South Africa’s Mining Charter

Much like the Mining Charter of 2017, Mineral Resources Minister Gwede Mantashe’s revised 2018 Charter III aimed to remodel the mining industry in line with B-BBEE principles. It has had major implications for the industry – find out what they are here…

Mining Charter III

The Broad-Based Black Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, or the Mining Charter, was first introduced in 2002 and has since had three amendments, with Mining Charter III being the latest. As with the Minerals and Petroleum Resources Development Act (MPRDA), the Charter was developed to transform the industry to address and improve the lives of previously disadvantaged black South Africans. Departing from the requirements set out in the previous Charters, the third iteration outlines new targets and expectations for the mining industry.

Changes in the Latest Mining Charter

The 2017 Charter, introduced by the then Minister of Mineral Resources Mosebenzi Zwane, received much criticism. The latest one aims to consider the actual state of the mining industry and thus provide what is considered achievable targets for key role players, with hopes to strengthen the effectiveness of the Charter and encourage investment in the sector as well. Take a look at some of the key changes and new regulations…

What the New Charter Means for the Mining

The 2018 edition of the Mining Charter makes many changes to the previous version and also introduces several new standards which to which mining companies must adhere. While the industry expressed its reservations when Charter III’s final issue was released, some leeway was made for existing companies already implementing previous Charter regulations.

• Minimum Black Ownership: while this has been increased to 30%, mining companies which met original requirements can retain the previously set 26%
• “Once empowered, always empowered”: this deals with instances where black shareholders have exited companies, and states that companies which met the previous requirements don’t have to sell to new black investors
• Dividends: mining companies no longer have to pay a 1% dividend of Ebitda (Earnings Before Interest, Tax, Depreciation and Amortisation) to employees and communities.

Rights holders must comply with the ring-fenced elements of the Charter which are, at a glance, 30% employment equity, 30% human resources development and 40% procurement, supplier and enterprise development, with consideration for housing and living conditions of employees and their families. For a full scope of the Charter, read here.

Concerns Regarding the Mining Charter

As with its predecessors, Mining Charter III has met resistance in the sector, and many have pointed out issues with the document and the implementation of its regulations. A major concern is the ambiguity found in some of its terms, which may provide administrators with interpretive discretion. Another concern was the lack of power on the part of the Mineral Resources Minister regarding granting a mineral right. In addition, mining companies are already subject to industry-specific ownership targets and thus face two sets of compliance requirements. The Charter may also violate the country’s obligations under applicable bilateral treaties – i.e. favouring local entities over international mining entities. All of these concerns can dissuade and negatively impact investment opportunities.

Though the Charters aim at economic reform and redress, and though there has been improved collaboration between stakeholders across the mining industry, many argue that the latest Charter has proved too onerous for mining companies. Some organisations have seen decline since the implementation of the Mineral and Petroleum Resources Development Act (MPRDA) in 2004, and argue that the latest Charter will only accelerate the decline, saying that the regulations of the Charter are untenable considering the fact that many mine deposits are located in remote areas and lack easy access to equipment suppliers and service providers. Concerns are also felt for junior miners and future possible organisations who may be dissuaded by the strict directive.

Mining in South Africa

The mining sector is one of South Africa’s largest, with mineral reserves estimated to be some of the world’s most valuable – R20.3 trillion. Though the industry has seen decline in the last two decades, it is still an imperative part of the South African economy, and in the global economy. The industry provides many benefits internally as well:

• Creates hundreds of thousands of jobs
• Accounts for approximately 20% of GDP
• Creates investment interest
• Is the primary source for electricity creation.

Fuel for Mining

Maintaining the mining industry is crucial for the country and for the industry on a global level. Over and above important regulations and directives like the latest Mining Charter, fuel is a major requirement for mining operations, literally powering the procedure. As the provider of choice for some of Southern Africa’s biggest mines, we provide tailored solutions for your operation. Speak to us today!