Zwane’s Mining Charter to face critical legal test next week

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SOUTH Africa’s High Court starts three-day deliberations on the so-called ‘Minister’s Charter’ on Monday (February 19), the third iteration of the 2004 Mining Charter which the Chamber of Mines wants set aside.

According to the Chamber of Mines’ senior executive, Elize Strydom, there’s “a quiet confidence” that the appointed bench of three judges will find in the industry’s favour. To be honest, it’s not hard to think the same, especially when one is reminded of some elements within the redrafted Mining Charter against which the Chamber protests.

Take, for instance, the proposed 1% revenue tax to be paid to empowerment partners. These are monies the redrafted Charter proposes be paid to empowerment partners before lenders or other shareholders receive dividends. This is to propose the creation of a new type of preference share which would treat the Companies Act with disdain.

Then there are elements of the redrafted Mining Charter that simply cut across the jurisdiction of other departments, or are unconstitutional. One example is the new definition applied to black persons. According to the Chamber, this flouts the parameters of Historically Disadvantaged South Africans (HDSAs) as set down in Section 100 of the Minerals & Petroleum Resources Development Act (MPRDA).

There’s also instances of ministerial over-reach such as the Mining Transformation Development Agency (MTDA). This is the entity that will collect a new tax in the form of 1% of revenue that foreign companies must pay, as well as portion of the payroll that mining companies currently earmark for skills development. According to the Chamber, it’s for the National Treasury to create the processes and structures for tax collection, not the Department of Mineral Resources (DMR), hence the over-reach.

Once the bench of judges has considered the representations – it has been mulling over the heads of argument since they were first posited in December – there will be a period of debate and reflection. So Strydom expects the bench to reserve judgement until reaching a decision. This could take two to three months.

It’s quite possible that, during that time, a new mines minister is appointed to replace incumbent and Mining Charter redraft author, Mosebenzi Zwane. In fact, anything could happen during this period, but one suspects it’s important that the bench be allowed to make a decision in any event.

Drawing a line in the sand will give a legal underpin when the Chamber and government, as well as unions and communities, sit down to negotiate new regulations on economic transformation in the mining sector. This will play to the Chamber’s intentions. Whilst details are scant, my understanding is that the Chamber wants to recast the debate as to the features that constitute appropriate, sustainable and workable empowerment. At the moment, the Chamber’s officers are keeping it high level – somewhat loftily captured in the phrase: “What does good look like”. My bet is that “the good” doesn’t extend to endless iterations of vendor-financed equity sales to under-financed black partners.

That model has had its run. In any event, the Chamber will want to argue that it has already met its equity-based or units of production targets of 26% as set down in the 2004 Mining Charter. A second stream of legal judgement – the High Court’s assessment of the ‘once-empowered, always-empowered’ – is already under consideration by another bench of judges. Heard in December, the ‘once-empowered, always-empowered’ debate will provide important companion direction so the industry and the country’s new government can get on with setting down the basics for the next chapter.

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