Mining Charter BEE Clauses Challenged
Jun 19, 2015
Allan Seccombe
Chamber of Mines seeks declaratory orders after opting out of process with Department of Mineral Resources to approach courts to clarify empowerment clauses in charter
THE Chamber of Mines is seeking a range of declaratory orders after opting out of a joint process with the Department of Mineral Resources to approach the courts to clarify empowerment clauses in the Mining Charter over which the two parties have deadlocked.
Mineral Resources Minister Ngoako Ramatlhodi had said at the end of March that the chamber and his department would jointly approach the court for a declaratory order over the key sticking point in interpreting the charter, which provides a framework and timetable for the transformation of the mining sector.
The problems arose, the chamber contends in court paper seen this week, when the original 2004 charter was amended in 2010 and the department unilaterally inserted wording in the black ownership clause saying empowerment deals done after the promulgation of the Mineral and Petroleum Resources Development Act (MPRDA) in 2004 and which had fallen away should not have "continuing consequences" or count towards empowerment credits.
The chamber argues in detailed court documents that not only did it never agree to this wording, the interpretation by the department that these defunct deals did not count towards credits, but it would entail enormous expenditure for mining companies. These companies would incur further costs to replace transactions that had largely fallen away through no fault of their own as the partners sold and left or because the deals had fallen through because of changes in market circumstances.
So what exactly does the chamber want the court to decide on?
Firstly, it wants the court to declare that mining companies, which were either granted mining rights or converted old-order rights, are not obliged to restore black ownership to the 26% stipulated in the charter if it falls below that level.
It wants the court to declare that the holder of a mining right which does not maintain the 26% is not contravening the MPRDA and is not committing an offence in terms of the act.
The chamber argues that neither the original charter nor the 2010 charter requires a mining right holder to enter fresh empowerment transactions if black ownership falls below 26% and it wants the court to declare this is the case.
It wants the court to declare neither of the charters stipulated that the empowerment structures had to include black entrepreneurs, workers or communities.
It seeks the court to declare a paragraph in the 2010 charter to be ultra vires, or beyond the powers of the minister, and void because it deprives mining right holders of offsets to give them flexibility in meeting charter targets. It also prevents them from using excess empowerment at one operation to top up empowerment at other operations as well as not allowing companies to offset the full value of beneficiation against ownership commitments.
It would like the court to declare another paragraph in the charter ultra vires. This paragraph raises the prospect of the minister stripping companies of their mining rights for not complying with the charters.
The chamber wants the court to declare that any respondent, namely Mr Ramatlhodi and his director-general, Thibedi Ramontja, opposing its application should pay for the costs.
"The disputes are neither academic nor abstract. Their resolution is a matter of great importance for both the chamber and mining companies, on one hand, and for the minister and his department, on the other hand," said the chamber’s senior executive for transformation and stakeholder relations, Vusi Mabena.
The chamber has said the consequences for the industry of the department’s interpretation of the charter are severe.
It would mean a loss of investor confidence, "in particular the destruction of remaining investor appetite for South African mining equities", the chamber’s court documents say. It would reduce capital allocation by mining companies, further weaken balance sheets and reduce dividend flows and capital expenditures.
It would mean flat or reduced production rates from mines, which in turn would put further strain on community and employee relations, it said.
Allan Seccombe
Chamber of Mines seeks declaratory orders after opting out of process with Department of Mineral Resources to approach courts to clarify empowerment clauses in charter
THE Chamber of Mines is seeking a range of declaratory orders after opting out of a joint process with the Department of Mineral Resources to approach the courts to clarify empowerment clauses in the Mining Charter over which the two parties have deadlocked.
Mineral Resources Minister Ngoako Ramatlhodi had said at the end of March that the chamber and his department would jointly approach the court for a declaratory order over the key sticking point in interpreting the charter, which provides a framework and timetable for the transformation of the mining sector.
The problems arose, the chamber contends in court paper seen this week, when the original 2004 charter was amended in 2010 and the department unilaterally inserted wording in the black ownership clause saying empowerment deals done after the promulgation of the Mineral and Petroleum Resources Development Act (MPRDA) in 2004 and which had fallen away should not have "continuing consequences" or count towards empowerment credits.
The chamber argues in detailed court documents that not only did it never agree to this wording, the interpretation by the department that these defunct deals did not count towards credits, but it would entail enormous expenditure for mining companies. These companies would incur further costs to replace transactions that had largely fallen away through no fault of their own as the partners sold and left or because the deals had fallen through because of changes in market circumstances.
So what exactly does the chamber want the court to decide on?
Firstly, it wants the court to declare that mining companies, which were either granted mining rights or converted old-order rights, are not obliged to restore black ownership to the 26% stipulated in the charter if it falls below that level.
It wants the court to declare that the holder of a mining right which does not maintain the 26% is not contravening the MPRDA and is not committing an offence in terms of the act.
The chamber argues that neither the original charter nor the 2010 charter requires a mining right holder to enter fresh empowerment transactions if black ownership falls below 26% and it wants the court to declare this is the case.
It wants the court to declare neither of the charters stipulated that the empowerment structures had to include black entrepreneurs, workers or communities.
It seeks the court to declare a paragraph in the 2010 charter to be ultra vires, or beyond the powers of the minister, and void because it deprives mining right holders of offsets to give them flexibility in meeting charter targets. It also prevents them from using excess empowerment at one operation to top up empowerment at other operations as well as not allowing companies to offset the full value of beneficiation against ownership commitments.
It would like the court to declare another paragraph in the charter ultra vires. This paragraph raises the prospect of the minister stripping companies of their mining rights for not complying with the charters.
The chamber wants the court to declare that any respondent, namely Mr Ramatlhodi and his director-general, Thibedi Ramontja, opposing its application should pay for the costs.
"The disputes are neither academic nor abstract. Their resolution is a matter of great importance for both the chamber and mining companies, on one hand, and for the minister and his department, on the other hand," said the chamber’s senior executive for transformation and stakeholder relations, Vusi Mabena.
The chamber has said the consequences for the industry of the department’s interpretation of the charter are severe.
It would mean a loss of investor confidence, "in particular the destruction of remaining investor appetite for South African mining equities", the chamber’s court documents say. It would reduce capital allocation by mining companies, further weaken balance sheets and reduce dividend flows and capital expenditures.
It would mean flat or reduced production rates from mines, which in turn would put further strain on community and employee relations, it said.
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