SA government pledges 30-year stabilisation clause for mining licences

Gwede Mantashe, mines and energy minister, South Africa

THE long-sought security of tenure craved by mining companies operating in South Africa may be on the cards after the Government said today firms complying with the draft Mining Charter should not fear subsequent changes to regulations for the 30-year period set down in their mining licences.

“If there are any changes in law – and the South African government must be allowed to do this – the terms and conditions of the mining license will be applied for the tenure of the right,” said Mosa Mabuza, CEO of the Council for Geoscience.

Mabuza, who was previously deputy-director of licensing in the Department of Mineral Resources (DMR), said at a press conference today presided over by mines minister, Gwede Mantashe, that compliant mining companies could rely on security of tenure. In effect, the Mining Charter is offering miners a 30-year stabilisation clause.

“We need to provide long-term stability,” said Mabuza. “We have looked at best practice elsewhere in the world; Botswana for instance which provides stability for the 25 years of licences given to mining companies,” he added. “When you come to a renewal [of the mining licence] you will negotiate for terms and conditions that apply at that time,” he said.

The draft Mining Charter, which was published on June 15, dropped many of the controversial conditions adopted by Mosebenzi Zwane, the former mines minister, in his version of the document, published in June last year.

But a condition that mining firms should provide employees and communities a 10% free-carry has not drawn the support of the Minerals Council which said it would “… render uneconomic a significant proportion of potential new projects, and would undermine and constrain any prospects for growth in the sector and indeed the economy as a whole”.

Mantashe, however, said the principle of a free-carry had already been accepted by the Minerals Council. “The Minerals Council stated their original position against the free carry … as if there have been no negotiations,” said Mantashe of the three-month long talks between the DMR, the Council and unions.

He said the only outstanding issue on the principle was how it was applied. “The issue is whether the free carry is paid in shares or in kind. If they [the council] have a proposal, they must bring that proposal. We have agreed on the principle on the free carry. The only issue they raised is whether it can it be in shares or another form,” he said.

“The Minerals Council has suggested other ways in which communities and employees can benefit, and will do so again,” said Charmane Russell, spokeswoman for the Minerals Council. “The Council does not support the free carry or the trickle dividend,” she said.

Said Mantashe of the free carry: “It is not a cost, but an investment to commit workers to be part of the company by giving them shares”.

“Five per cent is not a big call as workers then become tied in the company. The same applies to communities. If you give them value on day one rather than waiting 30 years you are committing them to appreciate that co-existence. Any modern company that is not left behind will appreciate the value of that free carry,” he said.

The matter of the free carry is likely to be a main talking point at a Mining Charter summit which Mantashe said had been provisionally set for July 7/8. “We are targeting for that,” he said. “We will open the doors to journalists,” he added.

Mabuza also provided clarity on the 1% trickle down dividend that constitutes potentially another controversial aspect of the draft Mining Charter. He said that mining companies would be able to “claim back” the dividend paid – at the EBITDA level – once they stared to pay dividends. “The intention is to say that both communities and workers should not be subject to vagaries of market,” said Mabuza.

“When the dividend is paid at a later stage, the 1% payments can be redeemed back from the 5% free-carry. It is not over and above the 5% free carried interest. It is to make sure of the constant and consistent flow of cash for development,” he said.


The campaign against DMR corruption had been moved up a notch after Mantashe said that the department’s Limpopo office had been closed. This followed the assault suffered by its regional manager, Aaron Kharivhe in 2017, who Mantashe described had been “… left for dead”. When Kharivhe returned to work after recovering from the assault, he received an envelope containing a bullet,” said Mantashe.

“Our view is that we are not going to allow mining to be given to thugs and criminals. There will be small administrative staff [at the Limpopo office] until we understand the threat and the risks. We may close it forever,” said Mantashe “We will look into all major mining areas to clean our offices,” he added.

Mantashe also identified corruption in Mpumalanga province related to Section 54 of the Mine Health and Safety Act (MHSA) which entitles the DMR to close part or all of a mine in the event of a serious accident. He said this right had been abused.

“What we picked up is where Section 54s are used on companies to extort bribes. In Mpumalanga R50,000 was requested to lift a Section 54. We will pronounce on the outcome of that when we have finished the investigation,” he said.