Why SA’s mining law grants special privileges to China

I READ with interest, a comment by the Chinese delegation to BRICS, that South African Government procurement processes and BEE, are seen as an impediment to Chinese investment in South Africa.

These are not impediments as firstly, the Cadres do not allow their participation in State procurement to be affected by irritating legislation like the Criminal Procedure Act, the Public Finance Management Act and the Prevention of Organised Crime Act.

Secondly, and when considered in a mining context, Chinese people, even those that are not South African citizens, qualify as Historically Disadvantaged Persons for the purposes of the MPRD Act and the Mining Charter.

Some may say this is contrary to the spirit of the Mining Charter, but the truth is that the Yuan and Yang of the Mining Charter is that a history of racial discrimination and not citizenship, is the imperative for BEE in the mining industry.

The MPRD Act imposes an obligation on applicants for Mining Rights, to facilitate the participation by HDPs in the mining industry. This obligation is discharged by complying with the Mining Charter. The MPRD Act and the Mining Charter define HDPs as any person, category of persons or community unfairly discriminated against before the Constitution took effect. To fall into that category, a natural person does not have to be a South African citizen but can be from any country whose citizens fell within a racial grouping discriminated against under Apartheid laws. Chinese people were so discriminated against.

A prior version of the Mining Charter did attempt, albeit clumsily, to limit HDPs to include only South African citizens, but this version has been replaced by the 2018 version of the Mining Charter, which contains no such restriction or limitation.

Practically then, any Chinese person or a Chinese company for that matter which intends to apply for Mining Rights in South Africa, would not need to conclude a transaction with South African HDPs to discharge the BEE obligation under the MPRD Act.

The Codes of Good Practice for the mining industry, contain a definition of Historically Disadvantaged South Africans, but there is no significant difference between that definition and the definition of HDPs in the MPRD Act and the Mining Charter. The reference to South Africans is contextually meaningless.

Interestingly, in a 2007 Judgment, our Courts held that South African Chinese people fall within the ambit of the definition of “Black People” for purposes of the Employment Equity Act and the Broad-Based Economic Empowerment Act. The Mining Charter and the MPRD Act do not however require Chinese people to be South African citizens to qualify as HDPs for the purposes of ticking the BEE box for applications for rights under the MPRD Act.

It is doubtful that the DMRE will embrace this interpretation with enthusiasm, but they may do so to woo their new BRICS besties to increase their share in South Africa’s mineral wealth by applying for rights under the MPRD Act.

Hulme Scholes is a director of Malan Scholes Inc, an attorneys.