Delegates call for more changes to SA’s draft Mining Charter
BUSINESS LIVE / 08 JULY 2018 - 18:30 / ALLAN SECCOMBE
Mining-affected communities and industry members agree there is a lot of work to be done
As delegate after delegate voiced concerns about the third Mining Charter draft, it was clear there was a lot of work to be done during the two-day weekend summit to compile final major inputs into the document ahead of it being gazetted in August.
Picture: 123RF / GILLES PAIRE
The tone of the summit was set right at the start when one delegate was evicted by police for disrupting proceedings before they had barely begun. Mineral Resources Minister Gwede Mantashe quashed the vocal and increasingly angry delegate immediately and warned others against trying something similar.
The summit in Benoni was attended by hundreds of delegates drawn from communities, organised labour, mining companies and a heavy contingent of officials from the Department of Mineral Resources.
The gathering is part of collecting public responses by July 27 to the draft chart issued on June 15.
Mantashe will wrap up the outcomes of the summit on Sunday afternoon.
Since his appointment in February, Mantashe has toured SA to garner a “representative sample” of community input to draw up a new charter as well as engaging in intensive negotiations with the Minerals Council of SA (formerly the Chamber of Mines) to draw up a third iteration of the charter which sets targets for racial transformation of ownership and management of mining companies as well as commitments to communities, labour and suppliers.
The draft charter was welcomed as much-improved compared to the charter gazetted by former mines minister Mosebenzi Zwane precisely one year earlier and which the council had immediately taken to court to have it set aside.
However, before the summit broke into four different working groups a host of speakers from across the spectrum of stakeholders, including analysts and economists, it was clear there were not only a wide range of problems with the contents of the charter but vastly differing views about what should be in it.
Noting municipalities had returned R53bn in unspent developmental funds to central government, lacking the skills to implement projects, council president Mxolisi Mgojo said there should be a revision of a 2001 discussion and tacit agreement from the department to ringfence a substantial portion of royalties, which in 2017, totalled R7bn, towards community projects.
“We believe benefit sharing, profit sharing and pro-rata contributions from the government of mining royalties towards developmental projects and business start up for our communities would go much further in addressing our socio-economic challenges of poverty, inequality and unemployment,” he said.
The council was firmly opposed to the 10% free-carry in mining shares split between communities and employees as part of the 30% black economic empowerment ownership structure, he said.
Royalties paid by mining companies are absorbed by the national fiscus and bring no direct benefit to communities around operations.
“What we are doing as the government, industry and communities is not working optimally. But we are all responsible,” Mgojo said.
From the South African Mining Development Association, chairman Peter Temane, came the demand for 51% black ownership of companies and an allegation that the department had not properly enforced the first two charters because ownership levels, according to the association, were well below the 26% target stipulated in those documents.
Among the pleas from the community representatives were for the term “meaningful consultation” in relation to communities and mining companies to be inserted and for communities to be given full access to easily understood information.
Matome Kapa from the Mining & Environmental Justice Network of SA (MEJCON) asked for the charter, which is open for public comment until July 27, to stipulate that social and labour plans be drawn up with full community consultation and input. He also asked for the inclusion of a provision around free, prior and informed consent from communities in the allocation of mining rights.
Meshack Mbangula, the national convenor of Mining Affected Communities United in Action (Macua), stressed the inadequacy of the consultation process, wanting further meetings with Mantashe and his team, arguing communities were far more organised and able to negotiate a position than the government was giving them credit for.
Mbangula also made an impassioned plea for mineral rights to be linked to land rights owned by communities, effectively removing minerals from state custody to the communities.
As one departmental official later said, he was “crying at the wrong funeral” and should have made the request during the formulation of amendments to the Mineral and Petroleum Resources Development Act, which are working their way through the National Council of Provinces, with Mantashe wanting that process expedited.
The 10% free carry for communities and labour, along with a 1% trickle dividend paid from operating profit to these two groups, which must be given 8% ownership stakes each, would seriously compromise the ability to fund new mining projects, said Nkateko Mathonsi, a resources equity analyst at Investec.
Illustrating the point with two platinum projects underway, she extrapolated the impact of the free carry and trickle dividend, showing that these projects, which would struggle to meet the investment hurdle rate would fall far short of the levels investors required.
This meant companies would only “chase projects with a very high return. If we want to grow we need to accommodate marginal operations so we can grow the sector and increase employment,” she said.
Global exploration had completely passed SA by and there was little chance with the new charter barely mentioning prospecting rights or making allowances for a highly risky sector to attract investment in exploring the country’s treasure trove of minerals, she said.
“We need to go over and above to get capital to come to our shores,” she said, noting the charter was not providing that incentive in its current form.
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