[co-author: Camilla Froehlich]*

The final version of the revised Socio-economic Empowerment Charter for the Mining and Minerals Industry, 2018 (Mining Charter III) was released in June and published for implementation in the Government Gazette by South Africa's Minister of Mineral Resources Mr Mantashe on 27 September 2018.

Both the Mining Charter III and the appointment of Mr Mantashe as minister in February 2018, brought the weight of foreign investor hopes, along with those of many South Africans, that South Africa would at last see investor stability and much needed certainty within the mining sector. The gazetting of the Mining Charter III brings to an end several months of engagement amongst stakeholders in the industry and finalised a law that had been ardently disputed between industry and government. Minister Mr Mantashe was quoted as saying that the Mining Charter III represents a consensus between such stakeholders, which included mining communities after a High Court ordered them to be recognised as "interested and relevant stakeholders for the purpose of consultation on the charter formulation process".

The question remains however, is it really new and improved and does it allay investor fears as well as create an investor-friendly environment?

Basic features of The Mining Charter III

The Mining Charter III was first issued in 2004 and updated again in 2010. The previous Minister Mineral Resources Mosebenzi Zwane published his own somewhat controversial version last year, which was challenged in court by interested industry players.

The current Charter was issued as an initial draft in June of this year for comment, a mere 5 months after Mr Mantashe was appointed as Minister and promised to consult with all those involved in order to deliver a Charter that met expectations.

The Mining Charter III covers seven main elements, namely; ownership, mine community development, procurement, beneficiation, house and living conditions, human resource development and employment equity.

While many platforms have provided in-depth analyses on the above-mentioned elements, some of the most striking include that the Mining Charter III dictates for new permit holding mining companies to have a minimum 30% historically disadvantaged South Africans (HDSAs) ownership ( an increase from the previous 26% required). However, the Mining Charter III recognises the so-called "once empowered always empowered" principle whereby those existing mining rights holders who previously achieved a minimum of 26% will be recognised as having complied with this stipulation for the duration of their right and will not be expected to "top up" to the required 30%. This applies also to those rights holders whose HDSA partners have since exited the partnership for whatever reason, meaning that such companies who met the requirements previously won't be forced to sell or issue new shares. However, new mining right holders will have to comply with the 30% minimum.

This is development is largely due to the High Court ruling in April of this year that confirmed "continuing consequences" principle in the original 2004 charter cannot retrospectively be removed from companies who relied on it for obtaining their mining rights. This ruling meant that the 30% ownership cannot be retrospectively imposed on those granted mining rights under the earlier requirements. The Mining Charter of 2010 will still apply to all pending applications lodged proper to the coming into effect of The Mining Charter III and, once granted, the rights holders will be obligated to increase their HDSA shareholding to the required 30% within a 5 (five) year period.

A HDSA female representation of 20% has seen a change from the 25% in the previous 2017 version of the charter. Under the 2018 version changes to procurement and enterprise development see mining companies having to procure 80% of services from black economic empowerment enterprises, which must be South African Companies and 70% of mining goods are to be South African manufactured and produced by black economic empowerment enterprises.

Investors seek certainty

With foreign investors already closely monitoring South Africa in light of calls for land expropriation without compensation, there are hopes that the Mining Charter III will add a measure of policy certainty and bring with it a myriad of foreign investment into the mining industry of South Africa.

There is little doubt that the regulatory uncertainty of recent times in South Africa's mining sector has proven to be a very negative and controversial issue and there is a risk that any litigation or arbitral proceedings that could occur as a result of challenges to the Charter could lead to potential investors steering clear of South Africa.

A solid step in the right direction?

Perhaps an ironic question to ask of a charter that has seen so many changes and versions but with Minister Mantashe quoted as saying that the Mining Charter III represents a consensus among interested parties that reflects various compromises that were made on the most contentious of issues of the version that he published for public comments in June, it remains to be seen if this really will see much needed certainty in South Africa`s embattled mining sector.

While Minister Mantashe added a rather diplomatic disclaimer to his comments that not all parties "will be 100% satisfied with the final version of the charter, and may take it on review", many still believe that the new draft is at least an improvement on its predecessor; however various provisions remain problematic.

So what will happen next? Invariably rumours are swirling that interested parties may challenge the Charter from an administrative and constitutional perspective, while others says that perhaps there are potential claims under South Africa's various investments treaties under investment law obligations. What is sure however is while things remain so unclear, investors are likely to hold off and adopt a further "wait and see" approach.

*Lawyer (South Africa)

[View source.]