Mining Charter III part of efforts to bring ‘equality to reality’ – Mantashe
M.MININGWEEKLY / 07 JUNE 2019 - 14.19 / REBECCA CAMPBELL
The third – and latest – iteration of the Mining Charter should not be viewed in isolation, but rather seen in the context of the socioeconomic transformation of South Africa, affirmed Minerals Resources and Energy Minister Gwede Mantashe in a keynote address to a colloquium hosted by the University of South Africa, in Pretoria, in partnership with minerals technology and beneficiation science council Mintek just before the recent elections.
“Let me locate the Mining Charter within the context of transformation,” he said. “It’s not in isolation. It’s part of the broader South African transformation agenda.”
Broad transformation was required because of South Africa’s history, he highlighted. The black majority had been excluded from any meaningful role in the economy, other than as providers of labour, for centuries. They had suffered from racial discrimination and oppression, resulting in exclusion, exploitation and the concomitant suffering. There had been systematic and all-round deprivation of black South Africans. The consequences of these abuses still endured. “Unless we open the wound and wash it, it’s not going to heal'.
Mantashe cited his own experiences as an example. He worked in the mining industry, although in human resources-related capa- cities, starting at Western Deep Levels in 1975, moving to Prieska Copper Mines that same year and then to Matla Coal, thereafter becoming an official of the National Union of Mineworkers. He pointed out that, when he started working in the mining industry, although he had a matric certificate, he could not have been a shift supervisor because he did not have a blasting certificate, and shift supervisors had to have these certificates. Only white workers were allowed to qualify for blasting certificates, resulting in a situation where white workers who had not graduated from high school could be shift supervisors but black workers who were high school graduates could not.
Today, most mineworkers with blast certificates were black, and the number of black managers had increased considerably, he said. But, he noted, while staff transformation in certain areas was easy, in other areas it was not. In areas requiring hard skills, such as engineering, the composition of the personnel remained lopsided in favour of whites. He argued that companies that had, for example, many black human resources staff but only a few black engineers were not doing enough to develop black engineers. At the top, there were not as many black mining CEOs today as had been hoped. On the other hand, black mining CEOs had emerged much faster than Afrikaans-speaking white mining CEOs, the industry in the past having been dominated by English-speaking white CEOs.
Transformation was a central issue, especially with regard to mining. The mining sector had been a mini-State within the State in South Africa, with, for example, its own security.
He reiterated that, in the past, black mineworkers experienced inhumane working and living conditions.
“How can we bring equality to reality?” This, he stated, was the question at the centre of transformation. “The Mining Charter was but one tool that was drafted to guide us in the transformation of this society.”
Transformation was not about replacing white faces with black faces, but about real economic empowerment.
He cautioned that economic growth without transformation would only sustain the country’s previous patterns of inequality, while transformation without growth would be narrow and unsustainable.
The final version of Mining Charter III was published last September. It uses the term ‘historically disadvantaged South Africans’ (HDSA). It requires a minimum 30% HDSA shareholding in any entity seeking new mining rights. Of this figure, 20% is for black economic empowerment (BEE) entrepreneurs and not less than 5% each for the communities where a mine would be located (host communities) and for qualifying employees. (Previously, the minimum level for HDSA shareholding was 26%; for entities that already hold mining rights, this figure remains in place and they do not have to raise it to 30%.) It provides for a ‘beneficiation offset’ for mining companies that supply ore to local beneficiation enterprises at a reduced price, or carry out their own beneficiation, but this offset is limited to 5%.
Regarding procurement, mining companies are required to use facilities in South Africa to analyse all their mineral samples across the mining value chain; use of foreign-based facilities would require the permission of the Minister. Also, they must source 80% of their services from South African BEE enterprises, and 70% of their ‘mining goods’ from BEE entrepreneurs, entities, or women or youth entrepreneurs. Mining rights holders have to verify local content for their capital and consumer goods.
Concerning employment equity, 1.5% of jobs must be reserved for people with disabilities. At every mining company, at least 50% of executive directors must be black (20% being black women), at least 60% of senior management must also be black (25% black women), at least 60% of those in middle management must be black (25% black women), and at least 70% of junior management must be black (30% black women).
“Equity equivalent” schemes must be implemented for host communities and equity equivalent arrangements for bene- ficiation must be structured.
For skills development, over and above the already existing compulsory skills levy, mining companies will also have to spend the equivalent of 5% of their annual payroll on the development of essential skills. These will include science, technology, engineering and maths, as well as graduate training and research and development.
The Reasons Why
In his address, Mantashe explained that the use of the term ‘HDSA’ was to ensure that South Africans benefited from the Mining Charter’s provisions. As for the shareholding requirement, the figure of 10% reserved for communities and employees (5% plus 5%), which had to be given to them free by the mining companies, was chosen because government was concerned that a higher proportion would deter mining investors. Regarding the free shareholding for communities, the charter included the concept of equity equivalent benefits to give companies and communities flexibility; instead of communities simply getting a shareholding, they could ask the mining companies for concrete benefits instead, such as a school or a bridge and so on. The remaining 20% of the required minimum HDSA shareholding would have to be paid for by black investors. He stated that other countries had similar concepts and programmes.
He stressed that the 30% HDSA shareholding only applied to new mining rights. Existing mining rights, where the mining company had achieved the required 26% BEE shareholding, would be respected and maintained.
However, when the time came for their mining rights to be renewed, miners would have to come into line with (‘top-up’ to) the new BEE shareholding requirements. Mantashe admitted that this was an area of dispute between government and the industry. He affirmed that government had the right to renegotiate the terms and conditions attached to mining rights when the time came to renew them. He stated that, in Botswana, government renegotiated terms and conditions with the De Beers group every ten years, when the diamond miner’s mining rights had to be renewed. Why, he queried, was it acceptable for Botswana to do this, but not South Africa?
He addressed the issue of black shareholders selling their stakes in mining companies. He indicated that government had no problem with BEE entrepreneurs selling their stakes in mining companies, provided they then reinvested in other areas of the economy (Mantashe cited the hospitality sector as an example). But black shareholders selling their stakes and then fading away from the markets was quite another thing; he affirmed that such a situation indicated that they had been “elbowed out”. He stressed that, if BEE shareholders sold their equity, value had to have accrued to them.
Concerning the charter’s requirements on procurement, he said: “It is important to locate this objective within the National Development Plan.” The aim of these provisions was to strengthen the linkages between mining and local manufacturing, with the intent of encouraging entrepreneurs to participate in the mining industry’s value chain. This would include the manufacturing, installation and servicing of equipment, and the provision of other services. He argued that, if government did not become involved in mines’ procurement activities, their procurement managers would simply go on ordering from their long-standing and familiar suppliers (“old friends”, in Mantashe’s words) and not award any contracts to new black-owned companies.
He further warned that the South African mining industry had to carry out skills development to prepare itself and its employees for the Fourth Industrial Revolution (4IR). Automated mining activities were no longer scarce, he pointed out; 4IR was coming. He highlighted that, while 4IR was destroying old jobs, it was also creating new jobs. The country’s mines had to develop new skills as a result. “The more we improve technology in the mining industry, the safer the industry is,” he emphasised. “Technology must be part of finding solutions to many of these [mining] problems.”
As for beneficiation, this was meant to develop entrepreneurs and lead to the starting of new enterprises in the value chain. “Miners have no clue what beneficiation is all about,” he quipped. This was because they had not been educated about it. But they had to make an effort. “There are opportunities for our entrepreneurs . . . we can add value.” He admitted that the country’s high electricity prices made certain kinds of energy-intensive beneficiation too expensive to be competitive. He questioned whether cutting electricity tariffs to such beneficiation operations might not result in greater electricity demand, thereby compensating for the reduced tariffs.
“If we can do the right things, we can change this industry,” he concluded. Mantashe cited the example of former employees of the Arnot coal mine buying Exxaro’s 50% share of that very mine. (The other 50% is held by Wescoal.) The workers took ownership of their half on May 1.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER