Big blow to govt as court sets aside parts of Mining Charter | Fin24

The court ruling was needed to provide the certainty of the interpretation of the rules and legislation so mining companies can know the rules and feel comfortable to invest.(Image: Getty)

• The High Court has ruled that the Mining Charter is a policy guideline and not subordinate legislation.
• It has also clarified certain aspects of the charter relating to BEE requirements – especially if a BEE stake is later diluted.
• The charter increased the required black ownership stake in mines from 26% to 30% in 2018.

In a painful blow to government, the Gauteng High Court this week set aside parts of the Mining Charter, ruling that the charter provides policy “guiding principles” – and isn’t subordinate legislation.

The judgment means that when mining companies must renew their mining rights with government in future, they won’t have to “top up” their existing black ownership to the higher levels required by the charter since 2018.  

The charter increased the required black ownership stake in mines from 26% to 30% in 2018.

The court also set aside a provision that would allow government to suspend and cancel mining rights if companies didn’t apply with the charter.

The Minerals Council brought an application against the Minister of Mineral Resources to set aside parts of the charter, which was adopted in 2018.

The matter was first heard in May last year, and the court has since received evidence from host communities affected by mining operations, organisations representing those mining communities, and trade unions. 

While the unions did not support the challenge to the charter, the communities contended that there was not enough consultation and that the charter did not address the full impact of mining, nor poverty and inequality.

The court found that the charter was intended to be nothing more than guiding principles, and should therefore not be seen as “binding legislation” but rather as an instrument of policy.

The judgment also sets aside the provisions around procurement of goods and services (especially the capital goods target), and supplier and enterprise development, which the Minerals Council argued contained unachievable targets for mining companies to meet, the council said in a statement.

The Department of Mineral Resources and Energy said in a statement that it is studying the court judgement with its legal advisors “and will communicate further on the matter in due course”.

Tebello Chabana, senior executive responsible for public affairs and transformation at the Minerals Council, told Fin24 on Wednesday afternoon that it is very important for the Council to reiterate that it is pro transformation and pro the Mining Charter as part of the framework of transformation.

“A lot of people do not understand that we are literally implementing the mining charter, but needed certainty about certain of the provisions thereof. The court ruling is now providing that certainty,” said Chabana.

“Mining is a long-term game. We talk about huge investments over a long period of time and mining companies need assurance that in five to ten years’ time their investment they are making now and their plans will come to fruition and that there will not be a total change in legislation to undermine it. They need long-term consistency. You won’t have mining companies investing if they are not certain of tenure.”

Chabana says the court ruling was needed to provide the certainty of the interpretation of the rules and legislation so mining companies can know the rules and feel comfortable to invest.

“Remember, [mining] investors can vote with their feet and go elsewhere. That is why we need to provide a predictable and safe investment environment,” said Chabana.

Regarding the “once empowered, always empowered” principle – which the Council rather prefers to call the “continuing consequences of past transactions” principle – Chabana explains that if there is a mining investment and it includes BEE parties to make it an empowered deal, and then the BEE partner later sells its stake, the court has now ruled that there does not now have to be a “re-empowerment” taking place. This aspect was very concering for the Council.

“We think the court ruling and interpretation not only provides clarity, but is investor friendly. The court ruling now means the continuing consequences principle will apply even with the renewal of mining licenses or the transfer of a mining right and the company will be seen as having complied,” says Chabana.

“The DMRE really scrutinise whatever transactions are put in place and investors have a lot of things to comply with. So, when they are granted mining rights, it is basically an acknowledgement that they have the requisite expertise and financial backing.”

Chabana said for the Council the most important aspect of the court ruling is that it found the Mining Charter to be a policy guideline and not subordinate legislation. That means non-compliance with the Charter cannot be used to revoke a mining right.The court awarded the Council costs to be paid by the DMRE.

The Chairperson of the Portfolio Committee on Mineral Resources and Energy, Mr Sahlulele Luzipo, warned that the judgment could spark tensions between the mining sector and the regulator. “Although there is no winner or loser, the judgement may create an environment where the regulator resorts to legislating every aspect of the sector, which could have far-reaching implications for mining companies,” he said.

The committee would be briefed on the judgment’s implications and the next course of action when Parliament resumes in November, he said.