A journalist called me last night to ask me about the mining charter. I am quite familiar with it but it did require a little bit of touch-up research. The BEE codes of good practice are badly written, to put it politely, a feature that almost every other code that has followed the generic codes has adopted (the FSC is actually quite well drafted even though it does refer to the generic codes on occasion). And because the codes are not so much legislation but practice, the interpretations are very broad. The mining charter is very different – this document is analysed down to the last word by lawyers, not BEE consultants. So it follows that what we as BEE consultants might regard as being a simple typo, is regarded as something serious by a lawyer. For instance the mining charter calls for meaning economic participation – it means the HDSA (more on this below) shareholders must get some of the dividend money in their pockets and the balance used to service a debt. This has serious implications for shareholders.
The purpose of this post is the use of the term HDSA. This is a term that has fallen out of favour in the PPPFA which has replaced it with the word black. The mining charter defines HDSA as
"Historically Disadvantaged South Africans" ("HDSA") refers to South African citizens, category of persons or community, disadvantaged by unfair discrimination before the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993) came into operation which should be representative of the demographics of the country
We must break this down into components to understand what it means
South African citizens, category of persons or community, disadvantaged by unfair discrimination
This is simple enough. We know from the HDI in the PPPFA that this includes white women
before the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993) came into operation
The date of commencement of the Constitution is the 4th of February, 1997. That is about 16 years and two months' ago.
which should be representative of the demographics of the country
The dreaded Economically Active Population (EAP).
What this says is that HDSAs must be reflective of the EAP (which puts African at about 85% of the population) and they must be older than 16 years, two months and 19 days (as of today). I suppose you could argue the Nasciturus Rule and include those children who were in utero 9 months before the 4th of February, 1997. I think this is clear. But it does have an impact on HDSA's as beneficiaries. Under "Meaningful economic participation" in the charter it is stated that
BEE transactions shall be concluded with clearly identifiable beneficiaries in the form of BEE entrepreneurs, workers (including ESOPs) and communities
It is possible that the 16 year olds could find themselves as employees of a mine and be part of an ESOP, younger than 16 years olds could find themselves as members of communities. The only problem is that these people cannot be regarded as HDSAs by definition. They are too young to have suffered any discrimination before February 1997. What are we then left to assume – it must be that the usual suspects (ANC cadres typically) are the best beneficiaries for your mining deal.
I haven't run this past Percy Abelkop or Peter Leon. And I'm sure they are both aware of this. I suppose this is just another one of those ridiculousnesses that is contained in empowerment legislation. If you would like to read a very humorous article on the MPRDA you should read Peter Leon's tragicomic analysis of a good mining regime and how South Africa's is the antithesis of this.
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