On 30 June 2010 a Stakeholders' Declaration on Strategy for the Sustainable Growth and Meaningful Transformation of South Africa's Mining Industry was signed by the Department of Mineral Resources, National Union of Mine Workers, Solidarity, UASA-The Union, the South African Mineral Development Association and the Chamber of Mines of South Africa.
During the March 2010 Mining Summit it was agreed that the Mining Industries Growth, Development and Employment Task Team ("MIDGETT") would review the current Mining Charter with regard to the issues of competitiveness, infrastructure, sustainable development, beneficiation and transformation. This became necessary as South Africa's reputation as an investment destination with sound mineral policy and regulatory frameworks has been steadily deteriorating over the past number of years. As a result, investment capital has, to an ever increasing degree, been seeking alternative mineral projects in other parts of Africa and elsewhere.
The Stakeholders' Declaration is largely the outcome of the work done by MIDGETT in accordance with its Mining Summit brief. It is anticipated that the Declaration will form the framework against which the Mining Charter will be reviewed and amended. It is also hoped that the Mining Charter, revised within the framework of the Declaration, will quell investment fears raised by the justifiably maligned Codes of Good Practice ("Code").
However, those who are hopeful that all of the targets set by the Code will be swept away under the newly revised Charter are likely to be disappointed. In that the Code was generally considered legally unenforceable, it is now probable that many of the provisions of the Code will find their way into the revised Mining Charter. As such, it is useful to consider the various correlations between the Mining Charter, the Code and the Stakeholders' Declaration. The Charter was promulgated in 2002 and there is no doubt that its review is long overdue. The purpose of the Charter was to set the framework, targets and time-tables for the implementation of the Government's transformation policies through its power to regulate and grant prospecting and mining rights. The Stakeholders' Declaration is an acknowledgement that such a transformation cannot be achieved without a competitive and sustainable mining industry in South Africa.
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THE CHARTER
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THE CODE
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THE DECLARATION
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Part 1: Objectives Dealt with in Item 3 of the Charter. Includes empowerment, transformation and the promotion of beneficiation. No reference to competitiveness and sustainability
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Part 1: Objectives Dealt with in the Purpose of the Code. Includes facilitation of the implementation of broad based socio-economic aspects of the Charter to give effect to section 100 (1)(b) of the MPRDA
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Part 1: Objectives To promote investment, enhance competitiveness, drive transformation, remove barriers to sustainable growth and transformation and commit to effective implementation strategy
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Part 2: Infrastructure Not dealt with in the Charter
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Part 2: Infrastructure Not dealt with in the Code
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Part 2: Infrastructure Provides for the identification, evaluation and engagement with national stakeholders regarding critical infrastructure such as rail, ports, electricity and water supply.
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Part 3: Innovation Not dealt with in the Charter
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Part 3: Innovation Not dealt with in the Code
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Part 3: Innovation Stakeholder agreement to assess current research and development, resuscitate and research development culture in the mining industry, and strengthen partnerships with research institutions.
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Part 4: Sustainable Development Not dealt with in the Charter
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Part 4: Sustainable Development Not dealt with in the Code
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Part 4: Sustainable Development Declares intention to develop regional approaches to environmental impacts, particularly acid mine drainage; research on mine closure and mining legacies, establish a task team to accelerate prospecting investment, adopt an integrated development approach through pooling of resources, work towards a "Mining Vision 2030".
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Part 5: Beneficiation Dealt with in Item 4.8 of the Charter through general statements. No targets set. Allows for beneficiation off-sets against HDSA ownership commitments without details as to how this is to be achieved.
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Part 5: Beneficiation Set a compliance target of 42% of annual production measured from the refined stage.
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Part 5: Beneficiation Agreement to support local beneficiation, consider establishing a national beneficiation agency, procure the support of international partners to facilitate skills and technology transfer for local beneficiation. No targets reflected.
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Part 6: Regulatory Frame-work Dealt with under Item 4.13 of the Charter. Merely states that the regulatory frame-work and industry agreements shall strive to facilitate the objects of the Charter.
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Part 6: Regulatory Frame-work Not dealt with under the Code
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Part 6: Regulatory Frame-work Reflects agreement to strengthen MPRDA architecture to improve efficiency and effectiveness by 2011; strengthen enforcement, monitoring and evaluation; streamline administrative processes and eliminate inconsistent application of regulatory frame-work; harmonise with other related legislation; finalise Mining Charter review by August 2010; explore single authority for environmental regulation; transparent compliance; and message the positive regulatory frame-work to promote South Africa as an investment destination. |
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Part 7: Human Resources Development Dealt with by Item 4.1 of the Charter. Provides for education, training and scholarships to up-skill HDSA employees to provide HDSA employees with skills required by the mining industry.
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Part 7: Human Resources Development Dealt with in Item 2.4 of the Code. Provides for measurement through the score card, through a 100% compliance of skills development expenditure, learning programmes and functionally literate and numerate programmes
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Part 7: Human Resources Development Provides for the conduct of at least two skills audits by 2014 and assessment of institutional and organisational absorptive capacity by December 2010; invest an incremental percentage of annual payroll in skills development activities from 3% in 2010 to 5% in 2014; ensure effective spend of mandatory skills levy.
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Part 8: Employment Equity Dealt with in Item 4.2 of the Charter. Companies to aspire to 40% HDSA participation in management within 5 years; companies to focus overseas placement and/or training programmes on HDSA's; identification of talent pool and fast tracking and ensuring inclusiveness and advancement of woman. No measurement of management control.
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Part 8: Employment Equity Dealt with in Items 2.2 and 2.3 of the Code. Provides management control score card in respect of board participation and 40% representivity of HDSA's on executive committee. Also provides employment equity score card requiring compliance target of 40% in top management, senior management, middle management, junior management and woman in mining (10%). |
Part 8: Employment Equity Stakeholders undertake to create an environment to promote and encourage diversity to retain an increase of requisite skills; minimum target of 40% by 2014 in all of top management (board); senior management (Exco); core and critical skills; middle management, and junior management.
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Part 9: Mine Community Development Dealt with in Item 4.4 of the Charter. Stakeholders undertake to co-operate in the formulation of integrated development plans for communities where mining takes place and for major labour-sending areas, with special emphasis on development of infrastructure.
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Part 9: Mine Community Development Dealt with in Item 2.6 of the Code. Creates target of 1% of net profit after tax to develop mine community and rural development elements.
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Part 9: Mine Community Development Provides for developing guidelines and adherence to community consultation processes; intention to develop a partnership approach towards mine community and major labour-sending areas, development and consider regional (social) developments funds for effective implementation of social and labour plans; implement and monitor social labour plan undertakings. |
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Part 10: Housing And Living Conditions Dealt with in Item 4.5 of the Charter. Establishes measures for improving housing, including upgrade of hostels, conversion of hostels to family units and promotion of home ownership options; establishes measures for improving nutrition of mine employees.
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Part 10: Housing And Living Conditions Dealt with under Item 2.8 of the Code. Establishes a score card which does not reflect the general principles. Deals with upgrading housing and equitable and sustainable proper nutrition, food and water. 100% of all hostels to be upgraded to single accommodation and/or converted into housing units by 2014.
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Part 10: Housing And Living Conditions Attain occupancy rate of 1 person per room by 2014; upgrade or convert hostels into family units by 2014; promote home ownership options and provide balanced nutrition.
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Part 11: Procurement Dealt with in Item 4.6 of the Charter. Companies undertake to give HDSAs preferred supplier status; commit to a progression of procurement over 3 – 5 year time-frame; no specific targets set.
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Part 11: Procurement Dealt with in Item 2.5 of the Code. Establishes preferential score-card of purchasers of goods and services from BEE compliant suppliers. Score-card requires, within a 6 – 10 year target, 30% BEE procurement spend for capital goods; 70% BEE procurement spend on services; 30% procurement spend on consumables; 20% procurement spend from local SMME's and 20% procurement spend from suppliers that are more than 50% black owned or suppliers that are more than 30% black woman owned.
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Part 11: Procurement Promotes adherence to fundamental principles of enterprise development, irrespective of mining companies turn-over; agrees to develop mechanisms for multi-national suppliers of capital goods to the mining industry to contribute towards social development. No targets set.
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Part 12: Ownership And Funding Dealt with under Item 4.7 of the Charter. Provides for 2 ownership targets of 15% within 5 years and 26% within 10 years of 1 May 2004.
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Part 12: Ownership And Funding Dealt with under Item 2.1 of the Code. Requires 26% HDSA voting rights by 2014 plus 26% HDSA economic interest (on a modified flow through principle) by 2014 plus a net HDSA value of 26% by 2014. Net value defined so as to exclude value of interest still burdened by loans after 2 years.
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Part 12: Ownership And Funding Minimum target of 26% HDSA ownership by 2014. Meaningful participation includes that BEE transactions will be concluded with clearly identified beneficiaries (BEE entrepreneurs, workers and communities); barring unfavourable market conditions, some cash-flow to service the funding structure, the remaining cash-flow to be paid to the BEE beneficiaries; ownership must vest within agreed time –frames of the BEE transactional structure (taking into account the prevailing market conditions); and BEE participant shall have full shareholder rights, eg full participation at annual general meetings and exercise of voting rights, regardless of legal form of instruments used.
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Part 13: Monitoring And Evaluation Dealt with in Item 4.14 of the Charter. Companies undertake to report on an annual basis; stakeholders agree to participation in annual forums for monitoring implementation, developing new strategies, government/industry interaction; developing strategies for intervention; exchanging experiences, problems and solutions; arriving at joint decisions; reviewing the Charter.
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Part 13: Monitoring And Evaluation Monitoring and evaluation of the various items under the Code is done through the Code score-cards.
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Part 13: Monitoring And Evaluation Adherence to effective implementation of agreed strategy; comply with annual progress reporting requirements; monitor and take into account the impact of constraints beyond the stakeholder's control which may result in not achieving set targets.
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As can be seen from the foregoing comparisons, various aspects of the ill-conceived Code have found their way into the Declaration, particularly with regard to employment equity.
However, one of the major stumbling blocks to potential investment, namely the definition of net value in terms of the Code, has been substantially reworked. Transactional arrangements regarding BEE in the mining industry will, in future, have to set time-tables within which the extinguishing of funding obligations should occur, whilst still allowing for a trickle dividend to BEE shareholders whilst such funding obligations are still being serviced. However, deviations from the anticipated time-lines will be catered for where unusual market conditions prevail or where there are other impacts beyond the parties' control.
The Stakeholders' Declaration thus reflects the reality that meaningful transformation can only be achieved within a mining industry which is competitive and sustainable. It is hoped that the acknowledgement of this fact will be carried through in the reviewed Mining Charter which is expected during August/September 2010.
Written by: Allan Reid, Director, Corporate and Commercial, Mining and Minerals at Cliffe Dekker Hofmeyr
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