditions

Like the 2010 Mining Charter, the draft reviewed Mining Charter maintains the occupancy rate of one person per unit and the maintenance of family units however, the draft reviewed Mining Charter, now introduces the requirement to contribute towards home-ownership options for interested mine employees, in consultation with organised labour.

Precious Metals and Diamonds Acts

The draft reviewed Mining Charter provides for the applicability of the Mining Charter to permits/licences granted under the Precious Metals Act, 2005 ("Precious Metals Act") and the Diamonds Act, 1986 ("Diamonds Act"). There are exemptions available for micro, small and some medium to large entities, depending on the turnover of the entity, and the amount of metal produced per annum.

Applicability of targets

The draft reviewed Mining Charter states that all targets stipulated in the Mining Charter will apply throughout the life of a mine, unless the specific element specifies otherwise. In this regard, existing mining right holders and holders of and permits or licences granted under the Precious Metals Act and the Diamonds Act must comply with their targets until the end of their operations or termination of the mining right or licence/permit.

The requirements of ownership, housing and living conditions, and human resources development are ringfenced and, therefore, mining companies that are not exempt will have to fully comply with the targets at all times.

Transitional arrangements

The draft reviewed Mining Charter gives existing mining right holders a maximum of three years to comply with the revised targets of the Mining Charter from the date of its publication. It would seem that this provision only applies to holders of mining rights and not holders of licences or permits granted under the Precious Metals Act and the Diamonds Act.

Non-compliance

The draft reviewed Mining Charter provides that mining right holders who have not complied with the ownership, housing and living conditions, and human resources development elements, and those who fall between level 6 and 8 of the Mining Charter scorecard, will be regarded as non-compliant with the provisions of the Charter and the Mineral and Petroleum Resources Development Act, 2002 ("MPRDA"), in terms of which the mining right holder will be in breach and subject to the relevant sanctions.

Originally published on 22 Apr 2016

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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