Historic moment or political flotsam: how might the High Court rule?

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IS it possible that given the nature of South African politics, the Chamber of Mines’ application for a declaratory order from the High Court regarding ‘once-empowered, always-empowered’ is a necessary, but ultimately academic exercise?

An African National Congress (ANC) with different leadership may take a completely opposite view to the current mines minister, Mosebenzi Zwane, that ‘once empowered is not always empowered’. Witness ANC Economic Committee head, Enoch Godongwana, who said earlier this year Zwane’s third charter, which intrinsically does not recognise previous empowerment below 26%, was a document worthy only of redesign.

The flip-side – that Zwane’s vision is our reality – is unthinkable. The suggestion that mining companies may have to re-empower themselves by selling up to 30% of their shares is as deathly an arrow to the heart of South Africa’s mining sector as could be imagined.

I hear that a bench of three High Court judges today was trying to understand the ‘once-empowered, always-empowered’ principle in terms of the Minerals & Petroleum Resources Development Act (MPRDA). That’s a good sign. It suggests they are concentrating on founding principles. One founding principle of the MPRDA is section 100(2) which empowers the mines minister to develop the Charter, but does not allow the minister the power to alter, vary or revise the Mining Charter.

This may come up again when the merits of the redrafted Mining Charter are debated in the High Court in December in a separate legal action. In respect of the once-empowered, always-empowered argument being debated in the High Court, however, the Chamber is arguing that the DMR is fundamentally changing the Mining Charter in its interpretation of ‘once-empowered, always-empowered’.

As for the DMR, it’s focus on the mining industry’s inability to address past social injustice is a wily, constitutionally-driven attack. The Constitution recognises the right to the state to actively intervene in changing the injustices of the past.

For my money, though, sustainability, jobs, and political stability is the clincher.

Look no further than a parallel debate in Lephalale in the province of Limpopo where Exxaro Resources convened an investor day, part of which was to discuss its proposed re-empowerment transaction. This is to replace the 2006 BEE transaction which has expired after ten years, as set down in the Mining Charter of 2004.

It’s worth remembering what Exxaro Resources represents: it is a cornerstone of South African mining BEE at its most successful. Yet its two-year long painstaking efforts to re-empower itself had analysts in protest who questioned the cost of the effort with such vigour that there’s a very real chance shareholders won’t approve it.

Imagine that on a wider sectoral scale? Mass investor dissension; flight of capital; and the atomisation of confidence. Without confidence, there’s no money; without money, there’s no mining sector, and no economic progress.

This year, South Africa lost about 25,000 jobs in the precious metals sector alone owing to market pressure and orebody exhaustion. That is nothing compared to the impact on investment and jobs that will follow if the High Court sides with the DMR on the once-empowered, always-empowered rule.

A second day of argument and questioning in the High Court is scheduled tomorrow – November 10 – with the conclusion of the proceedings likely by about 3pm. The expectation is that there will be no judgement for a couple of weeks whilst the bench weighs its most important of decisions.

3 COMMENTS

  1. I vehemently disagree with :

    ” It’s worth remembering what Exxaro Resources represents: it is a cornerstone of South African mining BEE at its most successful.”

    How so? Please provide evidence for such a claim.

    Exxaro is the biggest BEE fronting scheme ever concocted in this country, with the blessing of the CoM. The recent johny-come-late to anti-corruption , yet they have abetted it for years.

  2. All I can say is that this nonsense need to stop.
    Foreign companies regard political interference in SA mining as a risk and therefore rather walk away. They do not even consider the economic viability of the project anymore.
    Sanity must prevail. WE NEED THE INVESTORS BACK.

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