South African Mining Charter 2017

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Introduction

The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) provides for the Minister of Mineral Resources to develop a broad-based socio-economic empowerment charter (the Mining Charter) that sets out targets for the participation of historically disadvantaged South Africans (HDSAs) in the South African mining industry.

Not being compliant with the Mining Charter does not necessarily make it unlawful to conduct mining in South Africa. However, the extent to which an entity is compliant with or will be compliant with the Mining Charter is taken into account when considering an application for a mining right and mining companies are required to report on their compliance with the Mining Charter on an annual basis.

In April 2016, the Department of Mineral Resources published a draft version of the revised Mining Charter for public comment. Please see this link for our article on the draft Mining Charter. Following receipt of public comments on this draft, the revised Mining Charter (the 2017 Mining Charter) was published in June 2017. The 2017 Mining Charter replaces the Mining Charter published in 2010 (the 2010 Mining Charter).

Key differences between the 2010 and 2017 Mining Charter

The table below sets out some of the major differences between the 2010 and 2017 Mining Charter. 

Element

Sub-Element

2010 Mining Charter

2017 Mining Charter

Ownership

 

26% HDSA ownership (up to 11% offset for local beneficiation)

50% Black ownership for prospecting rights

30% Black ownership for mining rights (up to 11% offset for local beneficiation)

Procurement and Enterprise Development

Capital goods

40% from BEE entities 

70% from South African Manufactured Goods

  • at least 21% from Black Owned Companies
  • at least 5% from Black Owned Companies that are also female or youth owned
  • at least 44% from BEE compliant entities

Consumable goods

50% from BEE entities

Services

70% from BEE entities

80% services from South Africa Based Companies

  • at least 65% from Black Owned Companies
  • at least 10% from Black Owned Companies that are also female owned
  • at least 5% from Black Owned Companies that are also youth owned

Analysis of mineral samples

N/A

100% from South Africa based facilities

Employment Equity

Executive board

40% HDSA

50% Black

Senior management

40% HDSA

60% Black 

Middle management

40% HDSA

75% Black 

Junior management

40% HDSA

88% Black

All employees

N/A

3% people with disabilities

Core and critical skills employees

40% HDSA 

60% Black

Human Resource Development Investment

Essential skills development activities

5% of annual payroll

5% of annual payroll

Ownership requirements

Whereas the 2010 Mining Charter did not specify how the Black shareholding of a company must be structured, the 2017 Mining Charter does so. Under the 2017 Mining Charter, the 30% Black ownership requirement for mining rights must be distributed as follows:

  • a minimum of 8% of the issued shares must be issued to Black employee share ownership plans;
  • a minimum of 8% of the issued shares must be issued to mining communities in the form of a community trust; and
  • a minimum of 14% of the issued shares must be issued to BEE entrepreneurs (persons that acquire shares through BEE transactions under the principles of broad-based black economic empowerment).

The 2017 Mining Charter provides for a 12 month transitional period, during which time holders of mining rights are required to "top-up" their Black ownership – to the minimum 30% level.

Exempted Micro Enterprises (with a turnover of less than ZAR1 million) and Qualifying Small and Micro Enterprises (with a turnover of less than ZAR3.8 million) are exempt from complying inter alia with the ownership requirements.

Conclusion

In order to address the lack of transformation and the check box approach to transformation in the mining sector, the Mining Charter is becoming more onerous and prescriptive. This can be seen in the increased requirements for Black ownership and the manner in which Black ownership must be structured. Ultimately, government and industry need to work together to promote sustainable economic transformation.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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