SA unlikely to see new mines whilst Mining Charter III stays in current form

Pounds Sterling IF the third version of the Mining Charter is as investor-friendly as mines and energy minister, Gwede Mantashe, claims it is, where is the flood of new investment into South Africa’s dwindling mining sector?

Since the latest charter was gazetted last year on September 27, Rio Tinto announced the go-ahead of its long-deferred Zulti South mineral sands project, but AngloGold Ashanti said it would be selling, not investing, in its last deep-level gold mine in South Africa, Mponeng.

Under the Mineral and Petroleum Resources Development Act (MPRDA), compliance with the industry charter is necessary to secure a mining right. South Africa’s first mining charter was gazetted in 2004. A revised charter was gazetted in 2010, setting higher targets for black ownership and local procurement, among other provisions.

The latest charter raises the targets again. Although the holders of existing mining rights are compliant at 26% black ownership, Mining Charter III requires applicants for new mining rights, renewals of rights or transferees of rights to have 30% black ownership. It also lays down in excruciating detail what sectors of the population, in what percentages, can supply goods and services to mining companies.

On December 19, a set of guidelines was published to provide more detail on implementing the charter, but there are widespread complaints that some of the guidelines are adding further confusion.

This charter was widely hailed as an improvement on its two preceding versions, both the version published in June last year as well as the highly contentious charter published by former mines minister, Mosebenzi Zwane in June 2017.

But after months of talks to try to smooth out some of the problem areas, the Minerals Council South Africa filed “very reluctantly” an application for judicial review, citing particular concerns with the charter’s failure to recognise past empowerment deals for transfers of and new mining rights.

The council obtained a declaratory order in April 2018 that upheld the “continuing consequences” of previous ownership transactions (also dubbed the principle of “once empowered, always empowered”).

Peter Leon, a partner and co-chair of Herbert Smith Freehills, said despite extensive consultation on Mining Charter III, it still contained provisions that raised concerns. These included onerous re-empowerment obligations for the renewal and transfer of existing mining rights and “… the minister’s seemingly unlimited ability to review and revise the obligations imposed under the charter from time to time.”

Jonathan Veeran, a partner in Webber Wentzel’s corporate practice, said the tone […]

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