The Charter speaks to 30% black ownership at permit holding mining companies.
‘To entrench regulatory certainty for investors, and provide security of tenure for investments, an existing mining right holder who achieved a minimum of 26%
including a right holder whose BEE partner has since exited is recognised as compliant for the duration of the right. However, the 26% recognition will not be applicable upon renewal of mining rights and is not transferrable to a new owner.’
Minister of Mineral Resources, Gwede Mantashe, on the occasion of the release of the Mining Charter, 2018
27 September 2018
Today’s gazetting of the Mining Charter, 2018 is the culmination of seven months of intensive engagements with stakeholders in the industry; that includes mining companies, investors, mining communities, labour, financial institutions, the legal fraternity and, ultimately, the Cabinet. A variety of views, inputs and submissions were carefully considered. Therefore, this Charter represents a consensus among stakeholders we have been involved with in this process.
The Charter is an important contributory element to efforts aimed at stimulating the economy. It aims to create regulatory certainty, sustainable growth and a competitive and transformed mining industry. It is important to South Africa realising her long-term objectives of eliminating poverty, reducing inequality, and creating jobs.
The withdrawal of the MPRD Amendment Bill from Parliament is another step towards creating regulatory and policy certainty. In line with President Ramaphosa’s announcement on the decision by Cabinet to withdraw the Bill, I have submitted a formal request to the Speaker of the National Assembly and the Chairperson of the National Council of Provinces for the withdrawal. This would mean that the current MPRDA remains applicable. A separate regime for oil and gas is being developed.
I will now highlight the salient points of the Mining Charter, 2018.
Elements of the Mining Charter, 2018:
The elements of Ownership and Mine Community Development are ring-fenced, and they require absolute compliance at all times.
To entrench regulatory certainty for investors, and provide security of tenure for investments, an existing mining right holder who achieved a minimum of 26% -including a right holder whose BEE partner has since exited – is recognised as compliant for the duration of the right.
This recognition is not applicable upon renewal, and is not transferrable to a new owner in the case of a transfer or sale.
The Mining Charter, 2010 will apply to all pending applications lodged and accepted prior to the coming into effect of the Mining Charter 2018. The right holder will be expected to increase their minimum BBBEE shareholding to 30% within five years.
A new mining right – granted after the coming into effect of Mining Charter, 2018 – must have a minimum of 30% BEE shareholding, applicable for the duration of the mining right. It shall be distributed as follows:
A minimum of 5% non-transferable carried interest to qualifying employees;
A minimum of 5% non-transferrable carried interest to host communities, or a minimum 5% equity equivalent benefit. Equity equivalent refers to 5% equivalent of the issued share capital, at no cost to a Trust or similar vehicle set up for the benefit of host communities.
A minimum of 20% effective ownership in the form of shares to a BEE Entrepreneur, a minimum of 5% which must preferably be for women.
The Charter further outlines requirements for Junior Miners – i.e. a mining right holder with a single or multiple mining rights, having a combined annual turnover of less than 150 Million Rands, as well as licenses granted under the Precious Metals Act, 2005 and the Diamonds Act, 1986; and thresholds for precious metals jewellers and beneficiators.
To promote beneficiation in line with Government policy, a mining right holder may claim the equity equivalent mechanism against a maximum of 5 percentage points of a BEE Entrepreneur. A mining right holder must submit to the Department a Beneficiation Equity Equivalent Plan for approval, as outlined in the Mining Charter implementation guidelines.
Inclusive Procurement, Supplier and Enterprise Development
Procurement of South African manufactured goods and services provide opportunities for expanding economic growth, creating decent jobs and widening market access to the country’s goods and services. In this regard, the latest commitment of two billion Rand by Kumba is commendable.
To confirm local content, goods must be procured in line with a standardised product identification coding system being developed by the Department of Trade and Industry.
Mining right holders will be expected to provide proof of local content in the form of certification from the South African Bureau of Standards (SABS) or any other entity designated by the Minister.
On promoting Research and Development (R&D) capabilities, a mining right holder must spend a minimum of 70% of its total R&D budget on South African based entities, public or private.
Human Resource Development
Human Resource Development constitutes an integral part of competitiveness, transformation and sustainable growth. A mining right holder is therefore expected to invest a minimum 5% of leviable amount (excluding the statutory skills development levy) on essential skills development – including science, technology, engineering and mathematical skills, graduate training programmes and R&D initiatives.
A mining right holder must achieve a minimum threshold of Historically Disadvantaged Persons that reflects the provincial or national demographics at Board, Executive Management, Senior Management, Middle Management, Junior Management, Core and Critical Skills, as well as Employees with Disabilities.
Mine Community Development
For purposes of implementing Social and Labour Plans and Mine Community Development projects, the term “Mine Community” refers to communities where mining takes place, major labour sending areas, adjacent communities within a local municipality, metropolitan municipality or district municipality.
A mining right holder must meaningfully contribute towards Mine Community Development, with a bias towards mine communities both in terms of impact and size, and in keeping with the principles of the social license to operate.
A Trust or similar vehicle which will oversee the implementation of the 5% equity equivalent detailed under the ownership element should have – at minimum – representation from host communities and mining companies. The Trust will:
Identify community development needs
Be responsible for developing a host community development programme, fund distribution, governance and organisation.
Use of funds for administration costs, project management and consultation fees of the Trust or similar vehicle may not exceed 8% of the total budget. A development programme shall not substitute Social and Labour Plan (SLP) commitments.
Housing and Living Conditions
A mining right holder shall be required to submit a Housing and Living Conditions Plan to be approved by the Department, after consultation with organised labour and the Department of Human Settlements.
The Charter requires that mining right holders should submit annual compliance reports to the Department. In our engagements, stakeholders – in particular communities – were critical of the Department’s ability to monitor and enforce compliance. The Department is continuing with the process of filling key vacant positions to stabilise critical areas, including monitoring and enforcement of compliance. This is to ensure that we can adequately monitor and enforce compliance to the Charter.
This past weekend we undertook visits to KwaZulu-Natal and the Eastern Cape. We have established a team which will go back to kwaSomkhele, KZN early next week to deal in detail with issues raised by communities. Following the visit, the team will make recommendations with a view to finding sustainable solutions to the challenges there.
The team also visited Xolobeni village in Mbizana, to listen to concerns around proposed mining in the area. Ten organisations made presentations, namely: Mdatya Trust, Bekela Trust, Xolobeni Development Trust, Amadiba Development Forum, Mzamba Taxi Association, the Eastern Cape Contractors Forum, Xolco, Bizana Chamber of Commerce, Amadiba Crisis Committee and King Zanozuko Sigcau. Of these, nine were for the development of both mining and tourism, and one, Amadiba Crisis Committee, made a presentation against mining development in the area. Ward 25 in Bizana, of which Xolobeni is part, is the poorest in the area with high levels of illiteracy and dependence on social grants. The community wants to use tourism and mining to develop itself further. It is important that consultation is allowed to proceed peacefully, so a final determination can be made on this matter, which is long-standing.
I thank and commend all stakeholders and social partners who journeyed with us over the past seven months of engagements on the Charter. The department has prioritised proactive engagement with all our stakeholders. It is in our collective interests to ensure a sector that is thriving and transformed. The gazetting of the Mining Charter, 2018 is a decisive step in that direction.