Minerals Council brags about black empowerment, but department differs
BUSINESS LIVE / 09 DECEMBER 2019 - 05:08 / ALLAN SECCOMBE
Industry body says 32 of its members achieved 39% target, but government department says not so fast
On the face of it, there are 32 mining companies with little to worry about when it comes to meeting the demands of the Mining Charter, but legal challenges about the document put that compliance claim in doubt.
The results of the survey hold little real meaning for the department. Picture: 123RF/DAVID LOPEZ
The Minerals Council SA released data showing 32 of its members representing 80% of the headcount met or exceeded nearly all targets set in four major elements of the second charter, also known as the 2010 charter.
Among the most closely watched performance indicators are the ownership levels of mining companies by BEE entities, which the 2010 charter set at 26% and the third charter gazetted at the end of 2018 raised to 30%.
Based on the charter compliance documentation submitted to the department of mineral resources & energy by March 2019, the council said 32 of its members had an average 39.2% ownership by historical disadvantaged South Africans.
The department welcomed the self-assessment of charter compliance by the council, but it regarded the work with a degree of scepticism.
“The department welcomes the industry’s self-assessment when it is used to quantify progress and identify weaknesses, with the aim of making real effort to speed up transformation in the sector, rather than self-praise,” said department spokesperson Ayanda Shezi.
“The experience of mining communities throughout the country, suggests that little or nothing has changed. Compliance will ultimately therefore be real when the industry’s relationship to workers and communities is improved, and communities feel and recognise themselves as beneficiaries of what accrues to mining companies,” she said.
The results of the survey held little real meaning for the department.
“Assessment of compliance with the legislation governing the industry is the sole prerogative of the regulator, that is the department of mineral resources & energy.
“Therefore, the department is the only legal institution that can determine whether any company has complied, or not, with the Mining Charter,” Shezi said. The department was consolidating and assessing data submitted for all operational mines and would release its findings in due course.
Taken at face value, the council-member companies would have little to worry about in meeting the ownership target.
However, as evidenced in the past, the department has a vastly different interpretation of how it measures ownership and it has historically come up with significantly lower levels of ownership percentages.
One complication is that the department measures the entire mining industry, ranging from the smallest quarries to the largest, listed mining companies operating in SA.
The department has in the past issued general numbers. For example, it said in 2015 that only a third of mining right holders had met the target of service procurement from historically disadvantaged shareholders.
Second, and most importantly, the department has a deep-rooted antipathy towards past BEE deals that are no longer in force or in which the empowerment partners cashed in, long arguing they should not count towards credits in a concept known variously as “continuing consequences” or more popularly “once-empowered always empowered”.
The matter was so contentious that in the last departmental assessment of compliance, then minister Ngoako Ramatlhodi said in April 2015 that “stakeholders are not of the same mind on the principles applicable to assessing the ownership element” and they had agreed to approach the courts for a declaratory order to “promote regulatory certainty”.
The department did not release its finding on black ownership of mining companies in its April 2015 report.
The council secured a high court declaration in favour of its understanding of continuing consequences of past deals and that companies would not need to reintroduce new partners or top up if they fell below the ownership target if such transactions had met the target in the past.
The department has taken this on appeal in a case that will be heard during the first half of 2020.
Tebello Chabana, the council’s senior executive in charge of public affairs and transformation, says it is highly probable the matter will be fought all the way to the Constitutional Court.
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While the third and most recent iteration of the charter recognises that past deals count towards empowerment credits it stipulates that on renewal or transfer of mining rights those historical transactions fall away, needing companies to either renew or top up to 30% black ownership.
The council has lodged court papers against this provision in the third charter. For those of its members with a short time remaining on their rights or wishing to do deals, this becomes a critical factor.
Mining companies wishing to renew or transfer their rights are likely to contest any demand by the department to top up empowerment ownership, using the declaratory order as the foundation for their argument. This is one of the reasons for the department appealing against the order.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER