EXPLAINER | Why the court ruled that the 2018 Mining Charter is policy, not law | Fin24

The High Court has ruled that the 2018 Mining Charter is policy, not law, and has set aside various aspects of the Charter as unconstitutional. While sound, this judgment is likely to be appealed, say Jonathan Veeran, Bruce Dickinson and Rita Spalding.

On Tuesday, the North Gauteng High Court in Pretoria handed down judgment in the matter between the Minerals Council of South Africa v the Minister of Mineral Resources and Energy and Others.

The court ruled that the 2018 Mining Charter is policy, not law, and set aside various aspects of the Charter as unconstitutional.

While sound in law, the judgment is likely to be appealed.

In a nutshell

The Minerals Council had brought an application under the Promotion of Administrative Justice Act 3 of 2000 (PAJA), seeking to review and set aside certain clauses of the Broad-Based Socio-economic Empowerment Charter for the Mining and Minerals Industry, 2018 (the 2018 Charter). 

The Minerals Council sought a declarator that the challenged clauses were unlawful and should be set aside.

The joined respondents comprise host communities affected by mining operations, organisations representing those mining communities, and trade unions. 

While the trade unions opposed the relief sought by the Minerals Council, the communities did not – rather, they sought additional relief, arguing that there had been inadequate consultation with them prior to the publication of the 2018 Charter.

They also argued that the 2018 Charter did not substantially address some social issues, including environmental degradation and gender-based injustice by mining, as well as poverty and inequality in mining-affected communities.

Breaking it down

The matter was heard before a full bench: Kathree-Setiloane J, Van der Schyff J and Ceylon AJ. 

The court ruled in favour of the Minerals Council, with Kathree-Setiloane writing the judgment and Van der Schyff and Ceylon concurring.

The question before the court was the power of the Minister of Mineral Resources and Energy under the Mineral and Petroleum Resources Development Act (MPRDA) to make law in the form of subordinate legislation – and whether the 2018 Charter is in fact law, or policy.

The minister argued that the MPRDA empowered him to make law through the 2018 Charter, and that the Charter therefore constituted a singular form of legislation which is binding on the holders of mining rights.

But the Minerals Council contended that the 2018 was in fact a formal policy document developed by the minister in terms of the MPRDA – and that it was therefore binding on the minister when he considers applications for mining rights. This would mean the minister is permitted to grant a mining right only if, among other things, the grant would be in line with the Charter.

Kathree-Setiloane concluded that a contextual approach must be adopted in interpreting the relevant section of the MPRDA, noting that in terms of the legislation, the minister is empowered to:

While the word “charter” is recognised in SA law, the more commonly used “law” and “regulation” are used in the MPRDA. Indeed, the minister is expressly authorised to make subordinate legislation in section 107.

Hence, Kathree-Setiloane concluded that the word “charter” was chosen deliberately by the legislature to indicate something other than a law. 

Similarly, the word “develop” is not used by the legislature to describe law-making, but with reference to formulating policy. 

Importantly, using permissive rather than peremptory wording indicates that the Legislature did not intend the Charter to be subordinate legislation – rather, it suggests that the Charter was intended to be guiding principles. 

Lastly, Kathree-Setiloane noted that if section 100(2) of the MPRDA were construed as a delegation of the power to make legislation, it would go against the principle of separation of powers – and could lead to unbridled law-making.

Having concluded that the language of the MPRDA did not give the minister the power to make law in the form of subordinate legislation, Kathree-Setiloane looked at the purpose of section 100(2) of the MPRDA – which is transformation.

The MPRDA contains an enforcement structure – as no person may mine without a mining right, and the minister may only grant a mining right if it will further transformational goals in terms of the Act and in line with the Charter. The holder of a mining right is also obliged to report on compliance with the Charter and the transformational objects of the Act. But the transformational objectives of the MPRDA do not require the Charter to take the form of subordinate legislation in order to achieve this. The MPRDA’s purpose can be fulfilled without the Charter constituting binding law.

Still, the Minister argued that transformation of the mining industry has been ineffective and transformation could be expedited if the 2018 Charter were directly enforceable law. While Kathree-Setiloane acknowledged that failure to achieve transformation objectives was a concern, the Minister’s argument failed to account for other factors contributing to transformation: security of tenure, conversion of old order rights into new order rights and the Minister’s own failure to make regulations regarding the achievement of objectives set out elsewhere in the MPRDA.

In light of the above, Kathree-Setiloane declared, inter alia that:

• section 100(2) of the MPRDA does not empower the Minister to make law and that the 2018 Charter is therefore not binding subordinate legislation but is rather an instrument of policy;
• certain clauses of the 2018 Charter are reviewed and set aside in terms of PAJA.

Inter alia, the following aspects of the 2018 Charter have been found to be unconstitutional:

• provisions which require compliance with the 30% Historically Disadvantaged South African (“HDSA”) ownership requirement upon renewals and/or transfers of rights issued under the MPRDA;
• provisions which require the implementation of mandated structures, such as community, employee and HDSA entrepreneur schemes;
• the provisions which render the HDSA ownership requirement applicable to holders of permits under the Diamonds Act, 1986 and the Precious Metals Act, 2005;
• provisions which allow for a beneficiation offset;
• the provision dealing with preferential procurement; and
• the enforcement provisions which allow for suspension and cancellation of rights in the event of non-compliance with the 2018 Charter.

What are the implications?

The judgment is explicit that the 2018 Charter is not binding legislation – it is only binding on the holder of a mining right to the extent that its terms were lawfully incorporated by the Minister into any mining right issued. 

The implication of the judgment is therefore that a mining right holder will not be required to “top up” its empowerment credentials on renewal of the mining right and will have more flexibility in structuring empowerment transactions.

The judgment is sound in law, but is likely to be appealed. 

Jonathan Veeran, Bruce Dickinson & Rita Spalding are from the law firm Webber Wentzel. Views expressed are their own.