Has the publication of Mining Charter 3 brought some policy and regulatory certainty to the embattled mining and natural resources sector?

• South Africa
• Africa

• Infrastructure

13-06-2019

The publication of the Broad-Based Socio Economic Empowerment Charter for the Mining and Minerals Industry 2018 (“Mining Charter 3”) on 27 September 2018 was generally viewed in a positive light by industry stakeholders because it followed in the wake of the widely-criticised previous versions, and an extensive consultation process which was committed to by both President Ramaphosa and the then newly appointed Minister of Mineral Resources, Mr Gwede Mantashe, to seek solutions to the impasse brought about by previous versions published in 2017, and 2018.

As expected however, as soon as stakeholders started delving into the detail of Mining Charter 3, it became apparent that Mining Charter 3 did not necessarily provide the required level of certainty, demanded by certain stakeholders, and, in relation to other stakeholders, it did not go far enough in addressing their demands. There was also uncertainty regarding the legal challenges brought in relation to principles such as “once empowered, always empowered”.

It was initially hoped that the Implementation Guidelines, that were required to be published within two months of the publication of Mining Charter 3, would address, at the very least, some of these concerns. The Implementation Guidelines, which were subsequently published on 19 December 2018, are extremely complex, and the view is held by certain industry stakeholders, that the Implementation Guidelines, have not really addressed the interpretational concerns regarding Mining Charter 3.

Amendments to Mining Charter 3, which were published on 19 December 2018, have added to these interpretational concerns.

The amendments to Mining Charter 3 led to extensive debate, including in respect of item 2.4 of Mining Charter 3 (employment equity). A specific example relates to the composition of the board of a company which is the holder of a mining right.

Item 2.4.1.1 of Mining Charter 3 requires that boards of companies that are holders must comprise a minimum of 50% of Historically Disadvantaged Persons with exercisable voting rights, proportionally represented in terms of provincial or national demographics, 20% of which must be women.

Item 8.3 of Mining Charter 3 (transitional arrangements) provides that a mining right holder must progressively align existing targets from the Mining Charter 2010 targets within the transitional period, to meet the revised requirements as follows “… 5 years for the Employment Equity element. A mining right holder must within a period of six months from the date of publication of the Mining Charter, 2018, submit a 5 year plan indicating progressive implementation of the provisions of Employment Equity element targets.” (my emphasis)

It is not a requirement that the board of the relevant holder is constituted as set out in item 2.4.1.1 of Mining Charter 3, as at the relevant date (discussed further below) – the holder is required to submit a plan which sets out how it will progressively comply, over a 5 year period.

For completeness, item 8.6 provides that the a mining right holder's performance shall be reported, audited and verified annually against each element in respect of implementation for the applicable transitional period.

Item 8.3 refers to a six month period within which a mining right holder must submit a five year plan. Item 8.3 refers to the six month period being “… from the date of publication of the Mining Charter, 2018…”.

The term “publication” means publication in the Government Gazette.

Mining Charter 3 was published in the Government Gazette on 27 September 2018.

The six month period referred to in item 8.3, seems to have started to run, from 27 September 2018, and expired on 27 March 2019. 27 September 2018 would therefore be “Date 1” (“Date 1”).

However, when Mining Charter 3 was published on 27 September 2018, it referred to the Implementation Guidelines, which were intended to be gazetted within two months from the date of publication of Mining Charter 3. The date of publication of the Implementation Guidelines would therefore be “Date 2” (“Date 2”). Date 2 is 19 December 2018.

Matters were however complicated further by the publication, on 20 December 2018 of various amendments to Mining Charter 3.

The amendments to Mining Charter 3 included the insertion of, amongst others, a new item 8.9 which provides “existing mining right holders … must implement the Mining Charter, 2018 from the 01 March 2019. Before 1 March 2019, existing right holders … must maintain compliance with the requirements of the Mining Charter, 2010”.

One of the further amendments which were made to Mining Charter 3 on 20 December 2018, was the insertion of a new item 9.

Despite the wording of item 9 of Mining Charter 3, non-compliance could be regarded as a breach of the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (“MPRDA”), exposing holders to potential prosecution.

Section 93 of the MPRDA authorises persons that identify a contravention or suspected contravention of or a failure to comply with the MPRDA, or any term or condition of any right approved in terms of the MPRDA, or of any environmental management programme, to either (a) take rectifying steps, or (b) order that the operations or part thereof be suspended or terminated, and give such other instructions in connection therewith as may be necessary.

The “fix notice” contemplated in Section 93(1)(b)(i) would require the holder of the relevant mining right, to take rectifying steps. On the other hand, the “stop” notice contemplated in Section 93(1)(b)(ii) is aimed at the suspension or stopping of operations. Typically, the “stop” notice is issued, together with instructions to rectify. A non-compliance or suspected non-compliance with the provisions of Mining Charter 3, could result in instructions being issued under Section 93 of the MPRDA (this is also subject to the technical legal arguments referred to above regarding the status of Mining Charter 3);

In terms of Section 47 of the MPRDA the Minister is granted powers to suspend or cancel rights. Section 47 sets out the various processes that must be followed, before a right can be suspended or cancelled, and Holders would be granted opportunities to avoid the suspension or cancellation of any of the mining rights. Once again, the views expressed above regarding the status of Mining Charter 3 would apply.

The Department of Mineral Resources, expressed the firm view that the start date was 27 September 2018, and that the five year plan had to be submitted by 27 March 2019.

However, the DMR acknowledged, in response to concerns raised by various mining companies, that the provisions in Mining Charter 3, read together with the amendments, could possibly not be clear, and therefore extended the time period for the submission of the five year plan on a province by province basis.

The ongoing legal challenges in relation to Mining Charter 3, have contributed to the levels of uncertainty. The first legal challenge that is notable, is that the Minister of Mineral Resources lodged an appeal against the declaratory order that was granted in favour of the Minerals Council of South Africa (“MCSA”). The declaratory order in favour of the MCSA, was, in essence, that the “once empowered, always empowered” principle was applicable in certain circumstances. While the Minister of Mineral Resources has lodged an appeal, the appeal has not been set down for hearing. This has, understandably, led to some frustration.

There has also been speculation regarding the lodging of a review of Mining Charter 3, under the provisions of the Promotion of Administrative Justice Act, No. 3 of 2000. The emphasis on this review, will be the argument that Mining Charter 3 is a policy document, and not legislation. If the court were to find that Mining Charter 3 is a policy, rather than legislation, this will impact on, amongst others, enforcement action that the DMR may take against holders of rights.

Stakeholders in the industry remain concerned about key elements of Mining Charter 3, such as the “loss” of historical consequences (once empowered, always empowered) when mining rights are renewed, the procurement element, and the status of Mining Charter 3, in relation to the MPRDA.

This is not good for the mining and natural resources sector, and it is hoped that the philosophy of dialogue, which president Ramaphosa and Minister Mantashe have commented to, will lead to a pragmatic resolution of the concerns.