JOHANNESBURG - The Department of Mineral Resources (the DMR) on Monday released the revised Broad Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry.  Although the revised Mining Charter attempts to address a number of its predecessor's shortcomings, in some respects, it may paradoxically add to regulatory uncertainty in the South African mining industry.

The most far reaching change is that non-compliance with the revised Mining Charter will amount to a breach of the Mineral and Petroleum Resources Development Act, 2002 (the MPRDA) resulting in the suspension or cancellation of licences granted under the Act. 

Clothing the Mining Charter with the force of law may well not withstand constitutional scrutiny, in addition to vitiating its consensual nature. In addition, the Minister of Mineral Resources is now entitled to amend the Charter unilaterally, thus perpetuating the problem of overly broad administrative discretion. 

While the revised Mining Charter for the first time contains a number of helpful definitions, some of these are vague and imprecise or do not conform with the definitions in the MPRDA itself.  This may contribute to further regulatory uncertainty.  In addition, many of the soft requirements of the previous Mining Charter have been hardened.  For example, mining companies are now required to procure 40 percent of their capital goods from HDSA owned suppliers by 2014. 

In addition, multinational suppliers of capital goods are required to contribute a minimum of 0.5% of their locally generated annual income towards a "social development fund" for the benefit of local communities.  The revised Mining Charter fails to deal with the manner in which this fund is to be administered.  Although the mining industry committed to change its procurement policies in the Stakeholders' Declaration on Strategy for the Sustainable Growth and Meaningful Transformation of South Africa's Mining Industry, signed on June 30 2010, it is unlikely to have anticipated that it would be required to make such a significant contribution to a social development fund.

On a positive note, the Mining Charter's HDSA ownership requirements have not been altered. In addition, the revised Mining Charter defines the term "beneficiation" and spells out for the first time that mining companies may offset up to 11% of their HDSA ownership requirements against the value of their beneficiation activities.

At the same time, the revised Mining Charter requires BEE beneficiaries to have "full shareholder rights".  This is seemingly in conflict with the Companies Act, 1973, as only shareholders are entitled to shareholder rights and, owing to the lengthy time line of many BEE transactions, BEE beneficiaries may not always be shareholders in a company for some time. 

*Peter Leon is a partner in law firm Webber Wentzel

Source: www.moneyweb.co.za

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