My numerous and (in some cases) somewhat sycophantic requests to numerous players in the minerals industry for an advance copy of the minerals charter fell on deaf ears. So I. like everyone else who is not in the industry had to wait for the document to be published. I got my copy off the Business Day this morning. (Thanks to Leila Munda and Thinus Kruger who sent me copies this afternoon – it is very appreciated).
The launch of this document drew attention from far and wide. We had Peter Leon claiming that it would probably not make it past the constitutional court
The most far reaching change is that non-compliance with the revised Mining Charter will amount to a breach of the Mineral and Petroleum Resources Development Act, 2002 (the MPRDA) resulting in the suspension or cancellation of licences granted under the Act. Clothing the Mining Charter with the force of law may well not withstand constitutional scrutiny, in addition to vitiating its consensual nature. In addition, the Minister of Mineral Resources is now entitled to amend the Charter unilaterally, thus perpetuating the problem of overly broad administrative discretion.
To the San Francisco Chronicle that dramatically announced S. Africa May Revoke Mine Licenses to Enforce Charter.
The question is how does it measure up? It certainly is a lot more detailed than the last one, but then the targets are infinitely steeper than the last one. If you had to actually calculate how much it would cost to implement this it might not be worth your while to mine in this country. I was expecting something a lot less punitive, especially after the ICT/Kumba and Lonmin scandals (those are only the high profile incidents – there are countless others that never make it to court or the press).
I'll go through some of the things that make for interesting reading.
-
The charter is NOT issued under section 9 of the B-BBEE Act, it's issued under section 100(2)(a) of the MPRDA. Perhaps this is why it is still called the "The Broad Based Socio Economic Charter". It has now drawn a fair amount of inspiration from the standard DTI-type scorecard, with its own little twist (more twisty than a string of DNA).
-
There is a scorecard, but ownership is not a scorecard item – it's an absolute (along with reporting). This is where things get a little murky – we know that ownership will always be an issue but is non-compliance with the scorecard also a breach? Paragraph 3 says
Non compliance (sic) with the provisions of the Charter and the MPRDA shall render the mining company in breach of the MPRDA and subject to the provisions of Section 47 read in conjunction with Section 98 and 99 of the Act.
-
A very nice feature of the scorecard is that the targets are ramped up over a four year period. This makes the targets more palatable (but does not detract from the sheer ridiculousness of those targets).
-
HDSA is still used in the definition but they've been a little cleverer with the new definition
Historically Disadvantaged South Africans refers to South African citizens, category of persons or community, disadvantaged by unfair discrimination before the (current) Constitution came into operation which should be representative of the demographics of the country.
In other words – you can include white women but only to the extent that they are demographically represented. A question springs to my lips – do you now need to structure deals so that all HDSA's are included and to the exact percentage (as Mpho Nkeli would have us do it).
-
BEE transactions must now include workers and communities – nice move.
-
I'm not going to speak about the ownership requirement – I'll leave that for the rest of the fourth estate. However the beneficiation requirement allows companies to set off 11% against their ownership targets. Only 11%!!!! They should be given 100% ownership credits.
-
You should feel sorry for multinational suppliers of capital goods – they have to contribute 0.5% of revenue generated from local mining companies (not NPAT) towards socio-economic development of local mining communities. This must be paid into a social development fund. It is thought that the DMR will manage this fund. I can't see anyone contributing to this fund if the beleaguered DMR is going to be managing the money.
-
Procurement is punitive. By 2014, 40% of all capital goods must be purchased from BEE entities (70% of goods and services). And a BEE entity is a company that is 25.1% black owned. The cynic in me cannot but laugh at this requirement. They are trying to extend the possibilities for the ANC and its cronies – they'll now go to the major manufacturers and suppliers and state that they must do a deal with them otherwise the mines won't buy from them. Couldn't they just be a little more subtle?
-
The skills development targets are a joke – 3% ramping up to 5% in 2014. This is SPEND on training – you don't have code 400 to fall back on here.
Otherwise there is a strong focus on staff and community welfare.
I was speaking to a mining guy yesterday who told me that this is still a discussion document – if it goes through in this form then Malema will get his mines because many will just stop mining here and head for West Africa.
I was hoping that the time must be approaching where the ANC drops its arrogant stance towards private and foreign investment and starts collaborating more. However a document like this would indicate that they are still a fair way away from this.
Comments