South African mining industry blindsided by Mining Charter III

Much controversy has surrounded the Reviewed Broad-Based Black Economic Empowerment Charter for the South African Mining Industry (“Mining Charter III”). Since a draft was published for public comment in April last year questions have arisen as to the lack of meaningful consultation by the Department of Mineral Resources (“DMR”) with the organised mining industry and other stakeholders and indications by the DMR that it would significantly increase the Charter’s black economic empowerment (“BEE”) ownership, procurement and employment equity requirements.

After months of speculation regarding the nature and content of Mining Charter III, the DMR finally published it on 15 June 2017 (“the Charter date”), when it also came into effect.

In contrast to suggestions by the Minister of Mineral Resources (“Minister”) that Mining Charter III is a “win-win” for all, the Chamber of Mines (“Chamber”), within hours of the Charter’s publication observed that: [it] rejects the unilateral development and imposition of the DMR’s Charter on the industry, and is of the view that the process that was followed by the DMR in developing its version of the Reviewed Mining Charter has been seriously flawed.

The Chamber indicated that it would approach the High Court for an urgent interdict to suspend its implementation, pending the launch of judicial review proceedings, and that it intended reviving its previous application for a declaratory order, which had been temporarily suspended pending discussions with the DMR. In this earlier application the Chamber sought a declaratory order from the High Court on the interpretation of various provisions of Mining Charter II, particularly in the context of the continuing consequences of previous BEE transactions and the ‘once empowered, always empowered’ principle.

The ruling African National Congress’s (“ANC”) economic transformation committee has likewise criticised the DMR’s decision to publish Mining Charter III without further engagement with the mining industry, observing that “the mining industry has shed about 60,000 jobs in the last five years” and that this position should not be aggravated further.

In addition to the concerns relating to the process and content of Mining Charter III, its validity and enforceability remains a key concern. The Minister published Mining Charter III under section 100(2)(a) of the Mineral and Petroleum Resources Development Act, 2002 (“MPRDA”) which empowers him to develop a policy, rather than a set of binding rules, and to do so only once, within six months of the MPRDA’s promulgation date (1 May 2004). This, in fact, occurred on 13 August 2004.

It is thus doubtful whether the Minister is empowered to introduce Mining Charter III at all (whether viewed as a new Charter or an amendment of the first Charter), and accordingly debatable whether it is legally binding on the mining industry. The MPRDA Amendment Bill, 2013 aimed to address this by elevating the Charter to the status of legislation while giving the Minister the power to amend it, but this Bill is still before Parliament and unlikely to pass this year.

Deeming this change (among others) “likely unconstitutional”, President Jacob Zuma referred the Bill back to Parliament in January 2015, where the process of correcting this and other identified deficiencies is still underway, two and a half years later. The legal position thus remains, in our view, that the Minister can neither amend the Charter nor make it binding on the industry.

Click here for our full briefing which explores the material changes and provides a useful comparison of Mining Charter II and Mining Charter III