Element 2.1.1 only applies to "existing mining rights". The definition of "existing right holder" is "a holder of a mining right granted prior to the coming into operation of the Mining Charter, 2018". The key aspects in relation to existing mining rights are as follows:

• Where an existing right holder has achieved and maintained a minimum of 26% BEE shareholding as at the date of publication of Draft Mining Charter 2018, the existing right holder will be recognised as compliant (with Draft Mining Charter 2018) but must, within five years from the date of coming into effect of Draft Mining Charter 2018, supplement its BEE shareholding to a minimum of 30%. The existing right holder in these circumstances must therefore top up from its 26% BEE shareholding to 30% BEE shareholding. The term "BEE shareholding" is defined to mean "host community, qualifying employees and BEE entrepreneurs' shareholding". A "host community" is defined to mean "a community/ies in the local, district, metropolitan municipality or traditional authority within which the mining area as defined in the MPRDA is located". The term "qualifying employees" is defined to mean "for the purposes of the ownership element employees of a mining company excluding employees who already hold shares in the same company as a condition of their employment agreement except where such condition is a Mining Charter requirement". The term "BEE entrepreneur" is defined to mean "Black enterprises that are at least 51% owned by Black persons in which Black persons hold at least 51% of exercisable voting rights and 51% of economic interest or an organ of State excluding mandated investments".
• Where an existing right holder at any stage during the existence of the mining right achieved a minimum of 26% BEE shareholding and the BEE partners have exited the BEE transaction, the existing right holder will be recognised as compliant (with Draft Mining Charter 2018) but must, within a period of five years from the date of coming into operation of Draft Mining Charter 2018, supplement its BEE shareholding from 26% to a minimum of 30%. Element 2.1.1.2 seems to suggest that, as long as an existing right holder achieved its 26% BEE shareholding at a point in time, it would be regarded as compliant even though its BEE partners have exited and that the "top up" is only 4% i.e. to 30%, and not from where the right holder may currently find itself as a result of the exit of the BEE partner. The same consideration referred to above in relation to what constitutes "BEE shareholding" applies equally here.
• The recognition of the continuing consequences of historical transactions include historical transactions that were concluded on units of production, share assets including all historical BEE transactions which form the basis upon which new order mining rights were granted. The recognition of continuing consequences apply at company or mining right level.
• The recognition of continuing consequences are not transferrable and lapse on transfer of the relevant mining right or part thereof. 
• The recognition of continuing consequences do not apply to an application for a new mining right and renewal of a mining right in respect of which there had been recognition of continuing consequences. 
• Where an existing right holder did not, during the currency of the mining right, achieve a minimum of 26% BEE shareholding (as broadly interpreted in Element 2.1.1.3), as at the date of commencement of Draft Mining Charter 2018, there is no recognition of any historical transactions and that mining right holder is required, within a period of five years of the date of coming into operation of Draft Mining Charter 2018, to supplement its BEE shareholding to a minimum of 30% BEE shareholding, i.e. from the level that it finds itself in, to 30% (as compared to an existing mining right holder which had achieved 26% but not maintained the 26% BEE shareholding as at the date that Draft Mining Charter 2018 comes into force and effect, which only needs to "top up" 4%, to 30%).

Pending applications

Where an application for a mining right has been lodged and accepted prior to the coming into effect of Draft Mining Charter 2018, the application will be processed and granted under the provisions of the current mining charter of 2010, with a minimum requirement of 26% Black Person shareholding. However, the holder of a mining right which has been granted under these circumstances must within a period of five years from the effective date of the mining right supplement its BEE shareholding to a minimum of 30%.

A new mining right, i.e. one which is applied for and granted/issued after the coming into effect of Draft Mining Charter 2018, must have a minimum 30% BEE shareholding "which shall include economic interest plus corresponding percentage of voting rights, per mining right or in the mining company which holds a mining right".

Draft Mining Charter 2018 prescribes how the BEE shareholding must be distributed amongst (a) qualifying employees, (b) host communities, and (c) BEE entrepreneurs. 

In the case of qualifying employees, a minimum of 8% of which 5% is non-transferrable free carried interest, must be distributed within a period of five years from the effective date of the mining right.

In the case of host communities, a minimum of 8% of which 5% is non-transferrable free carried interest, must be distributed within five years from the effective date of the mining right.

A minimum of 14% shares must be distributed to a BEE entrepreneur (no five-year period is prescribed in the case of a BEE entrepreneur). 

Element 2.1.3.2 therefore prescribes that 10% of the 30% BEE shareholding is on a free carried interest basis i.e. in respect of the 5%, respectively, qualifying employees and host communities will not need to contribute, in any manner, but will participate in the benefits. In addition, a right holder is required to pay a "trickle dividend" equal to a minimum of 1% of Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) from the sixth year of a mining right, to qualifying employees and host communities until dividends are declared. If, after the six-year period, dividends are not declared in any particular year, the annual 1% of EBITDA will be payable to qualifying employees and host communities in that year. 

Host communities and qualifying employees must also have representation on the board or advisory committee of the right holder. 

These provisions seem to suggest that, until year six, if no dividends are paid, then 1% of EBITDA will be payable as a trickle dividend. (Element 2.1.3 does not address the situation where the actual dividends paid are less than the trickle dividend of 1% of EBITDA).

Where a BEE entrepreneur exits, the right holder's empowerment credentials are recognised for the duration of the mining right provided that (a) the right holder is compliant with the requirements of the ownership element as at the time of disposal, i.e. 30% of the shareholding, (b) the BEE entrepreneur has held the empowerment shares for a minimum period equivalent to a third of the duration of the mining right and unencumbered net value must have been realised, and (c) the recognition only applies to measure effective ownership which has vested in a BEE entrepreneur. 

The BEE entrepreneur is required to re-invest a minimum of 40% of the proceeds from the disposal in the "mining industry". 

The prescribed board/executive/top management targets under the employment equity element must include Black shareholders in line with the objective for active participation in the management and control of the mining industry. 

Element 2.1.3.9 sets out prescribed vesting of the BEE entrepreneurship shareholding, namely (a) 15% in the first quarter of the duration of the mining right, (b) 50% in the second quarter of the duration of a mining right, (c) 70% in the third quarter of the duration of a mining right, and (d) 100% by the end of the last quarter of the duration of the mining right.

The prescribed minimum 30% applies for the duration of the mining right.

Element 2.1.4 allows for "set off", i.e. equity equivalent mechanism in lieu of BEE entrepreneurship shareholding. 

A right holder may claim the equity equivalent mechanism against a maximum of eleven percentage points of BEE shareholding, which may only be claimed against the portion of BEE entrepreneur shareholding (and not community or qualifying employee shareholding).

As with Mining Charter 2017, a distinction is made between mining goods and mining services. 

With regard to mining goods, a minimum of 70% of total mining goods procurement spend must be on South African manufactured goods. South African manufactured goods are defined to refer to "… goods with a minimum 60% of the value added during the assembly or manufacturing of the product… in the Republic". The calculation of value add excludes profit mark up, intangible value such as brand value and overheads.

Element 2.2.1 requires the 70% in relation to mining goods to be apportioned in a prescribed manner, namely (a) 21% on South African manufactured goods by Black entrepreneurs, (b) 5% on South African manufactured goods by BEE women entrepreneurs or 50% youth owned and controlled enterprises, and (c) 44% on South African manufactured goods by a BEE compliant company (a company with a minimum B-BBEE Level 4 status in terms of the BBBEE Codes of Good Practice and minimum 26% Black ownership). 

While it is not clear from Element 2.2.1 (it is clear in Element 2.2.2 relating to services), it appears that the specifications must be achieved within a period of five years from the date that Draft Mining Charter 2018 comes into effect. 

With regard to services, Element 2.2.2 prescribes that a minimum of 80% of the total spend on services must be sourced from South African companies. The term "South African Companies" is not defined. 

The 80% spend on services must be apportioned as follows, (a) 60% on BEE entrepreneurs, (b) 10% on BEE women entrepreneurs with or 50% youth owned and controlled enterprises, and (c) 10% on BEE compliant companies.

Element 2.2.2 specifies that the procurement targets must be complied with within a period of five years as outlined in the transitional arrangements. 

A "set off" provision is contained in Element 2.2 in terms of which a right holder may invest in enterprise and supply development which it may offset against the procurement element obligations. In the case of mining goods, up to 5% of the total procurement budget on mining goods may be offset using supplier development. In the case of services, up to 10% of the total procurement budget on services (excluding non-discretionary expenditure) may be offset using supplier and enterprise development. There are a number of restrictions against the set off including that supplier and enterprise development may only be invested on BEE entrepreneurs with a turnover of less than ZAR50 million per annum and the amounts may not be claimed as expenditure. 

In relation to research and development, a right holder must spend a minimum of 70% of its total research and development budget on South African based research and development entities. A minimum of 50% of the 70% must be spent at South African Public Academic Institutions or Science Councils. 

In relation to processing of samples, a right holder must utilise South African based companies for the analysis of 100% of all mineral samples, except in cases where samples are analysed for calibration of local laboratories. 

Element 2.2.7 makes provision for contribution by foreign suppliers. A foreign supplier is defined to mean "… a foreign controlled or registered company, supplying the South African mining industry with mining goods or services which does not have at least Level 4 status in terms of the BBBEE Codes of Good Practice and 26% Black ownership". A foreign supplier must contribute a minimum of 0.5% of its annual turnover generated from local mining companies towards development of suppliers to be directed to the Mandela Mining Precinct for research purposes.

A right holder is required to invest 5% of the leviable amount (excluding the Mandatory Statutory Skills Levy) on essential skills development, in the manner prescribed in Element 2.3.

Element 2.4 requires the following:

• At board level – a minimum of 50% Black Persons with exercisable voting rights proportionally represented, 20% of which must be Black women.
• Executive/top management – a minimum of 50% Black Persons at the executive directors’ level as a percentage of all executive directors proportionately represented, 15% of which must be Black women.
• Senior management – a minimum of 50% Black Persons in senior management proportionally represented, 15% of which must be Black women.
• Middle management – a minimum of 60% of Black persons in middle management proportionally represented, 20% of which must be Black women.
• Junior management – a minimum of 70% Black Persons in junior management proportionally represented, 25% of which must be Black woman.
• Employees with disabilities – a minimum of 1.5% employees with disabilities as a percentage of all employees, reflective of national or provincial demographics.

Mine community development