Shock new charter may outflank industry bid for legal clarity

LAWYERS have expressed concern over a new draft version of the Mining Charter that was published this afternoon and deduced that the unexpected move might have to do with the Chamber of Mines’ court case about black economic empowerment in the industry.

The revised document affirms the 26% black ownership per mining right, despite the fact that the Department of Mineral Resources (DMR) and the Chamber of Mines are involved in a court case to seek clarity regarding the once empowered-always-empowered principle.

The DMR wants mining companies to have a perpetual 26% black ownership even if the original empowerment company disposes of its shares, while the chamber believes once it has met the empowerment criteria they should be exempted from further empowerment obligations.

Peter Leon, mining lawyer at Herbert Smith Freehills, said that the publishing of the new version was not preceded by any discussions in the mining industry.

“The main issue in the revised charter is that black ownership of 26% is in tact,” he told Miningmx. “Effectively it’s an obligation to continually re-empower yourself. So the once-empowered-always-empowered principle goes out the window.”

What worries him further is that the revised charter seems partly retrospective, as the mining companies have to comply with it within three years of April 2016.

“This means by 2019 mining companies (if the new charter were to be implemented) will have to restructure a lot of transactions, as it requires empowerment at the level of mining right.”

Another concern is hardening of targets, Leon said as the revised charter increased the level of capital goods procured from BEE-compliant companies from to 60% from 40%.

“It seems like the new charter is ideologically driven and not pragmatically. It comes at time when mining companies around the world and in this country are under a lot of stress.

“One wonders how sensible this is and how does it talk to government’s statements about having a cooperative approach towards the mining industry.”

“The burden on the industry has increased further, said Leon.

“The contributions towards a skills levy and other levies have all increased. It doesn’t seem to be very well thought through given the problems the industry is currently facing.”

Tony Zoghby, mining industry leader at Deloitte, said he was taken by surprise by the release of a draft charter and that it was difficult to envisage how all the stipulations in it would be applied should it come into effect.

“[The] continuation of the 26% black ownership principle means] if a mining company has already sold 26% of their business to a black empowered operator and that operator disposes of those shares, the mining company has to cede another 26% to another BEE partner. This means the company will be left with only 48% of their business,” Zoghby said.

Although the revised charter is by no means a final one, the Chamber of Mines did not have any sight of the document before publication.

In a press statement, the chamber said the newly published version was the first sight the mining industry has had of the draft and that it was studying the content.

The chamber added: “The court decision about the empowerment issue) will undoubtedly influence both the assessment of the industry’s historical performance in terms of ownership and the way forward and could significantly influence this version of the Charter.”

Deloitte’s Zoghby feared though that a new mining charter could declare the chamber’s court case irrelevant. “It could very well be that legislation overrides the outcomes of the court case.

“The DMR could have waited for the outcome of the court case and once that outcome is known there could’ve been proper consultation and proper input from all the stakeholders.”