SOUTH Africa’s High Court (Gauteng) found in favour of the country’s mining sector today regarding the much-contested ‘once-empowered, always empowered’ dispute – a development that could influence Mining Charter talks between the Chamber of Mines and government’s Department of Mineral Resources (DMR).
Industry sources earlier today told Miningmx that an industry positive ruling was due to be delivered. The Chamber later confirmed the order: “The Chamber notes and accepts the High Court Judgment,” said Chamber president, Mxolisi Mgojo.
It’s worth noting, though, that the findings of the court were heard by three judges one of which appears to have had a dissenting view.
In November, the Chamber asked for a declaratory order from the High Court regarding whether past empowerment deals could be claimed by mining companies even if the parties involved had traded out of the transactions, or if the transactions had failed, in some cases due to normal market pressures.
The findings today supported by a majority of two judges – Justices Peter Mabuza and FG Barrie, an acting judge of the High Court – following two days of hearings. Crucially, the findings indicate that the third judge, Judge Siwendu, had a dissenting view which, in the opinion of JP Morgan Cazenove, raised the question as to whether “… the hearing applied only in respect of the 2004 and 2010 Mining Charters”.
“It is therefore unclear to us at this stage whether the legal framework surrounding ‘once empowered, always empowered’ can be superceded by the new Mining Charter issued in 2017,” the bank said, which added it had not relied on legal opinion in its report. On the face of it, however, JP Morgan was positive, saying that “… today’s ruling establishes a positive legal precedent in favour of the Chamber of Mines and its stakeholders”.
Had the High Court sided with the government, which argued that mining firms would have to re-empower themselves even if their empowerment partners traded out of their positions – the country’s mining sector would have been thrown into disarray, even in the midst of a recovery in confidence following the firing of former mines minister, Mosebenzi Zwane, whose redraft of the Mining Charter is – in parts – defeated by the High Court today.
The High Court said in its judgement that once the empowerment targets had been met, the mining right holder “… is not thereafter legally obliged to restore the percentage ownership … controlled by HDPs [historically disadvantaged person] or HDSAs [historically disadvantaged South Africans] to the 26% target referred to in the original charter and in the 2010 charter where such percentage falls below 26% …”.
The judges added in a later part of their findings that mining right holders could not be retrospectively deprived of offsets in terms of the 2010 Charter and its original version which gave mining firms flexibility to make up the 26% empowerment target by excelling in other aspects of the Mining Charter, such as beneficiation for instance.
The Chamber of Mines said last year that a positive outcome for the mining sector would necessarily be the end of the matter. “Irrespective of the outcome, it is possible that this matter will continue to be contested in higher courts for some time to come,” it said. But Mgojo was full of hope.
“The Chamber is engaged in meaningful processes with other stakeholders, including the DMR, to shape and develop a new Mining Charter that all stakeholders can support and defend,” he said in a statement. “This new Charter needs to help the mining sector to achieve stability, competitiveness, transformation and growth, and to ultimately enable the sector to realise its true economic and transformational potential,” he added.
The Chamber said in November that the issue of ‘once-empowered, always-empowered’, which is more accurately described as the ‘continuing consequences’ clause contained in the original Mining Charter of 2004 did not envisage a situation where empowerment credits would be sustained.
“The Chamber believes that it does not serve the interests of empowerment to impose a permanent lock-in or similar restriction on BEE entrepreneurs and other beneficiaries,” it said. “Had a permanent ‘lock-in’ been envisaged and imposed, we would have had a situation of far less empowerment than has currently been achieved with many black entrepreneurs who have built major companies having been restricted from making the decisions that enabled them to do so.
“Further investors would not have supported these transactions,” it said.
The call for a declaratory order was actually the brainchild of the Chamber and former mines minister, Ngoako Ramalthodi, a trained lawyer. However, it became clear after this decision in March 2015 that in seeking a declaratory order, a clear applicant and respondent would be required for the legal mechanism to work. As a result, a joint application was abandoned with the Chamber continuing with the application on a standalone, but same position basis.
The content of a Mining Charter redraft – dubbed Mining Charter 3 – is currently being re-negotiated between teams representing the Chamber of Mines as well as unions and the Department of Mineral Resources (DMR). The first report back on outcomes has been pencilled in for April 10.