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Mining Charter Requirement Unrealistic?

Broad-based Black Economic Empowerment (commonly known simply as “BEE”) has played a large role in South Africa’s business landscape over the past 16 years. BEE was implemented not only to rectify the wrongs of the past but also to effectively transform the country’s overall economy, with a role in every industry. The structure of BEE has changed since inception; the main criteria evolving to include not only black ownership, but management control, employment equity, skills development, enterprise and supplier development, preferential procurement as well as socio-economic development.

The mining industry has played a pivotal role in the transformation of South Africa’s economy. The industry is highly-labour intensive and as such contributes largely to job creation in the country, employing a total of 495,568 people as of 2014 and significantly contributing a R18 billion to the country’s economy.

The first Mining Charter was developed in 2002, and an amended Charter for the industry was gazetted in 2016 to include sustainable growth and meaningful transformation. The main objectives of the Mining Charter are to:

  1. Promote equitable access to the nation’s mineral resources to all South African citizens;
  2. Substantially and meaningfully expand opportunities for black South Africans to enter and benefit from the industry;
  3. Utilise and expand the existing skill base for the employment of black South Africans and to serve the community,
  4. Promote employment and advance the social and economic welfare of mine communities and major labour sending areas;
  5. Promote beneficiation of South Africa’s mineral commodities.

As a requirement, the 2002 and 2016 Mining Charters indicated a targeted ownership at 26% divided among employees, black entrepreneurs and the community. On June 15 2018, the charter was revised to an increased target of 30% Black ownership where communities and employees will each be entitled to 8% with 5% each determined as a free-carry.

According to NPI Governance CEO, Israel Noko, these ownership targets have been subject to criticism by many parties.  “On the one hand, organised Black business is pushing for more that 51% Black ownership, which established entities like the Minerals Council of South Africa (MCSA) say that the targets are an improvement from the 2017 Mining but it doesn’t promote competitiveness and economic growth.”  The MCSA, formerly known as the Chamber of Mines, has since put forward concerns where they feel the draft Mining Charter may weaken the competitiveness of the mining industry.

Israel Noko views that the proposed 10% free-carry allocated towards employees and communities can have a positive effect on the junior mining sector and will ensure that “meaningful transformation” truly benefits the intended beneficiaries of the Mining Charter.     Given the recent consultation of a variety of stakeholders, the elements of the Mining Charter aims to deliver shared value in the industry. It promotes this through product and market improvements driven by beneficiation and redefining productivity in the value chain.

 

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