The Revolutionary Mining Charter is irrational and divisive

23rd June 2017

The Revolutionary Mining Charter is irrational and divisive

Mining Lawyer Jacinto Rocha
Photo by: Duane Daws

This opinion piece on the issues around South Africa's new Reviewed Mining Charter was written by mining lawyer Jacinto Rocha.

On June 15, 2017, the Mineral Resources Minister announced to South Africa and the whole world the birth of the Reviewed Broad-Based Economic Empowerment Charter for the Mining Industry – the Revolutionary Mining Charter. Unfortunately, the Minister failed to notice that due to complications during the birth process, the Mining Charter was born dead.

The Minister must, however, be commended for having drafted a Revolutionary Mining Charter (RMC) which is easy to read. Unfortunately, the praise ends here.

The RMC owes both its existence and authority to the Minerals and Petroleum Resources Development Act (MPRDA) and its validity must also be tested through the prism of our Constitution. Therefore, the RMC whether policy or delegated legislation must be intra vires the MPRDA and the Constitution.

It must also be aligned to the Broad-Based Black Economic Empowerment (BBBEE) Act, 2003, which requires that organs of State apply the codes issued in terms of that Act when “…determining qualification criteria for issuing licences…in respect of  economic activity in terms of any law”.

The BBBEE Act, read with the Guidelines for Developing and Gazetting Sector Codes (Transformation Charters), lays out the consultation process organs of State must follow when developing sector codes or transformation charters.

It is my well-considered professional opinion that the RMC in its current form is irrational, discriminatory, paternalistic, unlawful and unconstitutional. For the purpose of this article I will confine the analysis mostly to the ownership element of the RMC. Suffice to say that the “numerical targets” for employment equity and procurements are quotas.

In the SA Police Service v Solidarity our Constitutional Court stated that “ …. irrational conduct in implementing a lawful project attracts unlawfulness. Therefore, implementation of corrective measures must be rational.” As such for the RMC to be rational, there must be a rational nexus between its objective and the policy or regulatory means it employs to achieve those objectives.

Some people are of the erroneous impression that the RMC will open the floodgates of new opportunities for black persons. The reality is, it will not.

The RMC, decrees that by no later than June 14, 2018, “[A]n existing holder…who has maintained a minimum of 26% black person shareholding…” must “…top up its black person shareholding to 30%”. However, the said top-up must be in favour of the existing “BEE partners” – no new entrants.

While the RMC pledges to “provide for policy and regulatory certainty” the very RMC sabotages this commitment by requiring, for example, that an existing empowered company, irrespective of the level of empowerment, must when applying for a new mining right have 30% black persons shareholding whereas when it applies for a new prospecting right it must have 50% +1 black shareholding.

Confused? It gets even more perplexing in that, when the new prospecting right is converted into a new mining right, the black person’s shareholding is reduced to not less than 30%. Now, if black persons can only transfer shares to another black person where does the 20% +1 go? Where is the policy and regulatory certainty?

Furthermore, consider for a moment the requirement for 50% +1 black persons shareholding for new prospecting rights. When judged against the objective reality that risk funding originates from stock exchanges in foreign jurisdictions and the fact South African banks and development finance institutions do not engage in risk funding, how are black persons going to fund their prospecting activities? Is this rational?

Our Constitution declares that “South Africa belongs to all who live in it, united in our diversity”. This is further echoed in the ANC’s own Freedom Charter which equally affirms that “South Africa belongs to all who live in it, black and white..”

The Mining Rights Act, 1967, enacted and repealed by the apartheid government, prohibited, although with some exceptions, the issuing of prospecting permits to companies where a coloured person held a controlling interest  or to companies where ‘Bantus’ held shares. Our Constitution and the new South African ethos detest and abhor discrimination on enumerated grounds, including as regards race.

However, 25 years after the repeal of the Mining Rights Act, 1967 the RMC has resurrected that racist provision – in this instance no new prospecting rights will be granted to companies where a white person holds a controlling interest. As the saying goes “those who cannot learn from history are doomed to repeat it.”

Why is the RMC paternalistic? Since “history is a good teacher” our recent colonial and apartheid past reminds us that the Native Land and Trust Act, 1936 empowered the South African Development Trust to hold land in trust for black people. Today, the RMC empowers the nebulous Mining Transformation and Development Agency, as prescribed in the new charter, to hold shares in trust for mine communities. South African governments, past and present, have always had the desire to manage black peoples’ assets on their behalf.

It is fundamental to our constitutional order that Ministers “… may exercise no power and perform no function beyond that conferred upon them by law”. The MPRDA empowers the Minister to develop “a broad-based socio-economic empowerment charter within 6 months from the date” that the MPRDA came into effect. It is now 4 and 13 years, respectively, since the MPRD Amendment Act, 2008 and the MPRDA, 2002 came into effect. Therefore, even if regard is had to the Interpretation Act, 1957, the Mining Charter, 2002 is the only valid and enforceable Mining Charter. 

Even if the Minister were to claim that the RMC is government policy, such policy must still be consistent with the Constitution, the MPRDA and others laws.

Lastly, although the Minister is an MP, he, in his capacity as member of the executive branch of government, does not have the power to pass legislation - such authority is in terms of our Constitution vested in Parliament.

The fact that the RMC is irrational, discriminatory and unlawful renders it unconstitutional.

Jacinto Rocha is a Mining Lawyer and Senior Lecturer (Honorary) at Wits University. He teaches Mineral Policy and Investment and Prospecting and Mining Law.