They’re calling it the last nail in the coffin. Africa’s biggest mining nation is in turmoil over Mining Charter III – a new document aiming for more black ownership to the industry that has also ruffled feathers among mine owners and foreign investors alike. It is heading to court.
A powerful team of private lawyers will fight the mining companies in court. With an attorney backed by four advocates, it is clear that the Department of Mineral Resources (DMR) plans to fight tooth and nail to keep its Mining Charter III intact. It promises a quick fix for the black majority calling, in tough economic times, for a larger slice of one of the richest cakes in Africa. The mining industry of South Africa contributed 7.1% of the country’s GDP in 2015, employing more than 450,000 people and paying more than $1 billion in royalties and taxes.
For a start, Mining Charter III calls for an increase in the black ownership of mines from 26% to 30% at all times. In court, the Chamber of Mines, which represents 90% of the country’s mining companies, will argue for “once empowered, always empowered” policy in that once a mining house has borne the cost of transferring ownership, into black hands, it is deemed to have done its job. This would make most companies compliant overnight.
What has become clear, since it was gazetted on June 15, is that even though it was more than four years in the making, many agree this was a hastily and poorly written document, full of holes, compiled without consultation with the industry. A source in mining says even the savvy, powerful, legally trained, regional managers of the DMR weren’t even consulted. All of this is likely to weaken the DMR’s case in court. Martin Madlala, the spokesman for the DMR, was unavailable for comment.
“I think just the whole approach is terrible and the content is flawed. If you look at what it says about prospecting rights of 50% black ownership, plus one share; when you are prospecting you must take drill samples of the ore body. One hole will cost you R200,000; for an emerging black miner, where does he get the millions to do that with?” says Frans Baleni, the former head of the National Union of Mineworkers and current central committee member of the South African Communist Party.
The head of the New York Stock Exchange-listed DRDGold, which produces more than 140,000 ounces of gold from mine dumps around Johannesburg, feels that the 70% black ownership requirement for procurement could infringe the General Agreement on Tariffs and Trade (GATT) rules.
“Very little in this document is right, it is a shambles… I don’t think it can be executed,” says Niel Pretorius, the CEO of DRDGold.
“We will not be applying for mining licences in this country anymore because of the new mining rules. We do have mining licences to last us for 10 to 15 years, but there won’t be any more applications for now,” says Pretorius.
Defeat in court would mean a rewrite, watering down the new mining codes. It’ll be a setback for the government. Either way, after years of attempting to be a team player, capital in mining is likely to become a lot more defensive, allocated in the interests of shareholders and little else.