DMR “out of court” settlement on charter seems unlikely

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A SOUTH African government declaration that it was “progressing” towards an out of court settlement with the country’s mining sector on black economic empowerment (BEE) ownership targets as set down in the mining charter look somewhat hopeful at this stage.

In a presentation to Parliament on November 16, the Department of Mineral Resources (DMR’s) deputy director-general, Mosa Mabuza, said his department and the Chamber of Mines were “progressing to finalise negotiations out of court” on the interpretation of once-empowered, always-empowered.

This is a principle that recognises certain BEE transactions in perpetuity even though they may have lapsed owing to difficult economic conditions, or where the black-owned partner entities have cashed in.

The view of the DMR is that mining companies ought to re-empower themselves – an outlook that has raised questions about just how much of the pie is foreign capital to be allocated when it comes to financing new mining projects in South Africa.

The South African mining sector is prepared to press ahead with a declaratory order from High Court on the principle. If the principle is recognised, it potentially breaks the entire mining charter process asunder because the relative basis on which the redrafted charter is founded will be changed.

The Chamber of Mines calculates black ownership of mining companies, either in shares or units of production (as some transactions were done), to have been about 38% against the 26% target. The DMR estimates roughly about half of this has been achieved – a massive difference in interpretation.

Unperturbed, Mabuza went on to say that the charter would be finalised by December and that the Department of Trade & Industry had therefore extended a moratorium on the DMR’s compliance with broad-based black economic empowerment (BBB-EE) until then.

If the DMR does gazette an updated mining charter this month, it will be without the blessing of the Chamber of Mines which views the negotiations to date as flawed.

The last discussion on ownership targets took place in July and the agreements were verbal only. A meeting between the chamber and the DMR for the weekend of November 19-20 was postponed at the last minute.

Quite apart from new ownership targets, which have yet to be finalised, the mining sector is also disconcerted by challenging fresh targets in issues relating to new employment equity.

Whilst the concept behind the goals is supported, they lack practicality especially as the current charter has a five-year timeline to it compared to the previous 10-year charter, say industry sources.

For instance, the DMR has set down a minimum that half of every mining company board should be black of which 20% must be black females. Compare this to the previous target of 40% for each of the management layers from top management through to senior, middle, junior management and core skills.

Based on the Chamber of Mines’ calculation regarding its performance on the previous charter, it actually achieved 50.4% black representation in top management positions, but only 41.9% for senior management, slightly above the 40% target.

But the most testing target at the moment is reaching the employment equity targets in respect of middle management skills.

According to the DMR’s presentation to Parliament, a minimum of 80% of black employees have been set as target of which 25% is black female employees in that category.

Based on Chamber of Mines calculations it achieved 50.9% employment equity for this employee segment – so the charter requires a massive leap in employment at a time when the mining sector in South Africa is under considerable economic pressure. It lost about R37bn last year, the chamber has said.

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